Start by checking whether the transaction changes the employer and meets the relevant TUPE tests; an ordinary share sale usually leaves the employer unchanged. Where TUPE applies, plan employee information and consultation, provide employee liability information and obtain advice on transfer-related changes or dismissals.
By Tony Vaughan · Published · Last reviewed
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Selling your business is a significant milestone, but if you're employing staff, it also comes with legal obligations that can't be overlooked. In the UK, employment law plays a central role in any business sale, particularly when it involves a transfer of ownership. Failing to comply can expose sellers to legal risks and reputational damage, even after the deal is done.
Let's break down the key employment law considerations for business owners planning an exit, with practical advice on how to stay compliant and avoid unnecessary hurdles.
1. Understand TUPE Regulations
In Great Britain, relevant transfers are governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Northern Ireland has separate service provision change regulations; obtain jurisdiction-specific advice.
What is TUPE?
TUPE is designed to protect employees when a business changes hands. Where TUPE applies, assigned employees normally transfer with continuity of employment and existing contractual rights, subject to statutory exceptions; special rules apply to occupational pensions.
When does TUPE apply?
TUPE usually applies in two scenarios:
- A business sale (where the business continues as a going concern), or
- A service provision change (e.g., outsourcing or bringing work back in-house).
Whether you're selling shares or assets affects TUPE:
- Share sale – The employer stays the same; TUPE does not usually apply.
- Asset sale – TUPE may apply if an economic entity transfers and retains its identity; an asset purchase alone does not establish that the test is met.
Key obligations:
- Inform appropriate representatives of affected employees in good time before transfer and consult on proposed measures. Direct information and consultation are permitted only where the statutory conditions are met.
- Provide key employee information (known as Employee Liability Information) to the buyer at least 28 days before the transfer.
2. Communicate Clearly with Your Team
Even if TUPE doesn't apply, staff may feel anxious about their future during a sale. Managing this early, openly, and with empathy is essential.
Top tips:
- Plan notification around applicable information and consultation duties, not the signing of Heads of Terms; allow enough time before transfer to comply.
- Reassure staff that legal rights will be respected and that you’ll support them during the transition.
- Engage legal or HR advisers to ensure communication meets your obligations.
3. Review and Resolve Employee Issues Before Going to Market
Buyers will scrutinise employment matters as part of their due diligence. It pays to get your house in order.
Prepare by:
- Reviewing employment contracts and HR policies to ensure compliance.
- Addressing any disputes or grievances proactively.
- Ensuring payroll, benefits, and holiday entitlements are fully up to date.
This helps avoid price chips, delays, or conditions being added to the deal at the last minute.
4. Seek Legal and M&A Advisory Support
Employment law is complex and mistakes can be costly. A proactive approach is essential, but so is professional guidance.
Sellers should work with:
- Employment law solicitors to handle TUPE obligations and risk mitigation.
- M&A advisers (such as BusinessExits.co.uk) who understand how to align legal requirements with commercial goals and a smooth transaction process.
5. Plan for Post-Sale Integration
Even after completion, TUPE-related obligations may persist. For example, if you agree to provide transitional support or remain involved in the business short-term, clarity is key. Make sure all obligations (both yours and the buyer’s) are recorded clearly in the Sale and Purchase Agreement (SPA), especially regarding staff responsibilities, warranties, and indemnities.
Navigating employment law when selling your business can seem daunting, but it doesn’t have to be. With early preparation, clear communication, and experienced advisers at your side, you can meet your legal obligations without jeopardising the deal.
Thinking of selling your business?Start with a confidential, no-obligation conversation.
Understand your options before deciding. If you would like to discuss your own circumstances, you can request a confidential business exit review; enquiries are reviewed by experienced advisers who can discuss suitable options.
Common questions
Why does TUPE usually not apply to a share sale?
The company remains the employer when its shareholders change. A related restructuring or subsequent business transfer may require a separate TUPE assessment.
Does buying equipment and other assets automatically trigger TUPE?
No. For a business transfer, an economic entity must transfer and retain its identity. The facts, including activities, workforce and assets, matter.
When must employee liability information reach a TUPE buyer?
Normally at least 28 days before the transfer. It must be accurate and updated for changes; limited special-circumstance exceptions require legal advice.
Can employers always consult directly with staff on a TUPE transfer?
No. In Great Britain, where there are no existing appropriate representatives, direct consultation is permitted for employers with fewer than 50 employees or transfers involving fewer than 10 employees. Otherwise representative arrangements are required.
Sources
- ACAS: TUPE, Acas
- GOV.UK: Transfers, takeovers and TUPE, GOV.UK
General information from our archive, not personal advice.
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