It is common ground that TUPE does not apply to share transfers, or so you thought. The recent EAT case of Jackson Lloyd Ltd and Mears Group Plc v Smith shows that matters may not be so straight forward.
In this case, the Mears Group rescued the ailing business of Jackson Lloyd and acquired its shares through a subsidiary Mears Ltd. As it was a share transfer the presumption was that TUPE did not apply and no information and consultation took place as required under Regulation 15. This was challenged and was the basis for how the case ended up before the EAT.
Although the Mears Group intended that Jackson Lloyd should remain a separate subsidiary and brand, upon completion it seized practical control to integrate it into the Group’s way of doing things. It was found that this integration process had triggered a secondary and concurrent TUPE transfer with the Mears Group who controlled and not Mears Ltd who owned the shares being the transferee. There was thus a failure to inform and consult.
The case is perhaps limited by its facts as upon completion the Mears Group announced to the workforce that it was beginning a programme of integration with the potential for staff to move over to the Mears Group. The Group replaced the Board with its nominees, an integration consultant was engaged who reported to the Group, the Chief Executive of Jackson Lloyd was removed by the Group bypassing its Board.
Those advising in commercial situations need to consider whether actions and words could trigger a secondary TUPE transfer. Attention will need to be given to drafting appropriate warranties and indemnities. Those acquiring businesses in this way can learn the lessons on not what to do from the case and to consider what is said, to keep the board in place and to consider control of the target.