As more and more employers register to become licensed sponsors under the UK’s work permit regime, it is increasingly likely that organisations will face challenges due to the significant compliance obligations that go hand in hand with holding a sponsor licence.

One area that often gets overlooked is the impact which changes to corporate structures, acquisitions and mergers, and group reorganisations have on sponsor licences. Not least because very often responsibility for administering the licence and/or compliance reports will fall to someone in HR or recruitment, who may not even be aware of changes at the corporate level.

Sponsor licences are not transferable, so whenever there is a change in a sponsor’s ownership or the group structure sitting behind it, it is important to think about the immigration law implications.  In nearly all cases, a sponsor will have to do something as a result of these sorts of changes. In some cases, this may be as straightforward as making a report to the Home Office (although there are strict time limits for doing this). In other cases, it may require the sponsor to apply for an entirely new licence.

Failing to comply with these requirements can have significant implications. The ultimate sanction for non-compliance is revocation of the organisation’s sponsor licence. This would mean that the business in question would no longer be able to sponsor any migrant workers (meaning that they could no longer employ any non-UK, non-settled nationals), and any existing sponsored workers would have their visas cut short. Typically, they would be given 60 days to leave the UK or find another sponsor.  This applies no matter the seniority of the sponsored worker involved, or how important they are to the organisation. There are also risks in relation to potential illegal working offences (including the civil penalty fine of up to £20,000 per illegal worker). Given the potential ramifications, compliance is absolutely essential.

In this article, we take a more detailed look at these legal issues, but would strongly advise taking specific advice based on your individual circumstances.

Mergers and Acquisitions

Sponsor licences do not automatically transfer as a result of mergers and acquisitions. 

This seems self-evident when considering a TUPE transfer, given that the identity of the employer company will be changing as staff transfer from Seller to Buyer. It is unsurprising that where sponsored staff transfer from Seller to Buyer as a result of TUPE, the Seller will need to take some action relating to its sponsor licence to effect the transfer of sponsored staff to the Buyer.

However, on a share sale, the identity of the employer doesn’t change; just the owners behind it. As such, it feels counter-intuitive that a simple share sale could impact on a sponsor licence in the same way as a TUPE transfer (but that is exactly what the immigration rules require).

Sponsor Licence issues arising on an asset sale/TUPE transfer

Where the Seller holds a sponsor licence, it will need to report the fact that a TUPE transfer has taken place to the Home Office within 20 working days of the transfer.  The Seller will also need to identify which sponsored staff have transferred and which have been retained. Finally, it will need to confirm whether it still needs to hold onto its sponsor licence. This will be the case if any sponsored staff remain with the Seller, or the Seller will continue to operate and might need to sponsor staff going forwards. If the Seller retains its licence, it will need to continue complying with its sponsor obligations in relation to any retained sponsor staff and more generally (in the usual way).

When the TUPE transfer takes effect, the Buyer immediately inherits the sponsored staff and duties in relation to them.  If the Buyer already has a sponsor licence, it will need to notify the Home Office that it has taken over the sponsorship responsibility of the transferring employees. This must be done within 20 working days of the transfer date. The Buyer will need to provide details of each sponsored employee.

If the Buyer does not already have its own sponsor licence, it must submit a valid application for a licence within 20 working days of the transfer date. The Home Office will usually request supporting evidence of the transfer, such as a letter from a solicitor confirming details of the transaction which resulted in the TUPE transfer or a copy of the business purchase agreement. If the Buyer fails to apply for a new licence within this window, transferring sponsored staff will have their visas curtailed or cut short. They will be given 60 days to find a new sponsor or leave the UK (or face deportation). If they continue working for the Buyer, they will be working illegally (leaving the Buyer exposed to a civil penalty fine of up to £20,000 per illegal worker).

Sponsor Licence issues arising on a share sale

The requirements here are similar to a TUPE transfer but less “obvious” because there is no change in the legal entity employing the sponsored staff. In addition, complications arise depending on whether the direct ownership of the sponsor changes, or whether ownership changes higher up the corporate structure.

As an example, a sponsor, Company A, sells 100% of its shares so that there is a new direct owner of Company A.  Company A will need to report the fact that a share sale has taken place to the Home Office within 20 working days of the acquisition. Company A’s licence will then usually be revoked or made dormant by the Home Office. Company A will then have to reapply for a new licence, again within 20 working days, if it wants to continue employing sponsored staff (or if it wants to continue having the option to recruit sponsored staff). Company A will be making a new licence application on the basis of its new ownership. Assuming this is approved, Company A will then have to confirm that it intends to take full sponsorship responsibility for workers under the new licence.

In our experience, this is often missed. However, this compliance failure has potentially serious implications. A failure to do this will mean that transferring sponsored staff will have their visas curtailed or cut short, and they will be given 60 days to find a new sponsor or leave the UK (or face deportation). If they continue working for Company A on the basis of the “old licence”, which could easily happen entirely inadvertently (and without any intention to breach immigration law requirements), they will be working illegally (leaving Company A exposed to a civil penalty fine of up to £20,000 per illegal worker).

If share ownership changes higher up the corporate structure, or if there is an intra group reorganisation, the situation becomes even more complicated; in some cases, this could simply trigger a requirement to inform the Home Office of what has happened (again within 20 working days). In other cases, a new licence could again be required.

Taking specific, specialist advice to understand the implications is essential to ensure that all the compliance obligations have been met and that you have not inadvertently fallen foul of these requirements.

Practical Tips

• Immigration due diligence is key. This is often overlooked but it is crucial to establish whether the target/its group holds a sponsor licence and, if so, how any licence is structured, whether any staff are or have been sponsored and whether there has been any previous Home Office enforcement action as a result of non-compliance with their sponsor duties (or illegal working issues).
• Take early specialised legal advice. The requirements are complicated so taking early advice is important to understand your obligations and prevent compliance failings.
• Build in compliance to your post-completion/post-sale activities. It is essential to understand whether any proposed sales, changes in ownership or restructures will trigger immigration compliance obligations. Given the 20 working day window for action, it will be important to act quickly after any transaction/sale. This means making sure that the relevant information is readily available, particularly if a new licence application is required.
• Take immediate advice, if you suspect historic breaches of these requirements. Whilst non-compliance is very serious, by acting promptly and with the benefit of specialist legal advice, you may be able to mitigate the risks of having your licence revoked and/or any illegal working penalties.

Should you require further advice or support, please contact Laura Darnley or a member of our specialist Immigration Team.