The High Court in has recently confirmed that the Transfer of Undertakings (Protection of Employment) Regulations 2013 (TUPE) do not apply to a mere share sale. But this case has brought to our attention to a reminder that this will not always be the case.
Broadly speaking, TUPE is generally understood to apply when the business or part of a business (or service) transfers out of company A into company B. When company B takes over company A by buying its shares, however, there is no change in the identity of company A, and TUPE therefore does not usually apply.
Where TUPE applies, the employment of employees attached to the business or service also transfers from company A into company B.
However, in Millam v Print Factory (London) Ltd 2007, the Court of Appeal held that TUPE had applied following a share sale and purchase. The reason was, that notwithstanding the share sale agreement gave the superficial impression that no TUPE transfer had occurred, after acquiring the shares in Fencourt Printers Limited (for whom Mr Millam worked) McCorquodale Confidential Print Ltd had done far more than a simple shareholder would have done following a simple sale. It held that Mr McCorquodale’s handling of a significant element of the management of Fencourt set its actions apart from those of a mere shareholder and therefore TUPE had applied to transfer Mr Millam’s employment from Fencourt to McCorquodale.
Implications for Employers
Employers need to ask themselves are the circumstances of Millam and Fencourt really that exceptional?
Companies/Investors often take over management functions of a company acquired by a share purchase. When deciding whether to change the terms and conditions of employees or if considering redundancies after a share sale and purchase, companies need to remind themselves that TUPE may apply and first consider who is the employer.