Having taken the keys of a troubled borrower from a sponsor, it is not uncommon for the new private credit owner to find that the management team may not be the right people to take the business forward and senior exits need to be contemplated.
With significant changes to employment law on the horizon, now is a good time to consider how those exits can be managed in the next six months and how the position will change from 2027.
Unfair dismissal: the current position and the upcoming changes
Currently employees with two or more years’ continuous service qualify for unfair dismissal protection. If an employee is dismissed unfairly, they can claim additional compensation. In order to dismiss an employee fairly, an employer must (i) have a fair reason for the dismissal (and, in all the circumstances, act reasonably in treating that reason as sufficient for dismissal), and (ii) conduct a fair process prior to the dismissal. The statutory fair reasons for dismissal include capability and performance, but the “fair” process required can be arduous.
Capability dismissals require the employer to give the employee sufficient chance to improve their performance. Typically where no improvement is made, a series of written warnings is given, which can lead to dismissal. However, from start to finish this process can take 4-6 months and requires significant management involvement and supervision. For C-suite employees, the process is even less straight forward. Appropriate target...
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