Acquiring a UK company? Points to consider during the due diligence phase

When a company becomes a target, whether it be for a merger or a takeover, many factors need to be considered during the due diligence phase – the immigration status of the target’s employees is one of those factors. One key area that is often overlooked is the company’s position from UK Immigration compliance perspective, especially if it holds a Sponsor Licence to employ non-UK skilled workers.

Impact of Company Restructuring on a target’s Sponsor Licence

When a target company undergoes restructuring—whether through a takeover, merger, or acquisition—a Sponsor Licence does not automatically transfer with the change in ownership or structure. The following points must be carefully evaluated:

• Change of Ownership: If there is a significant change in ownership (e.g., the company is acquired by another entity), the Home Office must be notified within 10 or 20 working days (depending on specific circumstances).
• Merger or Acquisition: If the restructuring leads to the creation of a new legal entity, the Sponsor Licence may no longer be valid under the target company. In such cases, the acquiror must apply for its own Sponsor Licence.
• Changes in Business Activities: Significant changes in the nature of the business, such as new locations, services, or operations, might require an update to the Sponsor Licence. The company should ensure that its licence accurately reflects its post-restructuring operations to avoid compliance issues during Home Office audits.

Effect of Company Restructuring on Sponsored Skilled Workers

The impact of restructuring on Skilled Workers employed under a Skilled Worker Visa can be substantial, and failure to manage this transition correctly can lead to visa cancellations or a loss of workforce. Key considerations include:

• Transfer of Employment: When the acquiror of a UK target takes control of a company through acquisition or merger, the employment contracts of sponsored workers may need to be transferred to the new company. This must be done carefully, ensuring that the new entity holds a valid Sponsor Licence and that the employment terms remain consistent with the workers’ visa conditions.
• Right to Work Checks: If a company undergoes restructuring, right-to-work checks need to be updated to reflect the new employer or legal entity. Failure to conduct these checks appropriately could result in penalties or visa cancellations.
• Notification of Changes: The Home Office must be notified of any changes to the employment terms of skilled workers, including job title, duties, location and salary. The employer must ensure that the job role continues to meet the requirements for sponsorship under the Skilled Worker Visa.

3 Tips for managing Sponsor Licence and immigration matters during an M&A transaction:

1. Notify the Home Office Early: If your company is undergoing a merger, takeover or acquisition, ensure that the Home Office is notified of any relevant changes at your earliest convenience.
2. Transfer Employees Seamlessly: Ensure that sponsored employees are transferred to the new entity without breaking visa conditions. This includes updating right-to-work checks and notifying the Home Office of any changes in their employment status, job role or salary.
3. Plan for a New Sponsor Licence (if required): If restructuring leads to the creation of a new legal entity, plan ahead to apply for a new Sponsor Licence. This is critical to maintaining access to skilled workers and ensuring compliance with immigration laws.

By taking proactive steps during the due diligence phase of a merger, acquisition or takeover of a UK target company, the acquiror will ensure the target’s continued access to global talent without interruption.

How Gherson can assist

Gherson’s Immigration Team are highly experienced in advising on UK visa matters related to the due diligence process of a merger or acquisition. If you have any questions arising from this blog, please do not hesitate to?contact us?for advice, send us an?e-mail: [email protected]

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

?Gherson?2024