Preparing your business for sale takes time and preparation especially where your employees are concerned. We have helped to guide many businesses through the process. Here are some top tips from Jayne Harrison, who is head of our employment law department.
Is your personnel paperwork up to date?
You need to ensure that your paperwork is up to date because every employee should be given written particulars of employment within the first two months of employment. An employer could be fined between 2 – 4 week’s pay if this is not done – a week’s pay is currently capped at £479 but on 6 April 2017 this will be increased to £489 – although this is not a free standing right.
Have you updated the written particulars of employment?
When an employer is preparing their business for sale it is vital that written particulars of employment have been issued because you have an obligation that no later than 28 days before the transfer of the business to provide the seller with the following information:
1. The age and identity of the employee.
2. Particulars of employment that an employee is obliged to give an employee pursuant to section 1 of the Employment Rights Act 1996.
3. Information of any disciplinary proceedings taken against any employee, and any grievance procedure taken by an employee within the previous two years.
4. Information of any court or tribunal case, claim or action brought by an employee against you within the previous two years or whether you have reasonable grounds to believe that an employee may bring a case against you arising out of their employment.
5. Information of any collective agreement that will affect the transfer.
You will not be able to collate and provide the buyer with the above information if you have not first ensured your paperwork is up to date. If you fail to provide the above information to the buyer then the buyer could raise a complaint and be awarded not less than £500 per employee.
The three vital concepts TUPE introduced into UK law
TUPE introduced three concepts into UK employment law:
1. The automatic transfer principle: employees transfer to the transferee (buyer) who inherits all rights, liabilities and obligations in relation to them.
2. Protection against dismissal in connection with a TUPE transfer.
3. The obligation to inform and consult with representatives of the affected employees.
How do you inform employees about the sale of your business?
It can often be difficult to inform employees about the sale if you are still in negotiations and/or there are issues of confidentiality about the sale. When is the right time to discuss the sale to employees? This can often depend on the business and/or sale details but employees will usually want to know as soon as possible about the sale.
In any event, under TUPE as a seller you have an obligation to inform and consult employees affected by the transfer. You must inform affected employees long enough before the transfer to enable you to consult with the employees about the matters below. Failure to do so would render you and the buyer liable to pay an award of up to 13 weeks gross pay per employee.
What to tell your employees when the time is right
Affected employees need to be provided with the following information:
1. The fact that the transfer is going to take place, the date or proposed date of the transfer and the reason for it.
2. The legal, economic and social implications of the transfer to any affected employee.
3. The measures which the transferee will, in connection with the transfer, take in relation to any affected employee or if the transferee envisages that no measures will be taken that fact.
4. You will also have to let your employee know of any measures which you will take in relation to the affected employees after the transfer.
What are the lines of communication for both SMEs and large organisations?
If the business has fewer than 10 employees you are able to inform and consult employees directly rather than having to elect employee representatives. If you have 10 or more employees then if you recognise a trade union you must consult with that trade union or where there is no recognised trade union, appropriate representatives, either existing employee representatives or new ones specially elected for the purposes of the transfer. Sellers should be aware that electing employee representatives can take some time so this needs to be factored into any time frames for the sale.
Key managers who are not the sole shareholders of the business can create a huge conflict of interest during a sale and hold shareholders hostage during sale negotiations. Make sure to put in place incentives (like a sale bonus or stock options programme) prior to the sale to avoid eleventh-hour power plays and make sure that your key managers are on board with the new ownership.
If you need any help around the sale of your business, please contact Cleggs to discuss your circumstances in more detail.