What happens to your staff when you sell your business

For most owners, the team is the first concern when thinking about a sale. This guide explains how UK employment law protects your staff, so you know what to expect and can reassure them at the right time. It is general information, and your solicitor should advise on your specific circumstances.

Share sale or asset sale?

How your staff are affected depends first on how the deal is structured.

Share sale

In a share sale, the buyer acquires the shares in your limited company. The company itself, which employs your staff, stays the same. Employment contracts continue exactly as before, with no change of employer. The Transfer of Undertakings (Protection of Employment) Regulations 2006, known as TUPE, do not apply, because there is no transfer of employer.

Many acquisitions of established limited companies are structured as share sales.

Asset or business sale

In an asset sale, the buyer acquires the business and its assets rather than the company. If the business is transferred as a going concern, TUPE will usually apply.

What TUPE does

Where TUPE applies:

• Employees assigned to the business transfer automatically to the buyer.
• They keep their existing terms and conditions, and their continuity of service.
• Dismissals because of the transfer are automatically unfair, unless the employer has an economic, technical or organisational reason entailing changes in the workforce.
• Changes to terms made because of the transfer are restricted.

Informing and consulting

Both the seller and the buyer must inform appropriate representatives of affected employees about the transfer, and consult where measures are proposed. Representatives may be a recognised trade union or elected employee representatives. Smaller businesses can, in some circumstances, inform and consult employees directly.

Failing to inform and consult can lead to compensation awards, so the timetable for this should be planned with your solicitor.

Employee liability information

The seller must give the buyer employee liability information at least 28 days before the transfer. According to Acas, this includes each employee's name and age, their written statement of employment particulars, disciplinary and grievance records from the last two years, relevant collective agreements, and any claims made or expected.

Freelance crew

Event production relies heavily on freelancers. Freelancers who are genuinely self-employed are not employees, so they do not transfer under TUPE, and their engagements continue or end according to their own terms.

Buyers will, however, look carefully at how freelancers are engaged. If someone described as a freelancer works in practice like an employee, they may have employment rights, and there may be tax implications. It is worth reviewing these arrangements with your accountant before a sale.

Pensions

Pension arrangements have their own rules on a transfer, and some benefits are treated differently from other contractual terms. Take specific advice if your business has a pension scheme beyond the standard workplace pension.

When to tell your team

There is no single right answer, but most owners keep a sale confidential until terms are agreed, then tell their senior team first. Telling staff too early can create uncertainty and put the deal at risk. Too late, and you may not meet your legal obligations to inform and consult where TUPE applies.

A good buyer will plan the announcement with you, so your team hears clear, reassuring news about what the sale means for them.

How Ignite Group approaches your team

We buy businesses largely because of the people in them. Our plans are built around retaining your management team and crew, and we discuss their future with you openly and early. We agree how and when your team will be told, and we never contact your staff without your agreement.

Written by Sanjeev Desour, founder of Ignite Group. About Sanjeev

This guide is general information about UK practice, not legal, tax or financial advice. Take advice from your own accountant and solicitor on your circumstances.