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Steps you need to take when buying a business

Last week’s article focussed on ‘Purchasing a Business’ and over the next couple of weeks Lorraine Walker and Manjit Kaur-Heer, who work in our Litigation and Dispute Resolution Team, will be raising awareness of issues relating to a purchase, the first being in relation to your future employees

TUPE refers to the “Transfer of Undertakings (Protection of Employment) Regulations 2006” and protects employees’ rights when the organisation or service they work for transfers to a new employer.   

Firstly, does TUPE apply to your purchase?   TUPE applies where there has been a ‘relevant transfer’ which is defined in statute as meaning ‘transfer of an economic entity which retains its identity”.   There are a few but possible exemptions so if in doubt, always check!

As a future employer you need to work with the outgoing employer to ensure compliance with the regulations which place an emphasis on the outgoing employer to 1) provide employee liability information to you as the incoming employer and 2) inform and consult with staff.

 You are probably now thinking that obligations rest with the outgoing employer so how am I affected and why should I get involved?   Well, a failure to inform and consult can result in a joint and several liability between the outgoing and incoming employer so the failure of the outgoing employer can result in costs to you.    

Depending on the seriousness of the failure, a tribunal can award up to a maximum of 13 weeks’ pay per affected employee.

The message you’ve hopefully now got is DO NOT LEAVE YOURSELF OPEN TO RISK and:

  • ensure the contract governing the purchase includes clauses for the apportionment of liability
  • consider diving up TUPE liabilities between by way of contractual indemnities
  • ensure you receive employee information as early on in the transaction as possible (the law says not less than 28 days’ before transfer)
  • work with the outgoing employer and attend information and consultation meetings with employees and/or their representatives and start it early – 28 days before completion may be too late.
  • set out any changes or proposals for change in a clear and simple format and ensure all affected employees and/or their representatives receive a copy and know how, where and the timescales in which to respond.
  • Do not assume that the information provided is correct and carry out your own checks after transfer such as right to work

We hope you’ve enjoyed our article and learnt a little about TUPE.     Willsons Solicitors can help you with all of your business needs and don’t hesitate to call us on 02476 387 821.