The general position when the shares of a company are acquired by a third party, is that the share sale does not, of itself, trigger a TUPE transfer.
This is because the identity of the employer does not change; the employer continues to be the company whose shares have been bought.
On the other hand, where the assets of a company are acquired, rather than the shares, this may give rise to a TUPE transfer.
However, it is possible for there to be a “de facto” TUPE transfer in a share sale scenario. This was confirmed in the 2007 case of Millam v The Print Factory and has been looked at again in the recent case of Guvera Ltd v Butler.
This case concerned Blinkbox, the music streaming company, which was owned by Tesco. In January 2015, Tesco decided to sell Blinkbox’s shares. The shares were bought by a company called Guvera UK (“GUK”), which was the subsidiary of Guvera Ltd (“GL”).
For the next few months, Blinkbox’s business, now owned by GUK, and part of GL’s group, continued to operate as it had done before, and was run by its existing sole director.
By May 2015, however, the business was struggling and there was concerns about its solvency. At this point, the sole director resigned. The CEO of GL, the parent company, grew more concerned about the business and instructed one of GL’s other directors to take the place of the Blinkbox director who has resigned, and to make the majority of the staff redundant. The GL director did so, and essentially went in to run Blinkbox’s business. The remaining Blinkbox staff were informed that GL had now taken Blinkbox “into the fold” in a new structure, and GL was now in charge of the business.
A few weeks later, Blinkbox went into adminstration, having not paid notice pay or redundancy pay to those staff who had been dismissed. The staff claimed their employment had, in fact, transferred to GL by reason of TUPE, given the manner in which GL had “taken over” Blinkbox’s business.
The Employment Appeal Tribunal found that once GL’s director had arrived in Blinkbox’s business, GL had, for all intents and purposes, assumed day to control of that business “in a way that went beyond the mere exercise of ordinary supervision or information gathering between parent and subsidiary”.
Effectively, GL had stepped into the shoes of Blinkbox, and there was a TUPE transfer at that point.
Points to note for employers
This case reminds businesses that it is not necessarily safe to just turn a blind eye to TUPE in a share sale situation. GL unfortunately found itself in the position of having to pay substantial compensation to the employees in question, for whom it had acquired responsibility under TUPE.
Whilst in the majority of cases after a share acquisition, TUPE will not come into play, a parent company could, like GL, inadvertently find itself in a TUPE situation if it takes over day to day control of the running of its newly acquired subsidiary.
How far this “control” has to go before TUPE will be triggered is going to depend on the circumstances, and it may not always be an easy line to draw.
Businesses will need to think about their future plans and proposals when entering into a share acquisition, to try to identify any future TUPE risks.