PA - SGS 8
Terms
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- When thinking about different categories of staff, who should you be mindful of?
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Employees of each legal entity;
Shared staff;
Freelancers/contractors. - At the highest level, what are the two types of pension scheme?
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1. Personal
2. Occupational - What are the two types of occupational pension schemes?
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1. Money purchase; and
2. Final salary - What provides that employees will automatically transfer to the purchaser on a business sale?
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TUPE 2006
Asset sale is a relevant transfer under TUPE - Are freelancers affected by TUPE?
- No.
- What will a buyer company need to do if it wanted to engage freelancers?
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Need to novate or renegotiate the contracts (contracts
for personal services cannot be assigned). - In the context of an asset sale, will all employees transfer under TUPE?
- Not the employees of subsidiaries, on the basis that their employer will continue to be the subsidiary, it is the ownership of the subsidiary's shares that has changed.
- What is required under Regulation 13 of TUPE?
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The Buyer and the Seller must:
1. provide specific information; and
2. in certain circumstances consult with, representatives of affected employees - When is consultation required under Regulation 13 of TUPE?
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Consultation is required only where ‘measures’ are planned, e.g.:
- redundancy
- relocation
- potentially (wide meaning) could include very minor changes to the employee’s situation. - Who should be informed if there is a recognised trade union?
- Trade union representatives must be informed (and consulted if appropriate).
- What will happen if there are no trade unions?
- Employee representatives will be elected and will be informed (and consulted if appropriate).
- When must the informing (and, if necessary, consulting) take place?
- Before the transfer
- Who is generally in the best position to meet the requirements of Regulation 13?
- The seller given the need to inform (and potentially consult) before the transfer
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Who has liability in relation to failure to inform and/or consult (Regulation
15) - The Buyer and Seller have joint and several liability.
- What will the Buyer want in relation to the acquisition agreement?
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A warranty in the AA from the Seller that it has performed the duty, and appropriate indemnities for any loss arising from a failure
to do so. - What level of compensation is payable where the Buyer or Seller fails to inform?
- Failure to inform and/or consult may result in a claim in the ET for up to 13 weeks’ pay per affected employee (Regulation 16).
- Practically what might you advise in relation to communications to employees?
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Sensible for the Buyer to find out from the Seller to:
Jointly document what is being told to employees and host presentations. - What are the advantages of a buyer being involved in the communication process to affected employees?
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1. Know what information the employees have received; and
2. Consult in the best way to keep motivation levels high. - What are the issues with employees ‘shared’ across companies or businesses?
- Important in these circumstances to decide which employees are assigned to the undertaking being transferred.
- What should you note in relation to the the undertaking to which the shared employees are assigned?
- Not necessarily the same as the entity which is contractually the employer.
- Botzen
- Courts will look at an employee's function rather than contractual terms to determine whether an employee is wholly engaged or assigned to the business.
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Courts will look at an employee's function rather than contractual terms to determine whether an employee is wholly engaged or assigned to the business.
- Botzen
- Duncan Webb
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In determining assignment, the EAT should consider:
1. amount of time in each part;
2. value given to each party by employer;
3. employee's contractual terms re what the employee's job comprises; and
4. allocation of the cost for the employee's services. - What do the buyer and the seller do in order to manage the risk of this uncertainty in terms of some employees not passing?
- Agree a list of ‘Employees’ to whom they believe TUPE will apply.
- What will the buyer and seller give in connection with the list of ‘Employees’ to whom they believe TUPE will apply?
- Provide cross-indemnities
- How do the cross-default provisions work to manage the risk of uncertainty in terms of some employees not passing?
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Not on the list and transfers -
Seller indemnifies the buyer
On the list but does not transfer - Buyer indemnifies the Seller -
Who picks up liability in relation to an Employee on the list, but only in
relation to liabilities etc in relation to them which arose after completion? - The Buyer
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Who picks up liability in relation to an Employee on the list, but only in
relation to liabilities etc in relation to them which arose before completion? - The Seller
- Why might buyers wish to make changes to an employee's Ts and Cs?
- To harmonise these with existing employees.
- What might employees do if changes are made to their employment contract that are not permitted under TUPE?
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NB: Likely to amount to a fundamental breach of contract
affected employees could resign and
claim constructive dismissed (as a basis for a claim for unfair and/or
wrongful dismissal). - There there a guarantee period post TUPE during which there can be no change?
- No, however, advisable to wait a time after the transfer and try to ensure that changes are not connected to the transfer e.g. as part of an employee-wide salary review process.
- How are third party contracts transferred on a business sale?
- Assigned or novated
- When would key third party contracts be assigned or novated?
- Before or at completion (which is normally simultaneous with exchange).
- What is a cash shell?
- Where a company sells all its business and assets, will be left as a ‘cash shell’, and may be wound up.
- What will a buyer's concerns be in relation to seller becoming a cash shell?
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1. Warranties only as good as person who gives them; and
2. restrictive covenants are worthless
if the Seller is worthless and/or no longer exists. - What is a buyer likely to request from the seller if it considers that the seller will become a cash shell (and potentially be wound up) post completion?
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1. Make the seller's shareholder (parent) a party to the AA;
2. Require shareholder to give restrictive covenants directly in addition to procuring that all of its
subsidiaries also comply; and
3. Retention account to hold a portion of the consideration - What considerations should you have where the debts remain with the Seller but are collected in by the Buyer as agent for Seller.
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1. Good compromise;
2. Seller has no resource;
3. Seller still bears the risk if debts not recoverable;
4. Buyer has control over relations with debtors.
5. Buyer will want expenses paid for and likely to charge a fee. - What considerations should you have where the debts are transferred to the buyer?
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1. Detailed in a schedule to the AA
2. To be legally assigned, written notice given to each debtor
3. Buyer bears risk if debts unrecoverable. Buyer may ask for a discount. - What is a stakeholder pension scheme?
- a personal pension scheme to which employers are required to provide access once they have 5 or more staff.
- What are defined benefit and defined contribution pension schemes?
- Both are occupational pension schemes.
- What is a final salary pension scheme is also known as?
- A defined benefit scheme.
- What is a money purchase pension scheme is also known as?
- A defined contribution scheme.
- What is necessary to effect the transfer of moveable assets?
- Delivery
- What is necessary to effect the transfer of software?
- Transfer of rights granted under licences by assignment, novation or sub-licensing
- What is necessary to effect the transfer of goodwill, fixtures and fittings, book debts?
- Execution of the Acquisition Agreement
- What is necessary to effect the transfer of premises?
- TR1
- What is necessary to effect the transfer of shares?
- Stock transfer form
- What is necessary to effect the transfer of IP rights and benefits of contracts?
- Deeds of Assignment or Novation
- Describe assignment vs novation.
- Assignment only passes the benefit of a contract, whereas novation would effectively release the seller from the contract and replace it with the buyer as the contracting party therefore passing the benefit and the burden
- What if a contract includes a non-assignment clause?
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Cannot assign, can still novate.
Note: to novate you will always need the third party's permission (because they need to sign the new contract). - How are trademarks transferred on an business sale?
- Assigned and assignments registered
- How are domain names transferred on a business sale?
- Just transfer registration
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How are the following transferred on a business sale:
Copyright in materials, registered designs and unregistered rights in designs, database rights - Assignment
- How are rights in copyright materials (including software) transferred?
- Assigned or novated
- How is know-how protected in the context of an asset sale?
- Through the use of restrictive covenants