Tuesday 19 November 2024

Mergers and acquisitions require careful planning but all too often consideration of the immigration impact sits at the end of a long list of due diligence with businesses being caught out by the reporting and application deadlines.

A UK business with an international workforce may have a sponsor licence to enable it to employ foreign talent and this licence and the sponsorships under it can be affected by corporate changes.

When is action required?

A sponsor licence is non-transferable. Where there is a change in direct ownership of a sponsor for example, if it is sold as a going concern, or a share sale results in the controlling number of shares being transferred to a new owner – the sponsor licence will be either revoked or, if sponsored workers have transferred to another sponsor’s licence, made dormant.  A new licence application must be submitted within 20 working days of the change/transfer of sponsored workers.

Changes to the organisation

Businesses which hold a sponsor licence must report the organisational change on their Sponsor Management System (SMS) within 20 working days of the merger, takeover or similar change taking place. In addition, depending on the circumstances changes to the following will require reporting:

• the organisation’s details, such as the name, address, contact details or head office;
• the Authorising Officer and Level 1 or 2 users which may change with a new/merged HR team;
• the organisation’s structure, such as more or fewer branches, sites or linked entities in the UK (and overseas linked entities if a Global Business Mobility licence is held);
• the company size or charitable status;
• other changes such as surrendering the licence if it ceases trading;
• the nature of the business significantly changes.

New linked entities – to add or not to add to a licence?

The Home Office refers to linked entities as ‘branches’ and whilst consolidation and simplification may be the ultimate aim of the merger or acquisition, it may not be prudent to include all new related UK branches under the same licence. For example, if there is different HR provision and a lack of control with the employment and sponsorship of transferred sponsored workers. Non-compliance and failures to comply with sponsorship duties by one entity on a licence puts the entire licence and all sponsored workers’ immigration permission at risk.

Changes to a sponsored worker’s employment

Certain employment changes to a sponsored worker’s circumstances following a merger or acquisition will need to be reported within 10 working days of the change taking place. This includes (but is not limited to):

• if a sponsored worker’s salary or pay is reduced from the level stated on their Certificate of Sponsorship;
• where there are significant changes to the details of the worker’s employment (other than those which would require a change of employment application), for example to the role, title or core duties;
• when the normal work location changes.

Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

As part of a merger or acquisition, employees are often subject to TUPE which is aimed at protecting employees following corporate changes affecting their employer.  Where the employee retains the terms and conditions of their initial contract through TUPE, they do not need to apply for new immigration permission, provided that their role and duties remain unchanged. Where TUPE does not apply employees may still benefit from similar protection to TUPE which does not require a change of employment application.

Right to work checks and TUPE

TUPE regulations provide that right to work checks carried out by the seller in a corporate transaction are deemed to be carried out by the buyer who can benefit from any statutory excuse against illegal working established by the seller. But be warned that if the seller failed to adequately carry out right to work checks, the buyer would be liable for a civil penalty which is currently up to £60,000 per employee.   It is therefore essential that employers who acquire staff undertake right to work checks which should be carried out within 60 days of the transfer of employees. This applies to all acquired staff, not just sponsored workers.

Due diligence of Certificates of Sponsorship

It is also important to ensure that any sponsored workers who are transferred to a business have had their Certificate of Sponsorships correctly assigned.  It is unwise to presume that they were assigned correctly and as a matter of good practice when undertaking due diligence of sponsored workers’ files, sponsors should be satisfied that the employment details are accurate and if required, rectify any details as soon as possible to mitigate breaching of conditions.

Impacts of non-compliance

Failure to make the necessary reports or applications within the specified timeframe may result in a sponsor licence being downgraded, suspended or revoked and a migrant’s immigration permission being cancelled.

Top tips for employers to facilitate a smooth transition

The following considerations are critical to the transaction to ensure business continuity and the retention of foreign talent:

• licence review – evaluate the impact of the transaction on the licence and if reports and a new licence application are needed. Consider the required changes to an existing licence and the impact, bearing in mind that it can take months for the Home Office to process some changes such as new work sites or branches; and
• right to work checks – conduct an audit on the workforce to identify transferred workers who are subject to immigration control and complete right work checks within 60 days of the transaction completing;
• due diligence of sponsored workers – assess the details on Certificates of Sponsorships to ensure they were correctly assigned and identify any reporting requirements;
• changes to a sponsored worker’s role – will the transaction result in changes to a sponsored worker’s role, triggering the need for reporting and/or a change of employment application;
• timing – strategically plan the timing of actions. Applicants cannot travel while a change of employment application is being processed so be mindful of those frequent travellers and carve out time for this.

Get in touch

If you anticipate that your organisation may be involved in a corporate transaction affecting migrant employees, please contact us for our advice and support. You can also sign up to our mailing list for the latest news and updates.