We applaud the ESFA for reinforcing this week in their ‘weekly update to providers about the contractual requirement to give the ESFA 12 weeks’ notice, of any notice of intended, or proposed change of control / ownership of the contractor. Please refer to the relevant Change in Control/Change in Ownership (or equivalent) clauses within your respective contracts and funding agreements with the ESFA.
Under section 9 of the ESFA’s Apprenticeship Agreement for Training Providers, Spring 2020, Version 1.0, it informs:
9.1 – The Training Provider shall not without the prior written consent of the ESFA assign, novate or otherwise dispose of or deal in any other manner with (including by means of a change in ownership of the Training Provider) any or all of its rights, obligations or liabilities under this Agreement.
9.3 – The Training Provider will inform the ESFA as soon as reasonably practicable and, in any event 12 weeks before, any Change of Control of the Training Provider takes effect unless to do so would put the Training Provider in breach of the Law. If that is the case the Training Provider will inform the ESFA of the Change of Control within 10 Working Days of it becoming lawful to do so.
9.4 – The ESFA reserves the right to take whatever action it deems necessary, including but not limited to terminating the Agreement in accordance with Clause 24.2 (Termination) if it considers in its absolute discretion that any, or any proposed, assignment, novation, disposal or other dealing, including any Change of Control and / or of name of the Training Provider, may or would:
- 9.4.1 – put public funds at risk,
- 9.4.2 – put at risk the delivery of Training to Apprentices, and / or
- 9.4.3 – the ESFA has any other material concerns about the proposed assignment, novation, disposal or other dealing.
All parties need to do thorough due diligence against all elements of what is being acquired, always ensure you appoint a Solicitor who understands the market that is being operated in, as well as accountants that understand the market (ESFA). Through this it will become apparent that the acquirer must understand that the seller must notify the ESFA 12 weeks prior to any change, and that the ESFA approves the transfer of their contract, as per Regulation 72 of The Public Contracts Regulations 2015 which informs under 72 (d):
where a new contractor replaces the one to which the contracting authority had initially awarded the contract as a consequence of —
- (i)an unequivocal review clause or option in conformity with sub-paragraph (a), or
- (ii)universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established, provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Part…………
Furthermore, Promote-Ed has been contacted by numerous providers over the past few months concerning issues between the ESFA and providers which concerns change of control. The change of control provisions do not simply relate to a change of 51% of the change of the shareholding of the company but incorporates 8 provisions where a provider either has to seek approval which includes a change of name of the provider.
My Friday question for any organisation / person looking to acquire a provider is –
- The RoATP is currently closed and there might be a new register released with a different approach to Conditions of Acceptance as well as some or all providers having to re-apply. Why not wait until the new register is open and understand what the new vision might be and to understand any new approaches that might be in the new Conditions, thereby saving your money to fully understand the full due diligence of the new ESFA approach and requirements.
I have always been told that there is ‘good business and bad business’, it is my view that acquiring a provider in the current situation where the RoATP is closed and possibly a new approach to the conditions, makes for bad business. I am saying this for the majority of people that are looking to enter the market, this is of course not the same for a going concern looking to merge or are in the process of merging or acquiring another going concern.
Patrick Tucker, Promote-Ed