Asset sales Flashcards

1
Q
  • An asset sale will contain the following provisions:
A
  • Recitals
  • Interpretation
  • Shares to be sold
  • Price
  • Completion accounts*
  • Conditions precedent*
  • Completion arrangements
  • Restrictive covenants
  • Warranties
  • Includes limited tax warranties e.g. in relation to the VAT position of the business and PAYE compliance
  • Indemnities
  • Not including tax indemnities
  • Seller protections
  • Boilerplate clauses
  • Further provisions in consequences of the way in which the transaction is structured.
  • Drafted for a simultaneous signing and completion but there may be reasns for why parties do not want this
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q
  • Third party contracts - assignment
A
  • A contract has both a benefit and a burden. For example, in a distribution agreement, the seller produces goods which are then passed to the third party for distribution around a relevant market. The benefit for the seller is receiving a price for the goods passed on but the corresponding burden is to produce and make the goods which are to be distributed.
  • If the buyer wants to take on the distribution arrangements, the seller may be able to assign the benefit of the contracts to the buyer but in law the burden cannot be assigned. Every contract must be examined as part of the due diligence process to see if it can be assigned or whether any clauses prevent this. There may be an outright prohibition on assignment or assignment may only be permitted with the prior consent of the third party
  • Easier because you don’t need to ask third party for consents but there need to be rights to assign
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q
  • Third party contracts – Novation and negotiation of a fresh contract
A
  • Novation
  • If the seller wants to be released from outstanding obligations, it may be possible for the contract to be novated. This means that the other contracting party will release the seller from the contract and allow the buyer to take over the benefit and the burden of the contract (effectively the buyer steps into the seller’s shoes and becomes a party to the original contract in place of the seller).
  • Novation will always require the consent of the third party and is often used for key contracts or unassignable contracts.
  • Negotiation of a fresh contract
  • If the third party does not agree to novation and assignment is either not permitted under the contract or is not commercially acceptable as the seller wants to pass both the benefit and burden of the contract to the buyer, then the buyer may want to try and negotiate a fresh contract with the third party.
  • This gives the buyer scope to negotiate new terms and conditions if the current ones are commercially unacceptable. The terms of any fresh contract will, of course, depend on the relative bargaining power of the buyer and also the third party.
  • However, negotiating a fresh contract will raise issues of confidentiality and timing.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q
  • Timing and confidentiality: Conditions precedent
A
  • Whenever a third party is to be approached, either for permission to assign or novate or with a view to negotiating a fresh contract, the buyer and seller will have to consider the timing of the approach very carefully in the light of confidentiality undertakings that have been given and the damage that could be done to the business if news of the proposed sale were to leak out.
  • The method of any approach to a third party is usually agreed by the seller and buyer before an approach is made. The parties should take care to avoid placing themselves in a disadvantageous negotiating position with the third party. For example, if a deal is announced which is conditional on a new third party contract, this could give the third party a very strong bargaining position.
  • In some cases, it will therefore be appropriate to delay contacting the third party until all the other terms of the transaction have been agreed. If a contract is very important to the target business, the seller and buyer may agree to sign the acquisition agreement but make the satisfactory assignment or novation of the contract or the satisfactory conclusion of a fresh contract with the third party a condition precedent to completion.
  • The parties will therefore be contractually bound to proceed with the transaction unless the assignment, novation or negotiation of a fresh contract is not obtained.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q
  • Timing and confidentiality – low value contracts
A
  • For low value or less important contracts, the parties may not want to wait to obtain consent to assign or novate these contracts before they go ahead and complete. Completion is unlikely to be conditional on (and therefore signing and completion will not be split purely because of) assignment or novation of these lower value or less important contracts. On completion of the acquisition such contracts will often still legally remain with the seller and the parties will agree to have them assigned or novated as soon as possible after completion.
  • With the lower value and less important contracts, novation is often effected by conduct. For example, if after completion the third party accepts performance by the buyer under the contract and pays for goods or services which the buyer provides, it can often be said that the contract has been novated by the conduct of the buyer and the third party.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q
  • Methods of transfer of UK assets typically included in an asset sale
A

· Premises - by deed, TR1
· Fixed plant and equipment - title will transfer with the premises
· Loose plant and equipment - title will pass by delivery
· Raw materials - title will transfer by delivery
· Work in progress - title will pass by delivery
· Stock - title will pass by delivery
· Vehicles - registration of anew registered keeper at DVLA
· Existing contract with customers and suppliers - assignment or novation
· Books and records - title will pass by delivery
· Intellectual property - assignment (and registration if applicable)
· Goodwill - title will pass in accordance with the acquisition agreement or there may be a separate deed of assignment
· IT systems - hardware will pass by delivery and software by assignment
· Employees - contracts of relevant employees will automatically transfer under TUPE
· Debtors - assignment
· Shares in UK subsidiary - stock transfer form

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q
  • How do you assess whether an employee is ‘assigned’ to the business being transferred?
A
  • Where only part of a business is being transferred, or where employees work in more than one business operated by a company, employees will not transfer to a buyer if they are not ‘assigned’ to the business or part business transferred.
  • The court will look at an employee’s function rather than the terms of their employment contract to determine whether employees are wholly engaged or assigned to the business (Botzen v Rotterdamsche Droogdok Maatschappij [1986] 2 CMLR 50).
  • The Employment Appeal Tribunal has set out further guidance in the Duncan Webb case – Duncan Webb Offset (Maidstone) Ltd v Cooper & Others [1995] IRLR 633. In determining the question of whether an employee is ‘assigned’ to the business or part business transferred, tribunals should consider the following:
  • the amount of time spent working in one part of the business over the other;
  • the value given to each part of the business by the employee;
  • contractual terms setting out what the employee’s job comprises; and
  • the allocation of the cost for the employee’s services.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q
  • Can sellers dismiss employees before a transfer to prevent the automatic transfer principle applying?
A
  • Employees only transfer if they are employed in the business being sold immediately before the transfer. However, if they would have been so employed if they had not been dismissed in certain circumstances prior to the transfer (Reg. 4(3)), the dismissal will be automatically unfair and liability for the dismissal will transfer.
  • The circumstances that would lead to dismissals being deemed to be automatically unfair and liability for that dismissal transferring to the buyer are set out in Regulation 7(1) - which provides that if the sole or principal reason for an employee’s dismissal is the transfer itself, it is automatically unfair UNLESS the dismissal was for an economic, technical or organisational reason entailing a change in the workforce (‘ETO Reason’) (see Reg 7(2)). ETO Reasons could include (for example) a reduction in the requirement for employees carrying on a particular function in the business
  • Whether or not the sole or principal reason for a dismissal is the transfer itself is a question of fact. Dismissals occurring shortly before or after completion of the sale are likely to be by reason of the transfer. It is important for these purposes to know when the transfer took effect.
  • If the transfer is the reason for the dismissal, then either (1) there is no ETO Reason for it – in which case the dismissal is unfair and the liability for the dismissal transfers to the buyer under TUPE; or (2) there is an ETO Reason – in which case the dismissal is potentially fair (as a redundancy or a dismissal for another substantial reason) and liability will not transfer to the buyer.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q
  • What rights and liabilities do not transfer automatically?
A
  • Under TUPE the buyer inherits the transferring employees on the terms and conditions which existed with the seller and with their continuous employment. The buyer also inherits all accrued rights and liabilities under or in connection with the employment contracts of the transferring employees: for example, an employee can sue the buyer for a breach of contract or acts of discrimination committed by the seller pre-transfer. This highlights the requirement for through due diligence.
  • However, TUPE does not transfer:
  • rights and liabilities under or in connection with a contract of employment that relate to an occupational pension scheme, and which relate to benefits for old age, invalidity or survivors Reg 10(1). However, an employer’s liability in respect of (i) contributions to a personal pension scheme, (ii) provision of life assurance benefits, (iii) certain enhanced early retirement/redundancy benefits under an occupational pension scheme will transfer, as these are not deemed to be old age benefits; or
  • criminal liabilities.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q
  • Changes to terms and conditions - TUPE?
A
  • Any changes to an employment contract at any time cannot be made unilaterally and must be agreed by the employee and employer. If a buyer unilaterally imposes changes to terms and conditions, the employees could resign and claim constructive dismissal.
  • TUPE further restricts the changes which an employer may propose. A change to the employee’s terms and conditions is void (even if the employee purports to agree with it) if the sole or principal reason for the variation is the transfer.
  • However, an employer may vary the employee’s contract if any of the following exceptions apply:
  • the reason for the variation is not related to the transfer;
  • the reason for the variation is an ETO Reason entailing changes in the workforce (which must involve a change in the numbers of functions of the employees) and the employer and employee agree the variation;
  • the terms of the contract permit the employer to make the variation;
  • potentially where the variation is entirely positive for the employee;
  • there are ‘relevant insolvency proceedings’ and the specified statutory conditions are satisfied (NB: this condition is beyond the scope of the knowledge stream); or
  • there is a collective agreement (these are agreements between employers and trade unions) from which the term or condition has been incorporated into the employment contract and certain conditions are met (NB: this condition is beyond the scope of the knowledge stream).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q
  • The parties to a business transfer cannot prevent TUPE applying but they can share the risks involved:
A
  • Schedule of employees: Because of the uncertainty in determining which employees will transfer under TUPE and which will not, the parties will often agree a list of transferring employees. These are the employees which the parties think will transfer; they will not necessarily be the individuals who do actually transfer by operation of law under TUPE.
  • Warranties: The buyer will carry out full due diligence of all transferring employees’ terms and conditions because it inherits those terms and conditions on a TUPE transfer. The seller will provide warranties that all of the information is correct and accurate and that no employment claims are threatened or pending.
  • Indemnities: The parties will often give cross-indemnities, in order to apportion the risk of (1) liabilities which arise pre transfer and post transfer; and (2) certain employees who are not in the schedule of employees but who claim that they should transfer to the buyer under TUPE. The standard position is that the seller picks up the cost if an employee who is not on the schedule transfers by operation of law.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q
  • The duty to inform and consult
A
  • Regulation 13 states that both the seller and buyer must provide information to, and in certain circumstances consult with, representatives of their own employees who may be affected by the transfer or by measures taken in connection with it (‘affected employees’).
  • The BEIS Guidance lists the following examples of affected employees:
  • employees who are to be transferred;
  • employees of the transferor who are not being transferred to the transferee but whose jobs may be affected by the transfer; and
  • employees of the transferee whose jobs may be affected by the transfer.
  • Appropriate representatives may be:
  • Representatives of a recognised trade union; or
  • Elected employee representatives. (This could be an existing representative body with that remit or newly elected for this purpose).
  • Where there is a recognised trade union, the employer must consult with those representatives rather than with any other employee representatives.
  • Information must be given ‘long enough’ before the transfer to enable any consultation to take place – so this either requires the employees to be informed before the transaction (which may have confidentiality issues) or there will need to be a split signing and completion. The Seller will also need to consider the timing for carrying out any elections.
  • Information to be provided must set out the fact of the transfer, when it is to take place, the reasons for it, the legal, economic and social implications for the affected employees and whether the seller and/or buyer envisage taking any ‘measures’ in relation to the employees (or if none, to state there are no measures intended). The buyer must inform the seller if there are any measures it is planning after completion, so that it can pass that information on to its affected employees.
  • ‘Measures’ would most obviously include planned redundancies or changes to job location. However, even minor changes to an employee’s situation (for example, changing floors or using a different telephone system) are capable of amounting to ‘measures’ which could require consultation.
  • Consultation is only required if ‘measures’ are planned in relation to a party’s own affected employees. Therefore, transferring employees of the seller will NOT be consulted about measures that the buyer is planning to take – only informed about them by the seller. However, in practice the employees will be consulted on all measures.
  • The consultation process must be carried out with a view to seeking agreement.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q
  • Consequences of failure to comply with informing/consulting obligations
A
  • If the information and/or consultation process is not carried out in accordance with the Regulations, the appropriate representative may bring a claim in the Employment Tribunal, within 3 months of the transfer.
  • A Tribunal has discretion to award up to 13 weeks’ actual pay per affected employee (“appropriate compensation”). This can obviously amount to a large amount of money, depending on the number of employees concerned.
  • If a claim is upheld against the transferee, then the transferee will be liable to pay the appropriate compensation. But if a claim is upheld against the transferor, then (1) the transferee may be solely liable if the breach resulted from its failure to tell the transferor about any ‘measures’ it was proposing to take; and (2) in any other case, the transferee will be jointly and severally liable with the transferor.
  • Typically, the buyer and seller will give cross indemnities covering liabilities arising from their respective failings in the information and consultation process.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q
  • Tax implications for the seller in asset sale?
A
  • When a company sells a business as a going concern it is in effect selling a collection of assets including the goodwill attached to the business. The seller company will receive the consideration and will be liable to pay corporation tax on it but the way in which the corporation tax liability is calculated will depend on the nature of the assets transferred to the buyer.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q
  • Calculating corporation tax liability
A
  • Profits or losses arising on the sale of:
  • trading stock;
  • goodwill; and
    · Every business has this
  • intellectual property
  • acquired or created after 1 April 2002 (in the case of goodwill and intellectual property), will be treated on the income side of the corporation tax calculation.
  • Gains or losses arising on the sale of capital assets such as:
  • land;
  • plant and machinery;
  • other goodwill; and
  • intellectual property
  • will be treated on the capital side of the corporation tax calculation, as either chargeable gains or capital losses.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q
  • When calculating the corporation tax payable on the sale of a business, the seller will be able to reduce its chargeable gains by using indexation in the usual way. It may be able to further reduce its tax liability by using any available losses.
A
  • Trading losses - a company incurring a trading loss in the year it sells a business, or which has an unrelieved carried forward trading loss, can set the loss off against profits of any description arising from the sale.
  • Capital losses - any capital losses made in the year of disposal of the business or in any previous years can be set off against any chargeable gains made on disposal.
  • Group losses - it may also be possible to set off losses which have arisen elsewhere in the seller’s group of companies and this will be explained in detail in later Topics when you consider the topic of Group Companies.
17
Q
  • Balancing charges
A
  • If an asset which qualifies for capital allowances (for example, an item of plant or machinery) is sold for more than its tax written down value (‘TWDV’) a balancing charge will arise. In effect an amount equal to the difference between the TWDV and the amount for which the asset is sold will be treated as a form of profit and will be added to the taxable profits of the seller and taxed accordingly.
18
Q

Balancing allowance?

A
  • If an asset which qualifies for capital allowances is sold for less than its TWDV a balancing allowance will arise. In effect an amount equal to the difference between the TWDV and the amount for which the asset is sold will be treated as a form of loss and will be deducted from the seller’s taxable profits.
19
Q
  • Rollover on replacement of business assets
A
  • It may be possible for the seller to defer some tax liability in respect of chargeable gains by means of rollover relief on replacement business assets if the selling company continues to carry on a business after the sale or if the selling company is part of a chargeable gains group and another company in that group acquires qualifying assets.
20
Q
  • Passing of sale to the shareholders
A
  • If a company only operates one business and sells all of that business then following the settlement of any outstanding liabilities, the selling company will be left as an empty cash shell. In such a situation it is likely that the shareholder(s) will wish to extract the cash from the company.
  • A major disadvantage of a business sale from the perspective of the tax treatment of the selling company and its shareholder(s) is that the consideration is potentially taxed twice: once in the hands of the selling company and once in the hands of the selling company’s shareholder(s).
21
Q
  • A major disadvantage of a business sale from the perspective of the tax treatment of the selling company and its shareholder(s) is that the consideration is potentially taxed twice: once in the hands of the selling company and once in the hands of the selling company’s shareholder(s). There are two options available to the selling company:
A
  • Declare a post-sale dividend: if the selling company declares a dividend, the cash received by the shareholder(s) will be an income receipt.
  • Place the company into liquidation after completion: the cash which the shareholder(s) receive through a liquidation of the company will be a capital receipt for the shareholder(s).
  • The tax consequences of this will depend on whether the selling company is owned by individual shareholders or by a holding company.
22
Q
  • A selling company with a corporate shareholder
A
  • If the company selling its business is a ‘subsidiary’ company, a pre-liquidation dividend will be tax-free because corporate shareholders generally are exempt from corporation tax on dividends.
  • On a voluntary liquidation the shareholder will be treated as disposing of its shares in the selling company and so substantial shareholding exemption (‘SSE’) will potentially be available provided all the conditions are satisfied.
  • If these exemptions are available, the corporate shareholder will not have any tax to pay whether the proceeds of sale are transferred to it by way of dividend or on a liquidation.
23
Q
  • A selling company with individual shareholders
A
  • If the selling company is placed into liquidation after the sale of its business, this will generally be a capital receipt for the shareholders and, as individuals, they will be liable to pay capital gains tax (‘CGT’) as if they had disposed of their shares in the selling company.
  • Business Asset Disposal Relief and other CGT reliefs may apply, in the usual way. The company may pay a pre-liquidation dividend first to reduce the value of the company before liquidation and thus reduce the capital receipt for the shareholders on liquidation.
  • If any part of the pre-liquidation dividend fell outside the individual shareholder’s dividend nil rate allowance, it would be subject to income tax at the appropriate dividend rate.
  • The selling company will already have paid corporation tax on the consideration received for the sale of its business, so if the proceeds are then taxed when they are passed to the individual shareholders this will be a double tax burden – the same proceeds will have been taxed twice.
24
Q
  • Tax implication for the buyer
A
  • The buyer of a business will effectively be acquiring a group of assets, some income generating assets and some capital assets. It does not inherit the seller’s tax liabilities and it will not be concerned about the seller’s base cost in relation to the capital assets.
  • Income generating assets: The price allocated in the acquisition agreement to trading stock and work in progress can be deducted when calculating the buyer’s income profits.
  • Capital assets: The price allocated in the acquisition agreement to each of the capital assets acquired as part of the acquisition will be the buyer’s base cost for that asset (subject to any claim that the buyer may make for rollover relief on replacement business assets).
  • Capital allowances: The buyer will also be able to claim capital allowances in respect of qualifying assets, for example, plant and machinery. Again, the price allocated in the acquisition agreement to the relevant assets will form the basis of the capital allowances for the buyer.
25
Q
  • Rollover on replacement of business assets
A
  • A buyer which has disposed of qualifying assets for the purposes of rollover relief on replacement of business assets within the period of twelve months before the business acquisition or which plans to make such a disposal in the 36 months following the acquisition, may be able to roll over the gain on that disposal into its base cost of any qualifying assets that it acquires as part of the business acquisition.
26
Q

Value added tax - general rule?

A
  • A ‘taxable person’ making taxable supplies of goods or services in the course of his business must charge VAT to the recipient of those supplies and account for this VAT to HMRC.
27
Q

Value added tax - exception to general rule?

A
  • There is a special exception contained in Article 5 of the VAT (Special Provisions) Order 1995 which applies where the goods or services supplied constitute a transfer of the whole or part of a business as a going concern (the transfer of a going concern (‘TOGC’) exception). There will be a transfer of a business as a going concern, as opposed to a transfer of a few assets, if sufficient assets are transferred to enable the buyer to carry on business with those assets as a separate operation. The effect of this exception is that the sale of a business as a going concern is outside the scope of VAT, so no VAT is chargeable.
  • To qualify for the exception two conditions must be satisfied:
  • the business assets transferred must be used by the buyer in the same kind of business, with no significant break; and
    1. the buyer must be registered or become registered for VAT before completion or as a result of completion.
28
Q
  • Value added tax - When the business assets transferred include an interest in land
A
  • If an interest in land is included, there is an additional requirement if the parties wish to avoid a VAT charge on the consideration allocated to the land.
  • Generally, the grant of any interest or right over land is an exempt supply for VAT purposes. However, the landlord can make an election to waive the exemption (‘opt to tax’) on a particular property and charge VAT on rent; thereby turning an exempt supply into a standard rated supply. The landlord can then reclaim VAT on expenses incurred in providing those rented premises. This issue becomes important where the assets of a business being transferred include one or more properties in respect of which leases have been granted to third parties.
  • In such a case the buyer must check to see if the seller has made an election to waive the exemption. If it has then the seller will be charging VAT on its rental income. If the seller has made such an election, the buyer must make the same election in relation to that property on or before completion.
  • If the additional condition is not satisfied then the TOGC exception will not be available, and as a consequence VAT will be chargeable, in respect of the consideration being paid for the properties concerned.
29
Q
  • Value added tax – provisions in the sale agreement
A
  • It is usual to have a specific VAT clause in the business sale and purchase agreement. If the conditions of Article 5 of the VAT (Special Provisions) Order 1995 are satisfied, the seller should not charge VAT on the consideration.
  • However, it may be that for one reason or another, the conditions of Article 5 are not satisfied. In such a situation HMRC will expect the seller to account for VAT on the consideration paid by the buyer. If the consideration in the acquisition agreement is not stated to be exclusive of VAT, the consideration will be deemed to be inclusive of VAT (s.19(2) VAT Act 1994). In this case, the seller would have to pay part of the consideration it had received to HMRC.
30
Q
  • As protection for the seller, in case HMRC conclude that the TOGC exception is not available, it is usual for the seller to:
A
  • oblige the buyer to pay any VAT due;
  • state that the price is exclusive of VAT; and
  • obtain confirmation from the buyer that it will comply with the conditions in Article 5 VAT (Special Provisions) Order 1995.
31
Q
  • Stamp duty and stamp duty land tax (SDLT)
A
  • Any shares that are sold as part of the asset sale will be subject to stamp duty, payable by the buyer.
  • If the assets of the business being bought by the buyer include an interest in land, the buyer must deliver a land transaction return to HMRC and pay the SDLT due, within 14 days of completion.
  • If the assets of the business being bought include more than one interest in land, the total consideration allocated to these must be aggregated and SDLT calculated on the total. This is due to the linked transaction rule, which states that where transactions form part of a single scheme, arrangement or series of transactions between the same seller and the same buyer (or between connected sellers and connected buyers), this is to be regarded for SDLT purposes as a single transaction, even if the separate transactions are the subject of different documents (if several TR1s are executed).
32
Q

Your client, a company, is in negotiations to acquire a private limited company (‘Target’). The Target operates its business from two manufacturing sites (‘Properties’) and it employs 120 employees. Your client has not yet decided whether it would prefer the transaction to be structured as a share sale, or as a business sale.

Which one of the following statements is the correct advice for your client?

If your client buys the entire business of the Target, the employees of the Target will be automatically transferred to your client.

If your client buys the entire business of the Target, all of the Target’s properties will automatically transfer to your client.

If your client buys the share capital of the Target, the employees of the Target will be automatically transferred to your client.

If your client buys the share capital of the Target, all of the Target’s properties will be automatically transferred to your client.

A

If your client buys the entire business of the Target, the employees of the Target will be automatically transferred to your client.

33
Q

Your client, a company would like to expand its operations and it is in negotiations with another company (‘Parent’) in relation to the acquisition of its wholly-owned subsidiary (‘Subsidiary’). The Subsidiary owns the leasehold titles of five warehouses. Your client is seeking your advice regarding whether to carry out the acquisition through a purchase of shares in the Subsidiary or through an asset purchase of the business of the Subsidiary.

Which one of the following statements is the best advice for your client in relation to structuring the acquisition as a share purchase or an asset purchase?

If the acquisition is structured as an asset purchase, any change of control provisions in the leases to the warehouses should not be triggered by the acquisition.

If the acquisition is structured as a share purchase, your client would need to check for non-assignment provisions in the leases to the warehouses.

If the acquisition is structured as an asset purchase your client can choose to leave outstanding liabilities as obligations of the Parent.

If the acquisition is structured as a share purchase, your client will automatically become the owner of the warehouses.

A

If the acquisition is structured as an asset purchase, any change of control provisions in the leases to the warehouses should not be triggered by the acquisition.

34
Q

Your client operates a business which is involved in the installation and servicing of domestic and commercial fuel equipment including solar, gas, electric and nuclear. Each fuel type has its own business division. A competitor is looking to acquire the solar installation and service business division (the ‘Division’). As a result, all the employees who work in the Division will transfer to the competitor in accordance with TUPE and a schedule of these employees (the ‘Employees’) has been agreed between your client and the competitor for inclusion in the acquisition agreement.

In relation to the impact of TUPE on the parties involved, which ONE of the following statements is CORRECT?

There will always be a duty to inform and consult the Employees.

It would be usual for the acquisition agreement to provide that the competitor will indemnify your client for any employees not on the agreed schedule who do transfer.

Your client will most likely be the party to inform the Employees of the transfer.

If the requirements of regulation 13 of TUPE are not adhered to, then your client will be solely liable for the breach.

A

Your client will most likely be the party to inform the Employees of the transfer.