Communicating with Employees During a Business Sale
When purchasing an existing company, it is important to consider whether employees must be kept due to laws around the TUPE transfer of employees. Providing clarity about their future is essential as the transition of ownership can create commotion for the workforce.
When buying a business with employees, the seller must announce the transfer of ownership to all staff through a trade union or representative and provide details about the transfer, including its implications for employees and new measures. Consultations with all staff members, including those not being transferred, are necessary to discuss their futures and any changes.
TUPE (Transfer of Undertakings Protection of Employment) applies to all businesses being transferred via asset purchase and protects employees’ rights during a business sale. When applicable, the employees’ roles automatically transfer to the buyer, including their contractual terms and conditions and related liabilities. The buyer is obligated to protect staff from unfair dismissal and declare any changes impacting them. When TUPE does not apply, the buyer has the option to retain the workforce, and an ETO reason is required if staff transfer is not desired.
TUPE ETO reasons must be given if employees are not being retained during a transfer of ownership to prevent wrongful dismissal claims and employment tribunals. Economic, technical, and organisational reasons can be used to justify staff changes. When buying a business with employees, the buyer has a legal right to employee liability information, which includes agreements, grievances, disciplinary records, and legal actions over the previous two years. Failure to receive this information can result in legal action.
When buying a business with employees, compliance with TUPE regulations is necessary, and staff are expected to transfer to the new ownership unless a valid TUPE ETO reason applies. If staff are not retained, it is common to offer a reasonable settlement or agreement to affected employees. Dismissals not under ETO may be considered unfair, leading to legal liabilities. It is crucial to seek legal advice during the TUPE transfer to ensure compliance and legal coverage.
When buying a business, various important factors should be considered, including financial due diligence, legal assessments, existing contracts, employee welfare, liabilities, business valuation, and market analysis. Professional legal advice and a well-executed strategy are critical for a successful acquisition.
Thursfields provides comprehensive strategies tailored to individual circumstances, covering mergers and acquisitions, corporate governance, employment matters, financial disputes, and more. Our services are built around clients’ objectives, and they approach each situation with an open mind. Contact us today on 0345 2073 728.
