Insolvency Service investigating Hadlow College directors

The former leaders of the first college to enter education administration are being investigated by the Insolvency Service.

The service confirmed the undertaking into Hadlow College today, following a leaked statement of proposals prepared by administrators BDO, which said enquiries into the “conduct of relevant personnel in the period leading up to the onset of insolvency” were being made.

As the Insolvency Service’s investigation will focus on the run-up to insolvency, it is likely it will cover the conduct of deputy principal Mark Lumsdon-Taylor and principal Paul Hannan – both of whom resigned following the commissioner’s intervention – and the chair of Hadlow College’s board Theresa Bruton, who also left the college around that time.

A spokesperson said if there is evidence of misconduct, and it’s in the public interest, the Insolvency Service may pursue enforcement measures, such as director disqualification.

The service has a three-year window from the date of insolvency “within which to issue disqualification proceedings should there be evidence of wrongdoing”.

Hadlow College went into education administration in May, followed by its sister college West Kent and Ashford in August.

Government guidance for FE bodies which become insolvent states that administrators must prepare a report for the business secretary on governors’ conduct for the last three years, which will then be reviewed by the service.

After doing so, the service can then decide whether to seek to disqualify any of the governors; but board members could also be convicted of a criminal offence.

“Sanctions may be imposed for causing or persuading the statutory corporation to commit an offence at common law (e.g. conspiracy to defraud) or for causing or persuading the statutory corporation to commit a statutory offence,” it states.

“A disqualification order may also be made by a court against a governor of a college that is a statutory corporation following conviction of a criminal offence.”

As reported by FE Week, the FE Commissioner Richard Atkins investigated how the college ran out of money as well as claims of financial irregularities.

Atkins’ report, published in May, said Hadlow’s board failed in its fiduciary duty and “put the sustainability of two colleges and its learners at risk”.

It also listed that Hannan and Lumsdon-Taylor “regularly made decisions themselves outside of executive and any open discussion – and reacted strongly to questioning or challenge”.

The leaked BDO report revealed the college owes £40 million to 300 companies; including £5 million to Barclays bank and £11 million to the Education and Skills Funding Agency.

The Department for Education will have to open its wallet to the tune of over £2 million to pay off BDO for the costs of the administration process.