mergers and acquisitions

September 14

Mergers and Acquisitions

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OTB Legal

Mergers and acquisitions are complex matters and this complexity extends to managing a sponsor licence. As responsible sponsors know, holding licence comes with a number of important reporting obligations to the Home Office.

This article sets out the key duties and actions sponsors should take when they are involved with an acquisition or merger, as well as those involved when one company splits off into two smaller companies.

Mergers and acquisitions

Mergers and acquisitions occur where there has been a change in the direct ownership of your organisation or business. This can occur in a number of ways, for example if the new owner has purchased a majority or controlling interest in shares.

Reporting duties

Where your business has been acquired by or merged into another business, your level one user must report these changes to the Home Office via your Sponsor Management System within 20 working days of the date of the change. Failure to report a change of circumstances can result in your licence being downgraded or revoked.

There are a number of other changes you must also report within 20 working days. These are:

  • Details of any sponsored workers who are not moving to the new business;
  • The details of any sponsored workers who are moving to the new business;
  • Whether you wish for the old sponsor licence to be surrendered, or made dormant.

Consequences for your licence

Sponsor licences cannot be transferred between businesses. Therefore, in most cases once your business has been acquired, the Home Office will revoke your existing licence. If your new owner already holds a sponsor licence and has transferred your workers to their licence, your existing licence will be made dormant rather than revoked.

If they do not hold a licence already, they will need to apply for a new one.

It is important to remember that these rules are the same regardless of whether the new owner is another business or simply a new individual who holds a controlling interest.

Consequences for your workers

As a result of the change in ownership your employees may be protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006, also known as TUPE. The short explanation of this is that in most cases your employees will move to the employment of the new business owner, with their existing terms and conditions in-tact.

If the new owner already holds a sponsor licence, and they will not be facing any significant changes in their jobs and day-to-day responsibilities, there will be no effect under immigration law on your sponsored workers. They can continue on their current visas and will not need to make a further application for permission to stay until their existing period of leave expires.

If the new owner does not have a licence already and wishes to continue the employment of sponsored workers, they must make a valid application for a new licence within 20 working days of the transfer taking place. Additionally, if they do not make an application within this time, or the application is made but is refused, then all sponsored workers who were transferred over will have their permission cancelled.

If you require advice on the effect of TUPE on your employees you should consult with a specialist employment lawyer.

De-mergers, partial acquisitions and splitting off

In some cases, the significant change in circumstances may relate to the separating of businesses rather than the purchase or merging. This means that where there was once one business, now there are two. Here, the fundamental reporting duties are the same but the complexity arises in identifying who must report what duties.

The existing business must report:

  • Any change in circumstances within 20 working days;
  • The details of any sponsored workers who are not moving to the new business within 20 working days;
  • Details of any sponsored workers who are moving to the new business within 20 working days;
  • If all of your sponsored workers are moving to the new business, report whether the licence can be surrendered, whether it needs to remain dormant, or whether you intend to sponsor new workers in the future;
  • Any intention to retain your licence, you must request a new CoS allocation. Failing to do so will result in your allocation being reduced to zero.

The new business must:

  • Apply for a sponsor licence within 20 working days;
  • Report the details of any sponsored workers who have been transferred to your business;
  • Comply with the standard reporting duties for sponsored workers moving forward (you can read more about sponsor duties here)

The new business will not be able to report on these employees via the SMS as their SMS account will not contain their details. Instead they will need to report via email to the ‘Worker and Temporary Worker Reporting’ mailbox. When making a report they should include:

  • The previous sponsor organisation’s name;
  • Previous sponsor organisation’s licence number;
  • The workers’ details;
  • Details of the change that they wish to report.

Get in touch

If you need support in managing your sponsor licence changes in any of the scenarios covered in this article, we would be delighted to support you. We can offer ad-hoc support or retainer packages tailored to your business.

To book a free consultation appointment and discuss your options with a member of our business immigration team, see below.

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