University Governance And The Financial Challenges Posed By Coronavirus

• Published date: 18 June 2020
• Author: Con Alexander
• Subject Matter: Corporate/Commercial Law, Consumer Protection, Coronavirus (COVID-19), Charities & Non-Profits , Education, Financing, Operational Impacts and Strategy
• Law Firm: Veale Wasbrough Vizards

There is increasing public awareness of the challenges facing universities as a consequence of coronavirus (COVID-19). Not least are the adverse financial implications raised by reductions in tuition fee income...

...and revenue from housing, catering and conferences. Many within the UK's higher education sector are already operating on narrow margins and have in past years taken on significant amounts of debt.

While some support has been announced for universities, the government has also said that "access to the business support schemes, reprofiling of public funding and student number controls should be sufficient to help stabilise most providers' finances .. Should that not be sufficient, such that a higher education provider finds themselves at risk of closure, the government will only intervene further where we find there is a case to do so .. and as a last resort."

The OfS has also consulted on a new time limited condition of registration designed to maintain "stability and/or integrity" within the HE sector during the pandemic, which is widely defined to include both "financial and economic matters" and "matters related to good governance".

The range of challenges raised by coronavirus for universities is wide, and many decisions for their governors and senior management will relate to the practical reality of issues such as moving students to virtual tuition. The financial stability of the university will underpin these kinds of decisions, because its ability to continue as an institution will ultimately determine its ability to continue to provide education and research.

What Should Governors Be Considering?

The overwhelming majority of universities are constituted as charities, and their governors are charity trustees who must make their decisions within the framework of charity law and regulation. The general duty owed by governors as charity trustees is to make their decisions in the best interests of their university and its current and future students, with a specific duty to safeguard their university's assets and financial position.

While the government has recognised the possibility of "risk of closure" posed by financial instability, there is no common statutory basis for universities which face this risk to fall back on. The Technical and Further Education Act 2017 introduced the concept of the 'education administration' for...