Asset Sale: Legal and Commercial Issues
LO1: asset sale v share sale
Asset sale -> more clauses (i.e assets, contracts, creditors, book debts, employees etc.)
Asset sale -> schedules
Excluded assets -> important for Seller bcs they obviously want those assets and to use them
LO2: Employment issues: asset sale
4 Categories of employees:
Employees of Target Employees will automatically transfer to NewCo 2 under TUPE
Bcs sale of business is a transfer of an undertaking under TUPE
Freelancers of Target They will not be affected by TUPE
(not employment If NewCo2 wants to engage them -> novation or renegotiations of contracts
contracts) If HMRC is investigating -> extra provisions in agreement to address this
Employees of T’s sub They will not be affected by TUPE
Sub will remain their employer (cuz it’s like a ‘mini share sale’)
Shared payroll staff This can be an issue -> empl-ees provide work for dif. cos in group structure
(1) TUPE only applies to the following transactions:
‘relevant transfer’ i.e sale of business as a going concern
previous common law position: employment contract was terminated: claim for redundancy
and/or unfair dismissal -> NO LONGER APPLICABLE
(2) TUPE only affects the following employees:
2-limb test re ‘relevant transfer’:
Limb 1: Regulation 4(1)
person must be employed by the transferor (or party of business); and
assigned to the organised grouping of resources or employees that are subject to the
relevant transfer (i.e employees must work for the business or part of the business being
transferred)
Issue arises when part of a business is sold: Botzen (ECJ) TEST or Duncan Webb
Test is whether the employee is ‘assigned’ to the part of the business being sold
Factors to be considered as to whether an employee is ‘assigned’:
o Amount of time employee spends working for that part of business
o Costs allocated to the employee’s services in that part of the biz compare to others
o Contractual terms of the employee’s employment indicating that they work in one part
of the business primarily over the other.
Limb 2: Regulation 4(3)
Employee must be employed in the business being sold immediately before the transfer
DUTIES on Seller and Buyer re EMPLOYEES - Reg.13 TUPE
1) Duty to inform and consult – Reg.13 TUPE
Buyer + Seller = Duty to inform (re biz sale – ALWAYS) and consult representatives before sale (in practice, it’s the Seller)
o consultation only needed if ‘measures’ are planned by B , i.e: redundancies
o Reps = elected employee representatives or trade union reps
o Trade Union must be consulted if it exists
Regulation 13A – micro businesses (i.e co’s w/t less than 10 employees)
o May inform and consult employees directly on a TUPE transfer
2) Buyer and seller = jointly and severally liable under TUPE if they fail to inform or consult
buyer will want the S to give a WARRANTY + INDEMNITY to ensure compliance
Employees can claim up to 13 weeks’ pay per employee
Employees have 3 months to bring a claim at the employment tribunal
Commercial Management of Uncertainty
TUPE can cause uncertainty for B & S
parties can’t opt out of TUPE -> empl-ees transfer automatically
Examples of uncertainty: (1) shared staff; and (2) freelancers
LO1: asset sale v share sale
Asset sale -> more clauses (i.e assets, contracts, creditors, book debts, employees etc.)
Asset sale -> schedules
Excluded assets -> important for Seller bcs they obviously want those assets and to use them
LO2: Employment issues: asset sale
4 Categories of employees:
Employees of Target Employees will automatically transfer to NewCo 2 under TUPE
Bcs sale of business is a transfer of an undertaking under TUPE
Freelancers of Target They will not be affected by TUPE
(not employment If NewCo2 wants to engage them -> novation or renegotiations of contracts
contracts) If HMRC is investigating -> extra provisions in agreement to address this
Employees of T’s sub They will not be affected by TUPE
Sub will remain their employer (cuz it’s like a ‘mini share sale’)
Shared payroll staff This can be an issue -> empl-ees provide work for dif. cos in group structure
(1) TUPE only applies to the following transactions:
‘relevant transfer’ i.e sale of business as a going concern
previous common law position: employment contract was terminated: claim for redundancy
and/or unfair dismissal -> NO LONGER APPLICABLE
(2) TUPE only affects the following employees:
2-limb test re ‘relevant transfer’:
Limb 1: Regulation 4(1)
person must be employed by the transferor (or party of business); and
assigned to the organised grouping of resources or employees that are subject to the
relevant transfer (i.e employees must work for the business or part of the business being
transferred)
Issue arises when part of a business is sold: Botzen (ECJ) TEST or Duncan Webb
Test is whether the employee is ‘assigned’ to the part of the business being sold
Factors to be considered as to whether an employee is ‘assigned’:
o Amount of time employee spends working for that part of business
o Costs allocated to the employee’s services in that part of the biz compare to others
o Contractual terms of the employee’s employment indicating that they work in one part
of the business primarily over the other.
Limb 2: Regulation 4(3)
Employee must be employed in the business being sold immediately before the transfer
DUTIES on Seller and Buyer re EMPLOYEES - Reg.13 TUPE
1) Duty to inform and consult – Reg.13 TUPE
Buyer + Seller = Duty to inform (re biz sale – ALWAYS) and consult representatives before sale (in practice, it’s the Seller)
o consultation only needed if ‘measures’ are planned by B , i.e: redundancies
o Reps = elected employee representatives or trade union reps
o Trade Union must be consulted if it exists
Regulation 13A – micro businesses (i.e co’s w/t less than 10 employees)
o May inform and consult employees directly on a TUPE transfer
2) Buyer and seller = jointly and severally liable under TUPE if they fail to inform or consult
buyer will want the S to give a WARRANTY + INDEMNITY to ensure compliance
Employees can claim up to 13 weeks’ pay per employee
Employees have 3 months to bring a claim at the employment tribunal
Commercial Management of Uncertainty
TUPE can cause uncertainty for B & S
parties can’t opt out of TUPE -> empl-ees transfer automatically
Examples of uncertainty: (1) shared staff; and (2) freelancers
