TUPE and insolvency 




Regulations 8 and 9 of the TUPE regulations introduced a special insolvency regime, intended to encourage the rescue of failing businesses and to safeguard employment opportunities. To trigger this regime, an insolvency practitioner must have been formally appointed over the business before the transfer date (Secretary of State for Trade and Industry v Slater [2007] UKEAT 0119/07/2706). 




The rules distinguish between sales of an insolvent business as a going concern (administrations), and liquidation sales to sell off the assets, pay off creditors and wind up the business.


TUPE applies to every case when an administrator is appointed over an insolvent business. This is because the primary aim of any administrator is always to sell the business as a going concern (Key2Law (Surrey) LLP v De’Antiquis [2011] EWCA Civ 1567). To encourage the rescue of failing businesses, TUPE protection is modified in two ways, as long as the administrator was appointed before the transfer date: 




• first, by ensuring that some of the transferor’s pre-existing employment debts owed at the transfer date do not pass to the new employer, including statutory redundancy pay, arrears of pay, pay in lieu of notice and the basic award for unfair dismissal (all capped as set out on page 412). These sums are paid instead out of the National Insurance Fund; and




• second, by allowing greater freedom to change contract terms (see below).