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administrations – There's no escaping TUPE!

23 February 2011

In OTG Ltd v Barke, the Employment Appeals Tribunal (“EAT”) has held that an administration can never qualify as “insolvency proceedings with a view to the liquidation of the assets of the company” under Regulation 8(7) of the Transfer of Undertaking (Protection of Employment) Regulations 2006 (“TUPE”).

Accordingly, unless employees have been properly dismissed by the Company or its administrators prior to the transfer, all employees will automatically have their contracts transferred to a purchaser under TUPE.

The previous decision of the EAT in Oakland v Wellswood (that Regulation 8(7) could apply to the purchase of companies in administration in some circumstances, including pre-packs) was not followed. This latest decision gives certainty to an area that was fraught with difficulty. However, it will undoubtedly have an impact on the appetite of purchasers to acquire the assets of a company in administration, particularly where the company has a large number of employees.

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