Asset sales

Question 1

TUPE regulation 3(1)

Answer 1

EMployees of target automatically transfer to buyer on a relevant transfer.

Question 2

TUPE regulation 4(1)

Answer 2

Contract for employment is automatically changed so reads as if always between buyer and employees

Question 3

TUPE regulation 13

Answer 3

Inform - EMployees must be given information regarding the transfer

Consultation - Duty to consult with the employees if ‘measures’ are planned. Failure to consult means employees can claim for up to 13 weeks of wages

Buyer and seller are jointly liable to inform/consult. In practice seller will perform, and buyer will take warranty and indemnity from seller in this respect.

Question 4

What clauses are always required in addition in comparison to a share sale?

Answer 4

• Assets purchased
• Allocation of consideration
• VAT (no VAT payable on shares)

Question 5

Change of employees Ts + Cs:

Answer 5

• Change unconnected with transfer of business + employee consents
• Change connected with transfer, but there is one of:
  - Economical, technical or organisational reason
  - Change is entirely positive
  - Change is in an insolvency rescue situation
• Employee consents to change

**In reality the best way to change Ts and Cs is to use a compromise agreement

Question 6

Tests for who shared staff belong to:

Answer 6

• Botzen -> Look to function not terms of contract
• Duncan Webb -> Time spent in each business, value given to each business, contractual terms indicating which business employee is assigned to, who pays staff

Question 7

What does regulation 10 of TUPE say?

Answer 7

• Occupational pension liabilities do not transfer

- Personal scheme liabilities do transfer

Question 8

What does the Transfer of Employment (pension protection) regulations 2005 state?

Answer 8

• If occupational pension under previous employment then the new employer must provide limited but not equivalent pension rights:
  
  1. Final salary scheme
  2. Money purchase scheme
  3. Stakeholder scheme

Question 9

What does s75 Pensions ACt 1995 state?

Answer 9

• Where a scheme is in deficit and a company leaves the scheme the company will become liable for a proportion of the deficit.
• Affects share sales as company leaving group
• Affects asset sales as TUPE means employees are leaving scheme and cash shell company must pay liability.

Question 10

Assignment

Answer 10

• Only transfers benefit not burden
• Only requires consent if non-assignment clause
• CAnnot assign contracts for personal services

Question 11

Novation

Answer 11

• Requires consent

- Transfers benefit and burden.

Question 12

Minority third party contracts

Answer 12

• Seller still paid and holds on trust for buyer
• Buyer undertakes to perform sellers obligations for services
• Buyer indemnifies seller for any failure to perform services
• Seller contracts to use best endeavours to novate/assign contract