NOVA scrabbles for court protection with 43.9 billion yen of debt

NOVA Corp., Japan’s largest English conversation school chain, took a further dive Friday morning, after filing for court protection from creditors under the Corporate Rehabilitation Law.

The Osaka District Court is expected to appoint a receiver to try and rehabilitate the scandal-tainted firm, which currently has liabilities totaling 43.9 billion yen.

Prior to the filing, NOVA dismissed its president, Nozomu Sahashi, at an extraordinary board meeting in Tokyo late Thursday night, which he refused to attend.

Sahashi opened NOVA in the Shinsaibashi district of southern Osaka in 1981, and the chain grew rapidly through its aggressive TV marketing campaign. With about 900 schools and some 418,000 students as of late March this year, NOVA became the largest language school operator in the country.

However, it failed to employ enough instructors to teach its rapidly growing student base, and as a result, many complained that they often couldn’t book any lessons.

Furthermore, the Supreme Court ruled in April that NOVA was breaking the law when it refused to refund tuition fees to students who cancelled their contracts. In June, the Economy, Trade and Industry Ministry banned NOVA from some of its business activities after concluding that 18 reported cases of refusing to refund tuition fees and other business practices were illegal.

After losing a significant number of students over the scandal and with its financial situation rapidly degenerating, NOVA desperately attempted to find new investors while closing and integrating more than 100 of its schools. The company has also suspended wages for many of its instructors and staff, apparently leaving some instructors facing eviction from their NOVA-run housing.