In light of the international successes of many leading British independent schools, many UK education institutions are looking towards progressing with overseas expansion. The question is, where to start and what issues your institution needs to consider throughout the process?
Can you expand internationally?
The first thing to consider is whether the UK institution’s existing constitution allows for overseas expansion. For instance, it may be that the UK institution’s objects state that it will provide, or be involved in the provision or support of a school or schools within a certain geographic area. These objects may therefore need to be amended (or even removed) before the expansion process begins.
How do you expand internationally?
Once it is established that the UK institution is permitted to expand overseas - or steps have been taken to amend its constitution - the structure of the venture needs to be decided. It is prudent to set up a separate legal entity, in order for the UK institution to manage the risk and liabilities attaching to the proposed venture. The chosen structure could involve the establishment of a new subsidiary company, which could participate in a proposed joint venture company, or might involve simply the creation of a new entity into which other local parties might be invited to invest.
In respect of any new company established, the UK institution will need to decide whether the new entity will be charitable and, if so, whether it will be a charity limited by guarantee or a Charitable Incorporated Organisations (CIO). The differences between the two structures include the level of regulation, decision making powers, accounting obligations and borrowing opportunities. Careful consideration will need to be given to how the new company will operate initially and further down the line. If the plan is to open a number of institutions overseas, a holding company may be appropriate, both for tax structuring purposes and to separate any perceived risk from overseas activities.
The process involved in expanding overseas can be unexpectedly time-consuming. Local laws, regulations and conditions in the chosen jurisdiction will bring new hurdles, as will contractors and consultants, who will usually operate differently. It will certainly be a challenge to set up overseas in a matter of months or years what it has taken possibly many decades to establish in the UK. The UK institution should therefore consider delegating authority to an individual or a committee who will be tasked with managing the expansion and who will report back to the board of directors.
Protection for the UK institution
The UK institution will need to ensure that it retains control over decision making processes throughout the project, for both legal and reputational reasons. From a legal perspective, the UK institution’s name, brand and logos may need to be registered in the relevant jurisdiction and intellectual property may need to be licenced to the new company. From a reputational perspective, consideration will need to be had as to how to unravel the project if it is ultimately unsuccessful, enabling the institution to revoke the use of its intellectual property in the relevant territory. Further, the UK institution will want to maintain control over the standards of the project, ensuring any key decisions are only made with the approval of the UK institution.
When setting up the new company, the UK institution needs to consider how any money generated from the new company will be efficiently returned to the UK institution. The structure of the UK institution (whether a charity limited by guarantee or a CIO) will affect how any revenue is taxed, as will the chosen location of any holding company.
It is important to spend adequate time and resources on the planning and development stage of the expansion. The above considerations are only a general overview of some of the considerations to begin thinking about if a UK educational institution is planning overseas expansion, with advice required from the relevant jurisdiction of expansion being vital.