Sponsor Licence: Changes to Organisation/Mergers/Takeovers/TUPE

If your business has recently acquired sponsor status from the Home Office to enable you to hire staff from outside of the UK, it is vital that you now keep up with the compliance duties which accompany your sponsorship licence. This is not a task which any business can afford to take lightly, as even the smallest breach of these duties and responsibilities can result in the licence being downgraded and even revoked. And given that there is a one-year cool-off period to then apply for another sponsor licence, this can have a devastating impact on hiring businesses and their sponsored employees. In this article, we will explain the reporting requirements for UK sponsor licence holders when it comes to changes to the organisation, mergers, takeovers, and TUPE.

What Are The Sponsor Licence Holder’s Reporting Duties For Organisational Changes?

The reporting duties are split into two categories; changes that must be reported within 20 days and changes that must be reported within ten days. The majority of changes which must be reported within ten days relate to the employee themselves, including if they fail to turn up to work on their first day, or if they take a long unauthorised absence. The immigration rules state that the following organisational changes must be reported within 20 days:

• a change of your company’s name or the name of any of your branches
• selling all or part of your business
• a merger or taken over
• you stop trading or go into an insolvency procedure
• you substantially change the nature of your business

Changes of this nature are reported to UK Visas and Immigration (UKVI) using the Sponsorship Management System (SMS) online portal (this must be done by the level 1 user). Where the level 1 user is not available, perhaps following a merger or takeover, the level 1 user from the new sponsoring business can report the change. Most organisational changes are assessed by a UKVI case officer before being approved.

To make this assessment, UKVI will typically ask for specific supporting documents depending on the nature of the organisational change.

How are mergers, takeovers, and other similar organisational changes handled by UKVI?

It is important to note that your sponsor licence cannot be transferred to another company, even if they have acquired your business. Licences are granted based on the information provided and are subject to strict eligibility rules, hence if a new legal entity now runs the business, they may need to apply for a sponsor licence. As UKVI’s guidance explains, the decision made regarding your licence following a merger, takeover, or other similar organisational change will depend on whether:

• there is a change in direct ownership
• you sell all or part of or the controlling number of shares in your business
• you are partly or wholly taken over by another business
• the business is being split into separate legal entities

If the direct ownership of the sponsoring business has changed (i.e. the business is purchased as a going concern or the majority of shares are transferred to a new owner), then UKVI will handle the change request by revoking the sponsor licence. If the sponsored employees are transferred to the new owner, and they are now formally sponsoring them, the licence will be made dormant. This means that if the new owner does not already hold a sponsor licence, they will need to apply for and acquire one before being able to take on the existing overseas workers. Likewise, if the scope of the new owner’s existing licence does not cover the workers being transferred, this will need to be requested (e.g. if the existing licence covers skilled workers but not intra-company transfers).

What happens when sponsored workers are transferred under TUPE?

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), acquiring businesses have a legal duty to transfer existing employees under the same contractual terms and conditions, and this includes sponsored migrant workers. There are limited circumstances under which TUPE is not invoked, such as transfers in the public sector, but other similar rules typically apply.

Where a sponsoring business merges, is taken over, or is acquired by another legal entity, and the sponsored workers are transferred under TUPE, those employees do not need to apply for a new work visa or request a new Certificate of Sponsorship (CoS), as long as:

• the new sponsor has a sponsor licence in the same route and has formally accepted responsibility for the worker/s, and
• the duties of the sponsored worker remain unchanged

The new sponsor will need to take up full responsibility for the transferred sponsored workers through the SMS portal. The challenge for many businesses in this situation is that they may not already have a sponsor licence. If this is the case, then to abide by TUPE, they will need to apply for a new licence from the Home Office – this must be done within 20 days of the legal transfer of ownership of the business. The guidance also states that if the new owner does not make a valid application within 20 working days, or if they do, but it is refused, all transferred sponsored workers will have their visas cancelled.

Final words

UKVI provides clear guidance on how to update the SMS in the event of a transfer of business ownership. It is recommended that this be followed carefully by the existing and new sponsor to ensure that the process is followed properly, as this will avoid the possibility of workers losing their work visas. If you are unsure which steps to take in the event of a merger or takeover involving a sponsor licence holder, speak to Immigration Solicitors who will be able to advise you and check that all of the necessary steps have been taken.