TUPE in Asset Sales: Why It Matters for Businesses in Brighton and Hove and Beyond.
At Acumen Law, our team of commercial solicitors often advise businesses in Brighton and Hove on the complexities of buying or selling a business. One of the most important, yet frequently misunderstood areas, is the Transfer of Undertakings (Protection of Employment) Regulations 2006, better known as TUPE.
If you’re considering an asset sale or purchase, understanding TUPE is vital to avoid costly mistakes, protect employees, and ensure a smooth transition.
What Is TUPE?
TUPE is legislation that protects employees when a business or part of a business changes ownership. It ensures that their employment contracts, rights, and protections transfer automatically to the new employer, preventing dismissal solely because of the sale.
In other words, TUPE makes sure employees aren’t left behind or unfairly treated during a business transfer.
Asset Sale vs. Share Sale: What’s the Difference?
- Asset Sale: The buyer selects which assets to purchase. Such as goodwill, intellectual property, or client databases, while leaving behind unwanted parts. However, employees cannot simply be excluded. TUPE applies, and their contracts and rights automatically move with the business.
- Share Sale: The buyer acquires the company as a whole, including its liabilities. TUPE does not apply, although normal employment law protections still do.
Many local business owners in Brighton and Hove are surprised to learn that TUPE applies only in asset sales, not share sales, which makes it essential to seek clear advice before finalising a deal.
Buyer Responsibilities Under TUPE
As the new employer, you inherit all employee contracts and obligations. This includes salaries, terms and conditions, and any pre-agreed benefits.
For example:
- A bonus scheme agreed by the seller remains binding on you.
- Enhanced redundancy pay must be honoured.
Even if the seller fails to disclose certain details, you remain responsible once the transfer is complete. That’s why due diligence is essential. Overlooking TUPE obligations can expose you to expensive claims for unfair dismissal or breach of contract.
Seller Responsibilities Under TUPE
Sellers also carry important legal duties. Under Regulation 11, the seller must provide the buyer with full Employment Liability Information at least 28 days before the transfer. This includes details of employee contracts, roles, and terms.
Under Regulation 13, sellers must also inform and consult employees (or their representatives) as soon as reasonably possible. Failing to do so can expose the seller to legal action, even after the business sale is complete.
Employee Rights During a Transfer
For employees, TUPE provides strong legal protection.
Key rights include:
- Protection from dismissal because of the transfer.
- The right to be informed and consulted by both buyer and seller.
- The ability to bring claims for constructive unfair dismissal if terms and conditions are ignored or altered.
Employees may object to transferring, in which case their contract ends on completion. However, this does not normally entitle them to redundancy pay, unless specific exceptions apply.
Timing Is Crucial
One of the most common pitfalls in a business sale is timing. TUPE imposes a 28-day minimum period between the seller providing employee information and the transfer taking place.
Trying to push a deal through quickly, for example, before the new financial year, can create delays and stress. Early planning is essential to keep your transaction smooth and compliant.
TUPE and Business Sales
Whether you are a buyer, seller, or employee, TUPE has significant implications for any asset sale. If you are planning a business transfer, asset sale, or purchase, our expert commercial solicitors, based in Brighton and Hove, can guide you through the process. We’ll make sure you understand your responsibilities, protect your employees’ rights, and keep your transaction on track. Get in touch today.
.jpg)
