Share purchases: employment issues

When a buyer is interested in acquiring a business, there are two options: either the buyer acquires the entire issued share capital of the company which owns that business (known as a 'share purchase'), or the buyer acquires the collection of assets that comprise the business, which may include eg machinery, equipment, property, intellectual property rights, employees and contracts (known as an 'asset purchase').

On a share purchase, the buyer acquires the company 'warts and all'. The company remains the employer of its employees and there is no effect on contracts of employment. With certain limited exceptions, whatever rights, obligations, powers and liabilities the company has towards past, present and future employees will be unaffected by the change in ownership. If the company has a subsidiary, the same considerations will apply to that subsidiary's relationship with its employees, if any.

In contrast, where the buyer acquires the target by way of an asset purchase, it is likely that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006), SI 2006/246 will apply. The key effect of TUPE 2006 is that the employees employed in the business