Buying a Business- Employee Issues.

Businesses for sale will accentuate their positives but prospective buyers need to be aware of the liabilities that could come along with buying a business in order to make an informed decision. Where employees transfer along with the business under TUPE certain assurances may need to be sought before the purchase is completed. Detailed below are 5 key points to consider:

  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.  Confirmation should be sought 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.

  1. 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 the purchase to give the employees more favourable terms.

  1. Restrictive Covenants

As above employees will transfer on their current contracts, this means that you will need to review the contracts to see what protections you have under the 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 transferred.

  1. Employee benefits

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

  1. Pension Provisions

As you make your enquiries about purchasing the business enquire as to pension provisions currently in place and if the business has already dealt with auto enrolment. Where this hasn’t yet happened ascertain the auto enrolment staging date and whether, if the date is close, it needs to be extended. Where there is already a pension scheme in place employees will need to be offered suitable options with regard to their current pensions.

Prior to buying an business suitable due diligence will need to be undertaken to prevent unknown liabilities from appearing once the business has been purchased and warranties to allow you to claim back against the seller will need to be included in the purchase agreement to protect your interests.

If you would like further information about any of the above issues or indeed any commercial advice, please contact Keighley Solicitor Umberto Vietri (Partner and Head of Commercial) on tel: 01535 613674 or email
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