Business transformations such as mergers, takeovers, de-mergers, changes in ownership, or restructuring are common in today's corporate environment.
However, these changes carry significant implications for companies holding sponsor licences, particularly concerning compliance with Home Office regulations and the sponsorship of migrant workers.
This article outlines key considerations and actions required when navigating such changes.
Non-Transferability of Sponsor Licences
A fundamental principle of UK immigration law is that sponsor licences are not transferable. When ownership or structural changes occur, the impact on the sponsor licence and the sponsored workers hinges on the nature of the change. Examples include:
- A direct change in ownership, such as the sale of shares or a takeover.
- The sale of part of a business or service to another organisation.
- The creation of new entities through mergers or de-mergers.
In all these scenarios, sponsors must comply with stringent reporting and application requirements to ensure they remain compliant and avoid disrupting their sponsored workers' permissions to work.
Legal Framework: TUPE and Similar Protections
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) often apply in cases of mergers, takeovers, or the transfer of services.
TUPE ensures that employees' jobs, terms, and conditions of employment are preserved during the transfer.
Where TUPE does not apply—such as in public sector cases—similar protections may be in place, such as the Cabinet Office Statement of Practice on Staff Transfers.
Reporting and Compliance Requirements
When ownership or structural changes occur, sponsors must act swiftly to remain compliant. Key actions include:
- Reporting Changes: All changes must be reported via the Sponsor Management System (SMS) within 20 working days. Failure to do so can result in the downgrading or revocation of the sponsor licence.
- Surrendering or Updating Licences: If a company is fully taken over, it must surrender its licence or make it dormant. The acquiring entity must then apply for its own licence or extend the scope of an existing licence.
- Certificates of Sponsorship (CoS): Sponsors must update their allocation of CoS via the SMS, particularly if the change affects recruitment needs.
Scenarios and Examples
To illustrate these principles, let us consider some common scenarios:
1. Takeover by a Licenced Sponsor
If Company A, a licenced Skilled Worker sponsor, is taken over by Company B, which also holds a licence, both entities must report the change. Company B assumes full sponsorship responsibilities, while Company A requests to make its licence dormant.
2. Takeover by an Unlicenced Sponsor
When a licenced sponsor is acquired by a company without a licence, the acquiring company must apply for a sponsor licence within 20 working days. Once approved, they assume sponsorship responsibilities for all transferring workers.
3. Indirect Ownership Changes
If a sponsor's parent company undergoes a change in ownership but the sponsor itself remains intact, a new licence is typically not required. However, the sponsor must still notify the Home Office of the change via the SMS.
4. Restructuring and Consolidation
In cases of business restructuring, such as when a sponsor's operations are transferred to a new entity, the original sponsor must report the change and make its licence dormant. The new entity must apply for a licence and assume responsibility for sponsored workers.
5. No TUPE Protection
Even when TUPE protections do not apply—such as in direct ownership transfers—the sponsor must report the change and reapply for a licence. Migrant workers can be moved to the new licence without needing a change of employment application.
Practical Considerations
The complexity of sponsor licence compliance increases significantly during business changes. Sponsors must carefully consider the following:
- The timing of licence applications and notifications to ensure continuity for sponsored workers.
- The accuracy and completeness of reports submitted via the SMS.
- The allocation and reallocation of CoS in line with changing business needs.
The Risks of Non-Compliance
Failing to comply with these requirements can have serious consequences.
The Home Office may revoke or downgrade a sponsor licence, jeopardising the status of sponsored workers and leaving the business unable to recruit or retain skilled migrants.
Seek Expert Guidance
Navigating the regulatory landscape during ownership changes or business restructuring can be challenging. To ensure a seamless transition and protect your workforce, it is crucial to seek professional legal advice.
Our team of experts can provide tailored support to help you manage these transitions effectively while maintaining full compliance with Home Office regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.