In a judgment handed down last week concerning the revocation of the sponsor licences of two colleges, the High Court has considered the Tier 4 rules on changes of ownership for the first time.
In R (on the application of Grenville College London Ltd and another) v Secretary of State for the Home Department  EWHC 1065 (Admin), it was submitted that because a transfer of shares had produced the change of ownership rather than the sponsor having ceased operating or trading or there having been a sale of the business, there was no requirement for a new licence to be obtained by the new owners.
Her Honour Judge Coe QC was not minded to accept this argument and concluded that:
‘…to apply the construction relied on by the Claimants would produce a potentially absurd outcome whereby the sponsor business could in reality be sold by way of transfer of all its shares between private individuals but its licence would continue without the Defendant having any power to revoke it.’
What does this mean in practice?
Those who are thinking of buying or investing in a business that holds a Tier 4 sponsor licence must consider carefully whether or not the licence can be retained or if a new licence must be applied for.
As the judge commented, the rules have been clarified and paragraph 33 of the current Tier 4 sponsor guidance (document 3: sponsors duties and compliance) now clearly states that:
‘If there is a change in ownership of your organisation or business, for example if it is sold as a going concern or a share sale results in the majority number of shares being transferred to a new owner, we will revoke your sponsor licence. The new owners of the business must then apply for a new sponsor licence (unless they already have one) if they wish to continue teaching any migrants that you were sponsoring before the change of ownership.’
If a new licence must be obtained then the rules require that the new owners must, inter alia, hold a licence for 12 months before an application for HTS can be made.
Agents and prospective students may not understand or be concerned about the perfectly legitimate reason for the lack of HTS status during this time and may simply discount the college as a viable study option. These issues should therefore be considered carefully by the parties during negotiations.
Depending on the specific circumstances and how the transaction is structured it can also be possible to retain the licence and we have found on a number of occasions that there is some room for UKVI to be flexible in certain circumstances.
We have considerable experience in navigating clients and their commercial legal advisers through the Tier 4 rules and if you require legal advice on this area of law, please do contact us.