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Due Diligence

Due Diligence is an essential feature of most corporate transactions. It can be of crucial importance when employees transfer to a business.

Under the Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”) an incoming employer will acquire almost all of the liabilities of an outgoing employer, at least insofar as transferring employees are concerned.

Immigration Advice based upon the MAC Report

Where employees transfer to a business under TUPE the new employer will rarely have had any opportunity to vet incoming employees.

Whilst certain Employee Liability Information (“ELI”) must be given to the new employer this may not show the whole picture. For example, it is entirely possible that, between the date on which ELI is given and the date of the transfer a situation may have arisen resulting in potentially expensive claims for an incoming employer which were not factored in to any purchase price. Added difficulties may also arise if personnel key to any defence have not transferred and remain employees of the outgoing employer.

Careful due diligence can be integral to the success of any acquisition and it is important to be able to identify and asses any potential “red flags” at an early stage with a view to understanding whether any costly claims may be in the offing. This could include issues which the outgoing employer may not be aware of, for example where liability for historic payments arises from a change in law. In most cases, appropriate warranties and indemnities should be agreed allowing both incoming and outgoing employers to plan appropriately. These must be carefully drafted and negotiated to ensure all potential and relevant issues are covered to the extent that this is commercially practical.

We can help you through the due diligence process, advising on what questions to ask and what responses to be on alert for. We are experienced in negotiating favourable warranties and indemnities to protect your business in the event of unexpected claims.

 

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