If the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply to a business sale, it has significant ramifications for both the buyer and seller. This Inbrief examines how the business transfer agreement can best cater for these issues.

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Inside

Buying a business – what if TUPE applies?

On a business sale, if the assets sold amount to “an economic entity which retains its identity”, TUPE will apply. As we have discussed previously in our M&A employment law support series, the main ramifications of TUPE applying are:

• there is a prescriptive information and consultation process which must be carried out before completion, failing which both seller and buyer may face legal claims; and

• employees who are assigned to the business will automatically transfer on their existing terms and conditions, meaning rights and liabilities also transfer to the buyer.

It is unsurprising, then, that a significant amount of time is devoted to the TUPE provisions in any business transfer agreement (BTA), to ensure that the correct process is followed, liabilities are apportioned appropriately and both parties have reasonable and reciprocal protection against any claims.

Information and consultation – the potential pitfalls

At the outset, it is worth noting that failure to inform and consult under TUPE can be a joint and several liability between the seller and the buyer. This means that when it comes to...

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