Experience

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The Company provided classes at a lower cost than other established schools and in the first five years of trading the business grew well, student numbers were high, nine teachers were employed and three floors of the premises was occupied.

After this period however, new reviews of Government Legislation were introduced regarding student / general immigration to the UK and the Company began to experience financial loss.  The new Legislation restricted the number of students entering the UK on student visas and restricted part-time work during the students stay in the UK.  If students could not work to fund their stay, they stopped enrolling for classes, which saw on overnight reduction in Chinese students from an annual intake of 60 to 5.  The Legislation also required a minimum level of English prior to entry into the UK and because most of the Company’s students were Chinese and Latin American, their English was not of a high enough level, which affected the number of students.

The change in Legislation together with the introduction of Tier 4, meant that schools had to undergo an inspection by Independent Schools Inspectorate. This resulted in smaller schools struggling to manage the fees equivalent to that of universities.

The Company offered two popular courses, a computer course and a European Computer Driving License, but these courses were deemed unsuitable for students wishing to get a visa, which affected the student numbers.

The Company was unexpectedly given a months notice to vacate the premises, as the building had to be sold.  The new premises where the Company moved was inadequate to be used as a language school.  Floorboards were old and creaked, creating unsuitable noise levels, heating was storage heaters, which could not be controlled and the lift constantly broke down, trapping students.

Because of the haste in which the Company had to move its premises, it had no alternative but to agree to a 14 year lease, even though the premises was far from adequate for a language school.  The appearance of the premises was very negative and the Directors were unable to refresh the image of the school due to restrictions imposed by the Landlord and due to the space and location of the premises.  This affected the student’s decisions to use the school as a better looking school is usually chosen.

After the most recent British Council inspections, the Directors’ were informed that they needed to take on more highly paid staff.

The Company was not in a financial position to meet the additional wages required, however if it did not, it would no longer be British Council accredited, which would have the implications of students not choosing a school which is not accredited.

With no additional funding, it became apparent that the Company was insolvent and the Director approached AABRS for advice.  The decision was made to place the Company into Liquidation.

Should you have any further queries in relation to this case study please contact Simon Renshaw on 020 8444 2000 or email sr@aabrs.com.

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