The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) and share sales are two different legal concepts that have significant implications for businesses, including Day Nurseries, Pre-schools, and Out of School Clubs.
Understanding the differences between these two concepts is crucial for Owners and Operators in the Early Years sector to navigate relevant legal requirements when undergoing a transfer or sale of their business. In this article, we will explore how TUPE differs from a share sale and its implications for Day Nurseries, Pre-schools, and Out of School Clubs.
TUPE, is designed to protect the rights of employees when a business or part of a business is transferred from one employer to another. The regulations apply to situations where there is either a business transfer or a service provision change.
In the context of Day Nurseries, Pre-schools, and Out of School Clubs, this could occur when a business is sold or when a service contract is transferred from one provider to another. Service provision changes are common for Clubs operated out of schools.
One of the key features of TUPE is that it automatically transfers the employment contracts of affected employees from the old employer to the new employer, along with all rights, benefits, and liabilities. This means that employees’ terms and conditions of employment, including their pay, working hours, and other employment rights, are preserved after the transfer. Additionally, employees are also protected against unfair dismissal and have the right to be consulted about the transfer.
On the other hand, a share sale is a transaction in which the ownership of a company is transferred by selling its shares to a new owner. In this scenario the Ofsted registration may transfer if you are buying shares of a limited company. Unlike TUPE, which focuses on the transfer of employment contracts, a share sale involves the transfer of ownership and control of the entire company, including its assets, liabilities, and contracts, without automatically transferring the employment contracts of its employees. This means that in a share sale, the new owner acquires the business as a whole, including all employment contracts, and becomes the new employer of the employees.
The key difference between TUPE and a share sale is the automatic transfer of employment contracts under TUPE, which does not occur in a share sale. In a share sale, the employees remain employed by the same legal entity, and their employment contracts remain unchanged. However, the new owner of the shares acquires all the rights, benefits, and liabilities associated with the business, including any employment-related liabilities that may arise from the pre-existing contracts. This means that the new owner will need to comply with all applicable employment laws and regulations, including those related to employee rights, benefits, and protections.
Another important distinction between TUPE and a share sale is the level of control and involvement that the employees have in the transfer process. Under TUPE, employees have the right to be consulted about the transfer and can also object to the transfer if it would result in a substantial change to their working conditions. In contrast, in a share sale, employees do not have a direct say in the transfer process, as the transfer of ownership and control is negotiated between the existing and new owners.
In summary, TUPE and a share sale are two distinct legal concepts that have different implications for Day Nurseries, Pre-schools, and Out of School Clubs. TUPE focuses on the automatic transfer of employment contracts and provides employees with protections against unfair dismissal and the right to be consulted about the transfer. On the other hand, a share sale involves the transfer of ownership and control of the entire company, including all assets, liabilities, and contracts, without automatically transferring employment contracts. Understanding the differences between these two concepts is crucial for businesses in the early years education sector to ensure compliance with relevant employment laws and regulations during a transfer or sale process.
If this is a TUPE you will need HR support to ensure your compliance with the regulations. Employee consultation and employer liability information (ELI) all benefit from HR involvement. For a no obligation discussion about your potential purchase please speak to us on 01527 909436.