UHI Rural and Island Colleges Merger

Following this, considerable discussion was taken forward between the colleges culminating in a visioning event in early September 2021 where staff and students from four colleges met to discuss their shared vision of what a new merged organisation could achieve, and what benefits and opportunities this could bring to students, staff and communities.

These perceived benefits of merger were tested with staff and students and three colleges formally confirmed that merger was their preferred strategic option.

The three colleges – UHI North Highland (North Highland College), UHI West Highland (West Highland College) and UHI Outer Hebrides (Lews Castle College) – began a joint, strategic project that would bring them together to form a new college within the University of the Highlands and Islands partnership.

The three colleges established a Partnership Board in September 2021 which was delegated responsibility to progress the merger, including overseeing the development of merger plans that would achieve the vision and aims set out in the options appraisal, consultation with stakeholders, developing the Merger Proposal and Business Case, and submitting it to the Scottish Government.

Membership included the Partnership Board Chair, Chairs and Principals of the three colleges, representatives of UHI, HIE, staff, students and the SFC (as observers). The Partnership Board meet monthly.

An Outline Business Case (OBC) was issued for consultation in December 2021 which set out the principles that would underpin the new college and provided an early indication of what a merged college might look like, and the potential benefits it would bring to the region. This was used to engage staff in discussion about the merger and offered them an opportunity to provide feedback on an early direction of travel.

A merger coordinator was recruited in January 2022. In addition to overall project management, the merger coordinator was responsible for updating partners on all aspects related to the merger, including the timeline, workstreams, the merger budget and risks. The merger coordinator in this case was also responsible for producing the Merger Proposal and Business Case, and for liaising with other partners including SFC and legal advisors.

In March 2022 SFC provided Phase 1 funding to UHI to support the development of the merger proposal and business case and carry out a consultation. This funding covered the costs of staffing, including the Merger Coordinator, travel and subsistence, and other merger related expenses.

One of the Partnership Board’s first tasks was to decide on a model for merger and whether the new college should be incorporated or non-incorporated. At the time, UHI North Highland and UHI Outer Hebrides were incorporated colleges and UHI West Highland non-incorporated. Initially, there was strong support for non-incorporated being the preferred form for the new college due to the financial flexibility it offered. However, following advice from stakeholders and the Trades Unions it was accepted that incorporated status was likely to be required to ensure the continuation of existing pension arrangements.

Following the consultation, and discussion with stakeholders, in May 2022, the Partnership Board and the boards of the partner colleges agreed to a merger using a fusion model whereby the assets and liabilities of West Highland College and Lews Castle College are transferred to North Highland College (the ‘host’) to create the merged college.

The term incorporated college refers to a college with a board of management established under the Further and Higher Education (Scotland) Act 1992. Incorporated colleges are classified as public bodies and as such, are unable to retain financial reserves. They are also subject to Scottish Government oversight and will have a Chair appointed through a public appointments process. Where a college is assigned to a Regional Strategic Body (RSB), the RSB will appoint the chair.

Once the colleges agreed how the merger should move forward (‘host’ and incorporated) the partners started a process of Due Diligence to explore all known risks and opportunities before the individual boards were asked to reach a decision.

Due Diligence builds the knowledge base that each of the merging partners has about the other and should help to build trust. It is important to know if there are any ‘deal breakers’ that could lead to a challenge to the merger progressing.

Due Diligence generally refers to financial Due Diligence, but the merging boards were also required to consider legal (and property) Due Diligence. Appropriate external, independent financial and legal advisors were appointed to carry out this work, which was completed in May 2022.

Following the decision to merge, the Partnership Board began the process of developing the Merger Proposal and financial Business Case. The Merger Proposal is the document that provides the case for merger, the evidence of what the new institution will deliver and how it will get there. It contains clear aims and objectives and the necessary steps and timescale for implementation. It also includes the outcomes of the legal and financial Due Diligence reports. The financial Business Case sets out a financial analysis and five-year forecast for the merged college.

The merger proposal for the Rural and Islands College merger was published prior to a 10-week consultation on 5 August 2022 and, following some refinement prompted by consultation responses, was formally submitted to the Scottish Government on 10 November 2022.

SFC provided Phase 2 funding in September 2022. This funding was provided to support staffing, legal advice expenses, the commissioning of legal and financial due diligence and a range of other merger-related activity up to vesting day.

In October 2022, a team from SFC, along with representatives of the senior team and Board at UHI, visited the three merging colleges to speak with staff, students and Trades Union representatives about the merger. These visits, along with SFC’s role as observers on the Transition Board contributed towards the development of SFC advice to the Scottish Government on the merger.

On 14 November 2022, the Principal Designate was appointed. This triggered the process to recruit the Transition Board Chair, resulting in an appointment in February 2023. This, in turn, triggered the appointment of Board members. The Transition Board Chair was appointed by the Regional Strategic Body; the Chair and Board members, became the Board of Management of the merged college from vesting day.

On 15 December 2022, SFC provided advice on the proposed merger to the Cabinet Secretary and the (then) Minister for HE and FE, Youth Employment and Training. This advice set out SFC’s analysis of the proposed merger, including the due diligence reports; the SFC view on the financial sustainability of the merged college; impacts on the provision of coherent learning across the region; and a discussion of the likely benefits and potential risks of the merger.

Following receipt of the Merger Proposal and Business Case the Scottish Government opened their own consultation on the merger on 24 February 2023. This ran for 10 weeks until 5 May.

In May 2023 the Scottish Government formally approved the merger and a negative Scottish Statutory Instrument (SSI) for the transfer and closure of Lews Castle College was laid before the Scottish Parliament on 2 June 2023. Generally, SSIs must be laid for at least 28 days before they come into force. Following this, UHI Outer Hebrides became part of UHI North Highland.

The winding up of UHI West Highland did not require a parliamentary process because it was non-incorporated and so, not a Scottish public body.

The Office of the Scottish Charity Regulator (OSCR) is the independent Regulator and registrar for Scotland’s charities, which include colleges. OSCR consent was required for West Highland College and Lews Castle College to wind themselves up (or dissolve) and transfer their assets and liabilities to North Highland College.

An application for consent submitted and following OSCR’s consideration of whether this complied with charity law and the requirements set out in the colleges governing documents, approval was confirmed on 12 June 2023.

In June 2023, the Chair of the UHI North Highland Board wrote to the Scottish Government seeking approval to change the legal name of the Board of Management of the North Highland College to the new name: The Board of Management of UHI North, West and Hebrides (with effect from vesting day, 1 August 2023).

Following this, the merged college now uses, as its operating name, “UHI North, West and Hebrides”. Once consent was given, this was then approved by OSCR and became the name of the new college.

Several key milestones took place on vesting day, including:

• The Transition Board merger into the Board of Management of UHI North, West and Hebrides.
• The TUPE of all existing staff, and their then terms and conditions, to the merged college.
• The transfer of contracts, properties, and lease agreements to the new college.
• The process for the implementation of shared systems (e.g., HR and Finance systems).