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The Sale of College of Law – broader implications

February 2, 2012

Education Investor reports on the latest developments in the ongoing “sale” of College of Law.  The result of the auction seems to leave Pearson plc looking like the winner by virtue of making the largest sealed bid.

All is not quite as straightforward as it might seem though for College of Law is both a charity and in receipt of a Royal Charter.  Both present impediments to any outright purchase.

With regard to the first, charitable status, a charity’s assets must be used solely for its charitable objectives and purposes; in this case the advancement of higher education for the public benefit.  Any sale of assets, which must be at market value and take account of more nebulous intangibles such as goodwill, would generate proceeds which should go into trust and continue to be used towards the original charitable aims.  That said, the majority of such money could be used to fund research or bursaries at what becomes of College of Law or the parent organisation thus returning some of the sale price back to the purchaser in the form of fees. 

Other options include keeping College of Law as a subsidiary but taking the physical assets (such as real estate) into Pearson plc and either selling those or leasing them back to the charitable subsidiary, thus stripping some profit from the enterprise.

The exact solution reached will require the approval of the trustees who are supposed to guarantee that the purchase is in the interests of the charity. In certain cases the final proposition may require approval by the Charity Commission.

There has been very little comment on the second impediment.  The College of Law is in receipt of a Royal Charter and therefore has the legal form of a chartered corporation.  In this important respect, the College of Law (although a private, independent higher education institution and not a university) shares its corporate form with many pre-92 “public universities”.  Therefore the legal procedure to “buy” the College of Law may look identical to that needed to purchase a pre-92 university.

It would appear that College of Law would first have to apply through a private Act of Parliament to have its charter revoked, ie primary legislation.  In the private 2004 University of Manchester Act, both Victoria University of Manchester and the University of Manchester Institute of Science and Technology (UMIST) sought the revocation of their respective charters prior to their merger(when a new charter was issued).

According to Dennis Farrington, co-author of The Law of Higher Education, there is no modern precedent for the “acquisition” of a chartered body as described in the reports about potential Pearson’s purchase. We have only previously seen a chartered corporation merged with another chartered corporation or revocation leading to dissolution.  Regarding College of Law, Farrington told me:

I imagine either the charter would be revoked and College of Law would take on some other form before sale, or the acquiring body would itself either already have a charter or apply for one (as in the University of Ulster merger) and then take over College of Law under its own Charter powers.

Pearson plc will not be applying for this status so College of Law would have to seek the revocation of its charter for purpose of being bought by a profit-making enterprise. 

For this latter reason, the sale of College of Law would appear precedent-setting: it lays down the procedure which would similarly apply to a whole class of public universities should they seek private takeover.

That is, although College of Law is private and independent, the general issues are those affecting many public universities.  It is therefore worth turning any private Act of Parliament into a public issue.


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  1. I am not sure that the chartered corporation would have to be dissolved, would it? Presumably it could spin off the staff and buildings into a wholly-owned company, sell the company and live on as a charitable corporation – perhaps making grants to support the education of promising Law students at the profit-making College in just the way you say. In this case there is no need to ‘buy’ the chartered corporation, merely the buildings it owns and the business it runs.

  2. p.s I realise that it is the chartered corporation which has the degree awarding powers, but I don’t see it as a big issue of the DAPs are in an allied charity rather than the actual privatised vehicle itself. Indeed if the Chartered corporation was dissolved, I don’t see how the DAPs could be transferred to the for-profit entity

  3. Mike Ratcliffe permalink

    There are precedents from the closure of colleges of education in the 1970s. While some merged, others closed outright. An example is Culham College which became Culham Educational Foundation, an independent Church of England charitable trust, which runs Culham Institute.

    These colleges didn’t have degree awarding powers, just their assets. The powers are what Pearsons are after, so they can’t go with the charitable part of the College.

  4. Thanks for the comments. My understanding is that a chartered corporation cannot be a subsidiary to any other form of company. They could sell buildings and business and then have a contract but it wouldn’t be the ‘sale’ being described in the press.

    I need to have a closer look at some of these private Acts of Parliament to get a sense of the details. But the models previously proposed by Eversheds did presuppose that we were looking at the buyout of a company limited by guarantee or a ‘higher education corporation’ (ex-polytechnic). Such takeovers wouldn’t require primary legislation on Evershed’s interpretation – in the case of HE corps, it would require Secretary of State approval after consultation.

    Yes, Mike, I suspect you are right. BPP kept their DAP when taken over by Apollo and there were some rumblings about it being inappropriate. Similar concerns have been raised about Capella who are in the process of applying for DAP but have just been taken over by RDI.

Trackbacks & Pingbacks

  1. More on dissolving chartered corporations « Critical Education
  2. College of Law – sale confirmed « Critical Education

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