Round #957

We are buying the trade and assets of a competitor but not the company itself. Does TUPE apply and what employees transfer with the business?

# TUPE Application to Asset/Trade Purchase ## Short Answer **TUPE may apply, but it's more complex than a standard company acquisition.** Whether employees transfer depends on whether it constitutes a "relevant transfer." --- ## Key TUPE Requirement: "Organised Grouping of Resources" For TUPE to apply to an asset purchase, you typically need: 1. **A transfer of an economic entity** (not just isolated assets) 2. **That retains its identity** after the transfer 3. Usually involving **an organised grouping of employees** Simply buying assets (equipment, stock, IP) **without** the associated workforce typically won't trigger TUPE. --- ## When TUPE WILL Apply TUPE likely applies if you're acquiring: - **Business operations as a going concern** - **With key employees already assigned** to that operation - Where the entity can **function and maintain identity** under new ownership *Example: Buying a competitor's entire manufacturing division with its workforce, premises, and operations* --- ## When TUPE Won't Apply TUPE is less likely if you: - Buy only **physical assets** (machinery, stock, property) - Buy **intellectual property** only - Don't acquire the **associated workforce** - Take on **no contracts** or customer relationships tied to employees *Example: Buying a competitor's patent portfolio and equipment but hiring your own team to commercialize it* --- ## Critical Factors Courts Consider - **Continuity of operations** (same customers, suppliers, location) - **Transfer of workforce** and work organization - **Whether the business functions** after transfer - **Customer/supplier base continuity** - **Time gap** between old and new operations --- ## Practical Implications ### If TUPE Applies - **All employees automatically transfer** (unless objecting) - **Existing contracts transfer** with same terms - **Cannot dismiss** due to the transfer alone - **Liabilities transfer** (redundancy, unfair dismissal claims) - **Collective agreements** usually transfer ### If TUPE Doesn't Apply - **You choose which employees to hire** - **You negotiate new terms** - **No automatic transfer of liabilities** - **More flexibility** but less certainty --- ## Recommended Actions 1. **Conduct detailed due diligence** on competitor's workforce structure 2. **Get TUPE advice** from employment counsel on specific facts 3. **Identify which assets/operations you're acquiring** 4. **Document the deal structure** carefully 5. **If you want employees**, be clear about transfer mechanisms 6. **If you don't want TUPE to apply**, structure the deal accordingly (asset-only purchases with clear separation) --- ## Key Risk Even if you **intend** an asset-only purchase, TUPE can apply if a tribunal finds you've effectively acquired a functioning economic unit. This is a **factual analysis**, not determined by labels. **Consult an employment lawyer before finalizing the deal structure** — the cost is minimal compared to unexpected TUPE obligations.

No, TUPE does not automatically apply in an asset purchase. TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) only applies when there is a transfer of an undertaking as a going concern—typically when a company or identifiable business unit with its own organisation transfers as a functioning entity. In an asset-only purchase: - You acquire physical/tangible assets and contracts, but not the legal entity - The employees remain employed by the seller unless they individually agree to transfer - TUPE protection does not apply unless the sale qualifies as a transfer of a going concern **When TUPE *could* apply despite asset purchase:** If the assets sold include enough of the seller's organised business structure (workforce, systems, customer base, goodwill) to constitute a meaningful going concern, TUPE may still apply. Each case depends on the Spijkers test: whether sufficient tangible/intangible assets, customer base, and workforce organisation transferred to enable continuation of the same activity. **What you should do:** 1. Have TUPE counsel review whether your acquisition meets the "going concern" threshold 2. If TUPE applies, all employees assigned to the transferred business *must* transfer automatically with their contracts and protections intact 3. If TUPE doesn't apply, you can selectively hire employees from the seller; those not hired remain with the seller (who may face redundancy liability) No employees automatically transfer without TUPE or explicit agreement.