Securing student success: Regulatory framework for higher education in England

Section 3 of HERA states that the OfS must register a provider where it:

In order to be registered, a provider will need to demonstrate that it meets the definitions in HERA and the additional eligibility requirements set by the OfS. These are set out below.

Only a provider that is, or intends to become, an English higher education provider, as defined in section 83 of HERA, can apply to register with the OfS. There are three elements in determining whether an entity is an English higher education provider:

In order to determine whether an entity is an institution for these purposes, the OfS will consider the following principles:

An institution must be able to demonstrate that it can satisfy the initial and ongoing conditions of registration in its own right. Normally, this means that an institution will have all of the following characteristics, which will persist over time:

• its own name and brand identity, which makes it clearly distinguishable from other institutions or entities, to provide transparency for both students and the general public
• a clearly distinguishable student body for whose teaching the institution is responsible
• its own distinct governance structure, governing body and governing documents
• it will not be under the control of another entity which is itself registered with the OfS or which has applied to be so registered
• Its own separate, distinguishable finances that allow for the identification of the institution’s income and expenditure, balance sheet and cash flow.

It will have all of the above characteristics for legitimate business reasons, a primary or dominant purpose of which is not to enable the entity to be separately registered in the OfS Register.

If a provider cannot demonstrate that it has all of these characteristics, it is unlikely to meet the eligibility criteria for registration. If a provider satisfies the majority, but not all, of the characteristics, the principles that the OfS will consider to determine whether an exception should be made, so that the provider is eligible, include, but are not limited to:

• whether separate registration of the provider would provide greater transparency and benefit for students
• if the institution has historically existed, and for how long
• whether it appears that the institution is being established with a purpose of avoiding regulation, or elements of it
• how far registration of the provider would allow for regulatory alignment with other government departments or agencies. 

An entity (Entity A) will be under the control of another entity (Entity B) if any of the following applies:

• Entity B holds or is entitled to acquire a majority of the shares in Entity A
• Entity B holds or is entitled to acquire a majority of the voting rights in Entity A
• Entity B has or is entitled to acquire the right to appoint or remove a majority of the governing body of Entity A
• Entity B has or is entitled to acquire the right to exercise dominant influence over Entity A by virtue of provisions contained in either entity’s constitution or in a contract, memorandum of understanding or other document regulating the entity. Such provisions may include, but are not limited to, the right to approve Entity A’s business or financial plan or budget
• Entity B has or is entitled to acquire the right to a share of more than half the assets in the event of a winding up or in any other circumstances, or of more than half the income or profits, of Entity A
• Entity A is operated for the primary benefit of Entity B
• both entities are in common or overlapping ownership or managed on a uniform basis or have a significant number of governors (or the equivalent) in common
• Entity B has or is entitled to acquire the power, by any other means, to secure that the affairs of Entity A are conducted in accordance with the wishes of Entity B.

Where an entity is under the control of another entity the OfS expects that there will be transparency about the ownership, governance and financial viability and sustainability of the controlling entity to the extent that the OfS will be able to gain the same assurance from the controlling entity as it could from any English entity subject to UK laws.

Where there is a complex legal form, for example involving overseas control, the OfS may seek specialist advice including corporate intelligence and due diligence work from independent experts about these issues and may charge a fee to the provider for this work. If the fee is not paid, the OfS may decline to consider the application further. The OfS may apply a specific ongoing condition of registration if it is not satisfied that the same level of transparency and assurance over the controlling entity can be achieved as would be the case for any other entity subject to English law.

It may be possible for a provider to meet the requirement of being an English higher education provider without being a legal entity that is incorporated in England or the United Kingdom. An example might be, where a provider incorporated overseas carries on the majority of its higher education activities in England. As long as the provider can and does comply with the conditions of registration, being incorporated overseas of itself does not prevent registration.

Any activities in England will be subject to the relevant law as it applies in England, for example tax and equalities legislation, or HERA. The OfS may impose a specific condition of registration to ensure that a provider will submit to English law and the exclusive jurisdiction of the courts of England and Wales in proceedings relating to its English higher education provision (including where this is provided by a subcontractor).

There may be particular regulatory risks associated with providers that are not, and/or are not part of, a legal entity incorporated in the UK, which the OfS would take into account when assessing whether or not conditions of registration are satisfied.

In doing so, the OfS will consider principles including, but not limited to:

The OfS will be able to use specific ongoing conditions of registration to address any such risks, for instance to require sufficient financial resources to be held in the United Kingdom.

A provider that is based in England and meets the definition of an English higher education provider may also carry on some activity overseas, for example, by operating an overseas campus where it awards its own English degrees or by delivering distance learning provision to students based outside England. The OfS will regulate such overseas activity on the basis that the obligations of the registered provider extend to students for whom it is the awarding body wherever and however they study. The OfS would not regulate overseas activity where the registered provider is not the awarding body for students based outside England, for example, if it works in partnership with another awarding body that is not itself registered with the OfS. Where such unregulated activity exists, the OfS would, however, take into account any income or costs, or risks to management and governance, to which the registered provider is exposed in relation to any such activities or entities for the purposes of determining whether the registered provider satisfies its ongoing conditions of registration.

For the avoidance of doubt, paragraph 88 is subject to the effect of any condition of registration.

Students ordinarily resident in England are eligible to claim student support when attending higher education courses delivered by providers in Scotland, Wales and Northern Ireland. This requires designation of the courses by the Secretary of State for Education under powers in the Teaching and Higher Education Act 1998 (THEA).

Under the current arrangements, where providers in Scotland and Northern Ireland are authority funded (i.e. in receipt of funding from the relevant regulator and subject to the associated assurance and compliance regimes), their courses receive automatic designation by way of regulations made under THEA. This process is operated on a reciprocal basis and will continue once the OfS’s regulatory framework is fully implemented from 1 August 2019. This means that such providers are not eligible and so do not need to register with the OfS.

For students ordinarily resident in England to receive student support at courses delivered by non-authority funded providers in Scotland, Wales and Northern Ireland (i.e. alternative providers), the provider has to apply for specific course designation from the Secretary of State for Education. These powers will remain in force and enable the designation of such courses for the academic years 2018-19 and 2019-20. This means that such providers are not eligible and so do not need to register with the OfS.

Each registration category has its own initial and ongoing conditions of registration. The conditions of registration for each category are designed to be proportionate taking into account the benefits of that category and the need to protect students.

A provider must demonstrate that it satisfies the initial conditions of registration applicable to the category of the Register in which it seeks registration. The OfS may specify different initial conditions of registration for different descriptions of provider, and for different categories of registration.

In developing the initial conditions of registration, the OfS has had regard to its general duties as set out in section 2 of HERA.

The initial conditions of registration are designed to mitigate the risk that the OfS is not able to deliver its four primary regulatory objectives. The conditions are ‘baseline requirements’, i.e. the minimum level a provider must achieve to be registered. The conditions are expressed in terms of the outcomes that the OfS wishes to see, rather than the particular approach that a provider might take to achieve such outcomes.

Annex A in Part V below sets out the initial conditions of registration and the categories of the Register to which they apply.

With the exception of any condition that expressly provides that it only has effect as an initial condition, each initial condition of registration will become a general ongoing condition of registration when a provider has been registered. This means that a provider is required to satisfy these conditions both as it seeks registration and on an ongoing basis throughout the duration of its registration.

With the exceptions of the requirements for access and participation, and for receipt of public grant funding, the initial conditions of registration for providers in each category are the same. This is because all students, regardless of the type or level of funding that their provider receives, should expect their provider to meet minimum baseline requirements.

A provider seeking registration with the OfS must make a correct application that contains all the required information. The OfS has published guidance that sets out the information about a provider that it requires to be submitted in an application ‘Regulatory Advice 2: Registration of current providers for 2019-20’, and ‘Regulatory Advice 3: Registration of new providers for 2019-20’.

With its application, a provider is required to submit evidence that demonstrates that it satisfies the initial conditions of registration that are applicable to the registration category for which it is applying. The OfS will also be entitled to use other evidence that is available to it in assessing the application. The full evidence requirements for current providers seeking registration during 2018 are set out in guidance published in ‘Regulatory Advice 2: Registration of current providers for 2019-20’The full evidence requirements for new providers seeking registration from 2018 are set out in guidance here ‘Regulatory Advice 3: Registration of new providers for 2019-20’

The OfS will assess a provider’s application and relevant evidence to determine whether the provider satisfies the initial conditions of registration. The OfS may seek clarification and further information.

Where a provider is subject to the access and participation plan condition, there will be a process of negotiation between the Director for Fair Access and Participation and the provider before a plan is approved to ensure that the plan is sufficiently ambitious, strategic, evidence- informed, and appropriately resourced.

The OfS will carry out a formal risk assessment in relation to each of the ongoing conditions of registration in order to determine the extent of the risk that the provider will breach one or more of its general ongoing conditions. The risk of a future breach will be assessed taking onto account both the probability of a breach and the potential severity of its impact.

The OfS will consider the pattern of risk for the provider as a whole – across all ongoing conditions – to ensure that any regulatory intervention can be tailored specifically to the exact nature of any increased risk. The OfS will also seek to understand the underlying causes of any increase in risk, paying close attention to circumstances where an increased risk in one specific area, or a weak response to that risk, may indicate wider concerns about the provider, for example where there is a concern relating to governance arrangements.

The risk assessment of a provider will inform decisions about:

The risk assessment undertaken at the point of registration will not be published on the OfS’s Register, but any specific conditions applied as a result of the risk assessment, and the reasons for this, will be published unless the OfS considers it inappropriate to do so.

When the OfS has determined that a provider is eligible for registration and that it satisfies the initial conditions of registration, the OfS will determine which general and specific ongoing conditions should apply to that provider. It will do this in accordance with the requirements of the registration category in which the provider will be registered and on the basis of its risk assessment.

HERA allows the OfS to decide that one or more of the general ongoing conditions of registration may be disapplied for an individual provider when the provider is first registered or thereafter. In determining whether this would be appropriate, the OfS will give due consideration to those conditions that are fundamental to ensuring that student outcomes and interests are protected and that allow the OfS to carry out its regulatory function effectively.⁶

The expectation is that ongoing conditions will seldom be disapplied, as they are all closely aligned with protecting students.

If the OfS decides to register a provider it will list the provider in the relevant category of the Register.

If the OfS intends to refuse an application for registration it must follow the procedure set out in HERA. The OfS must first notify the governing body of a provider of its intention to refuse registration and the reasons for this. It must set out the method and timeframe (which must not be less than 28 days from when notification is received) for the governing body of the provider to make representations about the intention to refuse to register the provider. The OfS must consider these representations before making its decision and must inform the provider of its decision. If the decision is to register the provider, the OfS will confirm the provider’s date of entry to the Register and the ongoing conditions of registration that will apply. If the decision is to refuse registration, the OfS must set out the grounds for refusal.

If a provider fails to meet the registration requirements, it may reapply to the OfS for registration once it has taken action to address any areas of non-compliance.