The quick answer
The Transfer of Undertakings (Protection of Employment) Regulations are often shortened to the acronym TUPE. These rules basically state that an employee’s rights follow a business to any new owner. So even if the business goes into Administration the ‘old’ employees can follow the new business owner even if they use a new separate legal entity.
In more detail
The TUPE rules are designed to protect employees. If a company goes into Administration and the business sells then all of the employee rights for the continuing business transfer to the new owner. This includes rights to redundancy, arrears of pay and unpaid holiday. The new owner takes on this responsibility automatically.
This often blocks the sale of a viable business where the employees have built up long term substantial redundancy rights. Once a buyer assesses the value of the risk of these claims they may be put off buying the business.
A well meaning director of a failed (insolvent) business must be very careful not to start up again and have the employee rights follow them. This can also stop the employees from claiming from the Government Redundancy Payment Service (“RPS”). The RPS will pay arrears of wages, redundancy, holiday and notice pay on an insolvency but not if the business is just transferred to a new owner.
Strangely TUPE does not normally apply in a liquidation.
