TUPE can, and often does, arise in insolvency situations and it’s important to be aware that some TUPE provisions are relaxed in such situations in a bid to make failing businesses more attractive to prospective buyers.
However, insolvency situations do not escape TUPE entirely and provided the transfer meets the usual definition of a ‘relevant transfer’ TUPE will apply in some form. Further, there is a distinction in UK law between non-terminal proceedings (such as administration) and terminal proceedings (such as liquidation). Each have slightly different rules with regards to TUPE with terminal proceedings benefiting from a much wider exemption.
A recent opinion given by the Advocate General in a case arising from Holland supports the UK position. In Federatie Nederlanse Vakereniging and others v Smallsteps BV, financial problems led to the nursery business appointing an administrator the same day as the business was sold in a “pre-pack” deal. The staff were dismissed and some offered new employment. Like in UK law, the Advocate General distinguished between insolvency with the aim of liquidating the assets and cases such as this were the aim was the continuation of the business as a going concern (like an administration).
Businesses are strongly advised not to assume that TUPE does not apply just because a firm is insolvent and seek legal advice concerning this complex aspect of TUPE.