The Legal Status of the New College
The new college (Shetland UHI) is constituted as a Charitable Company governed by Articles of Association (download pdf). It is a Scottish Charity registered with the Scottish Charity Regulator (OSCR) (SC050701) and a Company Limited by Guarantee (SC646337) registered with Companies House.
As a Charitable Company the new merged college has no owners or shareholders and will be required to achieve its charitable objectives and meet the needs of its intended beneficiaries (students, learners and researchers).
Further details of the new college's legal status may be found below:
An Assigned College
An Assigned College
The new college will be an assigned college of the Regional Strategic Body for the Highlands and Islands (the University of the Highlands and Islands).
A Regional Strategic Body is a body set up by law to provide funding for and ensure the quality of college education within a defined area (Glasgow, Lanarkshire, or the Highlands and Islands). Each Regional Strategic Board has several colleges ‘assigned’ to it. (In most parts of Scotland responsibility for college education lies with a single regional college.)
The Regional Strategic Body for the Highlands and Islands is the University of the Highlands and Islands which delegates its Regional Strategic Body Functions to the UHI Further Education Regional Board.
A Non-incorporated College
A Non-incorporated College
The new college will not be an incorporated college, under the Further and Higher Education Scotland Act (1992).
Incorporated colleges generally operate only in the FE sector and are subject to significant restrictions as to how they can manage their finances. Based on legal and other advice received, and taking into account the proportions of FE/HE activity across the merging organisations, the Shetland Islands Council determined the new college should not be incorporated, a decision that was endorsed by the Shadow Board and subsequently by the Transition Board.
Basis for non-incorporated choice
In making the decision that the new college would not be an incorporated college the following points were taken into account:
- Non-incoporated colleges' ability to generate and retain surpluses at year end to reinvest in the college’s development.
- No requirement to provide cash forecasts to the Regional Strategic Body on a monthly basis to prove no funding in advance of need which is resource intensive and adds no value.
- No requirement to comply with the Public Sector Finance Manual.
- No requirement to account at 31st March for adding into whole of government accounts (single financial year aligned to academic year).
- No requirement to comply with many aspects of public sector e.g. FOI, having regard to public sector pay, but without the constraint of being a public body.
- Fewer constraints in financial memorandum with the Regional Strategic Body regarding areas such as capital projects, insurance, and contingent liabilities.
- More autonomy for the board – board appointments made locally rather than by the Regional Strategic Body and the principal can be appointed without formal Regional Strategic Body approval.
- Safeguards would be in place to ensure financial control which would align to the UHI Financial Memorandum (which provides reassurance required for Scottish Funding Council and Scottish Government). The memorandum would outline the requirements which must be complied with in return for payment of grant by the Regional Strategic Body, including (but not limited to):
- The Regional Strategic Body has duties and responsibilities it is required to exercise in order to secure and deliver high quality further and higher learning provision in the localities of its colleges, and monitoring the performance of its colleges.
- Shetland UHI would have to ensure its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for.
- The Regional Strategic Body is accountable to the Scottish Funding Council for the use of public funds provided to it by Scottish Funding Council under the terms of the relevant legislation.
- The Regional Strategic Body is responsible and accountable to the Scottish Funding Council for ensuring that funds provided to academic partners are used for the purposes for which they have been given and in ways that comply with the conditions attached to them.
- The Regional Strategic Body will seek financial management and other information from Shetland UHI in support of its commitment to efficient regulation.
The new college will be governed by a Board of Directors under a single Chair. The board will have a legal responsibility to manage and conduct the affairs of the college in such a way that its staff deliver the required services. Board members will have the roles and responsibilities of both company directors and charity trustees.
Board members will only be liable up to the financial ceiling set when the Company is formed (recommended to be as little as £1 per board member).
Board members will be required to abide by the Code of Conduct for Members of Shetland UHI Board of Management (pdf) the Code of Good Governance for Scotland’s Colleges (pdf) which describe their duties and responsibilities.
As an assigned college of the University of the Highlands and Islands, the new college will be accountable to the University for all funding received from the Scottish Funding Council and will be required to monitor the financial health and compliance of the College in line with the Local Financial Memorandum agreed with UHI.
The new college will continue to be accountable to Scottish Funding Council and Education Scotland, through the Regional Strategic Body.
Members of the new college’s board of directors will be accountable to (amongst others):
- Scottish Ministers (‘the Government’)
- The Scottish Funding Council
- The Regional Strategic Body (the University of the Highlands and Islands)
- Employers and businesses that rely on the college to provide training and education.
- Partner bodies
- The community
The new college will also be accountable to a wide range of bodies that govern the accreditation of its courses and ensure that quality of the training provided meet their standards, including:
The following safeguards are in place to protect the students and staff of the new college and the community which it serves:
- No shareholders so there are no “owners” as such.
- Articles of association of the company set out clearly what the company can and cannot do.
- Not for profit status means that any surpluses from operations can be, but do not need to be, retained by the college; however, they must be used only for the purposes set out in the articles.
- Charitable status, therefore compliance with Charities Acts and OSCR regulations, are essential. An annual return to OSCR will be required.
- Board members are appointed under the guidelines set out by the ministerial code and the articles require that staff and student representatives will always be on the board.
- Articles and Charities Acts set rigorous restrictions on payments to board members – only reasonable payment and only to a minority of board members (excluding principal and staff members) are permissible.
- Financial memorandum with the University of the Highlands and Islands requires strict adherence to highest governance standards or funding can be withheld.
- Core funding from UHI is predicated on a regional outcome agreement with Scottish Funding Council to which all academic partners are required to contribute.
- Scottish Funding Council monitor achievement of targets.
- Assigned status must be achieved by the college for UHI to be able to fund it for further education and to achieve this, rigorous standards of corporate governance must be demonstrated.
- All colleges, regardless of status, must comply with the Scottish Code of Good Governance 2016.
- The principal of the college must confirm to UHI on an annual basis that all governance and financial requirements are met.
- All colleges, regardless of status, are included in Audit Scotland’s annual review of colleges.
- Regular financial and compliance returns are required to be submitted to UHI as the Regional Strategic Body.
- All quality arrangements (Education Scotland and QAA) are linked to core funding.
- The college will be expected to sign up to national bargaining arrangements.
- Shadow Board Paper PB2019-22 (31st July 2019) - Legal Status of the New College (pdf).
- Merger Business Case, Appendix 2 - Legal Due Diligence (pdf).
- Code of Good Governance for Scotland’s Colleges (pdf).
- Guide for Board Members in the College Sector (pdf).
- Registered Charity No. SC050701 - Scottish Charity Regulator (OSCR) (external link)
- Company No. SC646337 - Companies House (external link)
- Articles of Association of Shetland UHI Ltd (pdf)
- Code of Conduct for Members of Shetland UHI Board of Management (pdf).