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Employment Law

Legal guidance - compliance - software

28 MAY 2012

TUPE, administration and minimising employee liabilities for transferees

Nick Smith and Douglas Leach
Guildhall Chambers


1.       As a general rule, in practice it is fairly unlikely that an administrator will be directly interested in what happens to the purchaser of a business after the event, as long as the administrator's job is done and fees/expenses are paid. It is equally unlikely that the administrator will offer the purchaser any indemnities against potential employee liabilities that might arise out of the transaction, which may not come to light until several months later, when employment tribunal claims start rolling in.

2.       However, the administrator will generally be interested in the price that the purchaser pays. Indeed, the administrator is under a professional duty to try to achieve the best price possible. For that reason, some recent legal developments in the employment law sphere ought to be of interest. Their effect on the price a purchaser will be willing to pay, if sufficiently well advised, could be significant. Moreover, there are practical steps that can be taken by administrators which would reduce potential liabilities for purchasers (thereby increasing the value of the business being sold), and which purchasers can look for in order to inform themselves properly as to what they are buying. It is not proposed however to deal with the limited means by which liabilities for a failure to consult may be contained, since that would constitute a substantial lecture in itself.

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