A social housing maintenance group that took over complete control of an ailing rival following a shares acquisition also inherited the full burden of obligations owed to the latter’s 400 staff, the Employment Appeal Tribunal (EAT) has ruled.
Company A specialised in repairing and maintaining social housing stock and had a number of valuable local authority contracts. It was in grave financial difficulties when it sold its entire share capital to company B, which was a subsidiary of a larger group operating in the same field.
Following the sale, the outward appearance was carefully maintained that company A continued to be an autonomous entity that was in competition with the group. That was in order to protect company A’s contracts and to avoid the risk of re-tendering. However, the reality was that company A’s board had resigned en masse and the group had taken over control of all aspects of its business, imposing root and branch changes to its structure, including staff dismissals and redundancies.
A number of employees of company A took their case to the Employment Tribunal (ET), which found that, on the date of the acquisition, there had been a relevant transfer, within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), as between company A and the group.
The EAT agreed with the ET that the sale of the shares was a genuine transaction and had not itself amounted to a TUPE transfer. However, in dismissing the group’s appeal, it ruled that the acquisition provided the context in which it had begun to operate company A’s business. It was, in common parlance, ‘a takeover’ and the provisions of TUPE were therefore triggered. The ruling opened the way for the group of employees to seek protective awards under TUPE.