A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
What Is TUPE and When Does It Apply?
TUPE - the Transfer of Undertakings (Protection of Employment) Regulations - protects employees when a business or part of a business is transferred to a new owner. It applies in certain insolvency situations, most commonly where a business is sold as a going concern (for example, in a pre-pack or administration).
Understanding TUPE matters for both directors selling a business and employees whose jobs may be affected.
What TUPE Does
When TUPE applies:
- Employees transfer to the new owner on their existing terms and conditions
- Continuity of employment is preserved - years of service carry over
- Dismissal for a transfer-related reason is automatically unfair, in most cases
- The new employer inherits the employees' rights and liabilities
When TUPE Applies
TUPE generally applies where there is a "relevant transfer" - a transfer of a business or undertaking that retains its identity. In an insolvency context, this is most common where:
- A business is sold as a going concern in an administration or pre-pack
- A business is transferred as part of a CVA or restructuring
When TUPE Does Not Apply
TUPE generally does not apply in a straight liquidation where the company simply closes and assets are sold piecemeal - there is no transfer of an undertaking. In that case, employees are made redundant and claim from the Redundancy Payments Service.
What It Means for Directors
If you are selling a business as a going concern, TUPE may apply, and the buyer will inherit the employees. This can be positive - it preserves jobs - but it also means the buyer takes on employment liabilities. Proper advice is essential to structure the sale correctly.
What It Means for Employees
If TUPE applies to your transfer, your employment continues with the new owner on the same terms. You cannot be dismissed simply because of the transfer, and your continuity of service is preserved.
Speak to a Licensed IP
If you are selling a business or facing a transfer, our Manchester-based practitioners will advise on whether TUPE applies and how to handle it correctly.