TUPE and Insolvency

Regulations 8 and 9 of the TUPE regulations introduced a new insolvency regime intended to encourage the rescue of failing businesses to safeguard employment opportunities. The government has confirmed that it does not intend to change this aspect of TUPE.

The insolvency rules are only triggered where insolvency proceedings have been opened before the transfer date, with the formal appointment of an insolvency practitioner (Secretary of State for Trade and Industry v Slater (2007). The rules distinguish between situations where the insolvency practitioner aims to sell the business as a going concern, and asset sales, where the liquidator’s main aim is to sell off the assets, pay off the creditors and wind up the business.

TUPE does not transfer the employment of employees of the transferor where an insolvency procedure “analogous to bankruptcy proceedings” is started “with a view to the liquidation of the assets” under the supervision of an insolvency practitioner (regulation 8(7)). This does not mean that TUPE is irrelevant in this situation. In particular, the duties to inform and consult are still triggered.