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Buying a Business – Employment Issues

Businesses for sale will accentuate their positives but prospective buyers need to be aware of the liabilities that could come along with buying them – and make an informed decision.

Where employees transfer along with the business under TUPE, you may need to seek certain assurances before the purchase is complete.

1. Disputes or disciplinary and grievance matters

The business should keep a record of the employees who have had to be disciplined. They should also have a record of employees who have raised a grievance, what the grievance was and how it was handled. Seek confirmation from the seller that the company and ACAS procedures for disciplinary and grievance matters have been followed correctly. As a buyer, you should also ask the seller to disclose any future potential employment disputes and any ongoing or threatened legal proceedings.

2.Employee terms and conditions

Employees will transfer across to the buyer on the same contracts under which they were employed just before the completion of the purchase. Examine these terms and conditions and ensure that the seller does not amend these prior to purchase to give the employees more favourable terms.

3. Restrictive Covenants

Because employees will transfer on their current contracts, you will need to review the contracts to see what protections you have under their terms, should an employee choose to leave and work for a competitor. You will also need to review these to make sure that they will still be relevant and enforceable once the contracts have been transferred.

4. Employee Benefits

Employers often give employees further benefits such as private medical schemes and childcare vouchers. Before purchasing the business, find out what benefits are offered to employees and on what terms. You will be required to put a similar scheme in place if the current one does not transfer, and the costs of this need to be considered.

5. Pension Provisions

As you enquire about purchasing the business, find out what pension provisions are currently in place. Where there is already a pension scheme in place employees will need to be offered suitable options with regards to their current pensions.

Prior to buying a business, undertake suitable due diligence to prevent unknown liabilities from appearing once the business has been purchased. Include warranties in the purchase agreement that allow you to claim back against the seller to protect your interests.