TUPE on a share sale? Surely some mistake

When a buyer wants to acquire an existing business, it has two basic options: it can either acquire the shares in the company that operates that business or it can acquire the individual assets that comprise that business directly from the company that currently operates it. In both cases, the commercial effect of the acquisition is similar: the buyer takes over the business and its operation. Legally, however, the two transactions are quite distinct, particularly for any affected employees.

On a share sale, it is the ownership of the entity operating the business, rather than the ownership of the business itself, that changes. Assets continue to be owned by the target company, contracts continue in the name of that company and, crucially, there is no change of employer for the target’s employees.

On an asset sale, however, individual assets and contracts, including employment contracts, transfer into the name of the buyer. From completion, therefore, the target’s employees will have a new employer — the buyer. The law has evolved to protect employees in this situation and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) ensure that the target’s obligations and liabilities in respect of the employment contracts are transferred to the buyer…

Click on the link below to read the rest of the Gateley briefing.

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