A common question to consider when selling your business is how much information ought to be provided to the buyer in relation to your workforce.
Considering A Merger?
Likewise, if you are considering a merger that will involve buying another business, how much information should you expect to receive from the seller regarding the staff that you are taking on and, importantly, the liabilities that you will inherit?
Seller Requirements
This question was considered in the case of Born London Limited v Spire Production Services Limited which held that according to Regulation 11 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), all that is required is for the seller to provide is written particulars of employment as defined by section 1 of the Employment Rights Act 1996.
Regulation 11 of TUPE does not, therefore, require a seller to go beyond providing the buyer with the ‘particulars of employment.
For example, there is no requirement to provide information about contractual bonuses.
Buyer’s Responsibility
If the buyer wishes to protect themselves, it is the buyer’s responsibility to undertake further due diligence regarding potential liabilities that may be inherited by taking on the seller’s workforce.
Such due diligence would normally include instructing solicitors to review the information disclosed by the seller and entering into a written agreement which contains well-drafted warranties and indemnities from the seller.
As such warranties and indemnities are contractual, any breach by the seller by providing false information would give rise to a contractual claim by the buyer against the seller.
Relying on TUPE
As most service provision changes do not involve entering into a written sale agreement, the parties must fall back upon TUPE which may not provide adequate protection.
DPH Legal have experienced employment solicitors that have experience in advising local businesses in relation to TUPE transfers and can ensure that any sale agreements include adequate indemnities and warranties to protect your business whether you are buying or selling.
Disclaimer: The contents of this article are for information purposes only and should not be relied upon as formal legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Specific legal advice should be sort tailored to the individual circumstances in all cases.