How to Navigate Employment Law When Selling Your Business

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

The cornerstone of UK employment law during a business sale is the TUPE Regulations—short for the Transfer of Undertakings (Protection of Employment) Regulations 2006.

What is TUPE?

TUPE is designed to protect employees when a business changes hands. If the sale results in employees transferring to a new employer, TUPE ensures their terms and conditions of employment remain unchanged.

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 – The employer changes; TUPE likely applies, meaning employment contracts move to the buyer.

Key obligations:

• Inform and consult with affected employees or their representatives.

• 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:

• Notify employees at the appropriate stage—ideally after Heads of Terms are signed, but before completion.

• 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.

At BusinessExits.co.uk, we specialise in helping SME business owners prepare for sale with confidence - ensuring you get the best deal, while protecting your legacy and your team.

Thinking of selling your business? Start with a confidential, no-obligation conversation.

Contact us today.