Business transfers

There will be a business transfer where, after the transfer, there is an identifiable economic entity that has retained its identity. This is often described as the “going concern” test. Broadly speaking, it involves examining whether what has changed hands is a recognisable business to be carried on by a new owner, as opposed to a collection of assets, for example land and buildings, where there is no intention of carrying on the business.

There can be a relevant transfer even if, immediately after the transfer, the business merges into another business (Farmer v Danzas (UK) Limited EAT 858/93).

To decide whether a business transfer has taken place, tribunals adopt a “multifactorial test”. This is just another way of saying that the tribunal must examine all the relevant facts and circumstances to decide what has happened. Relevant factors can include:

• the type of business being transferred;

• the assets being transferred and whether the transfer includes goodwill, equipment or premises;

• whether the majority of the employees are being taken on by the new business, and if not, why not;

• whether customers are transferring to the new business;

• similarities and differences between the activities of the new and the old business; and

• any suspension of activities of the business, and the reason for and length of that break in activities.

This test was established in two leading European law cases, known as Süzen [1997] IRLR 255 and Spijkers [1986] ECR 1119.