English Employment Appeal Tribunal: provisional liquidator appointment may disapply TUPE

Quick read

The Employment Appeal Tribunal (EAT) has considered whether the appointment of a provisional liquidator triggers special insolvency protections that stop employee liabilities from automatically transferring to an acquiring business.

Background

Morton Rolls Ltd, a bakery, got into financial difficulties and its employees were made redundant. Phoenix Volt Ltd then stepped in to rescue part of the business.

Key dates:

3 March 2023 a conditional business transfer agreement was signed between Morton and Phoenix, and Morton stopped trading that day
7 March 2023 a provisional liquidator was appointed
21 March 2023 Phoenix commenced production
31 March 2023 a winding-up order was made.

Morton's former employees sought payments from the National Insurance Fund (NIF) but the Secretary of State refused, arguing that Phoenix was responsible for Morton's employees under TUPE.

Decision

The EAT agreed with the Employment Tribunal's finding that the 'relevant transfer' happened on 21 March 2023 (when Phoenix commenced production) not 3 March 2023 (when the agreement was signed). Morton was at that point in insolvency proceedings aimed at liquidating its assets, supervised by an insolvency practitioner (the provisional liquidator). This meant that the insolvency exception in TUPE applied and employees' contracts did not transfer to Phoenix.

The case has been sent back to the tribunal to consider employee claims for payments from the NIF.

Key takeaways

Appointing a provisional liquidator may disapply TUPE protections, which could make deals more attractive for buyers.
When a transfer actually happens will depend on the specific facts of each case - look at all the circumstances, not just when contracts are signed.