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9-04-2014

Businesses often assume that TUPE is only triggered where there is a sale of assets in a business, not shares. However, as the case below indicates, in the case of a share sale, there can also be pitfalls for the unwary.

M Ltd, the subsidiary company of MG Ltd, purchased 100% of the shares of J Ltd. J Ltd employed over 400 people.

For commercial reasons to preserve J Ltd’s contracts and to avoid the risk that a re-tendering process would be triggered, the outward appearance to be given was that J Ltd was a separate company in competition with MG Ltd. However it was not really an independent company.

The Tribunal found that, as from 1 October 2010, J Ltd was nothing other than a trading name. The Employees brought a claim for a protective award (failure to consult) against MG arguing that their employment had TUPE transferred to it.

The Employment Tribunal ruled that the transfer had occurred. Following the share purchase by M Ltd, MG Ltd began to operate J Ltd’s business, so as to trigger TUPE.

The case demonstrates the pitfalls of TUPE. While the transfer of ownership of J Ltd was by way of a share sale, the fact that another company effectively took over the running of J’s business was enough to trigger a TUPE transfer of the employees.

See: Jackson Lloyd Ltd and Mears Group PLC (Appellants)
(1) Smith and Others; (2) UCATT; (3) Williams and Others (Respondents)

Sarah Rushton (srushton@moonbeever.com)

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information.

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