Sponsor Licences: Corporate transactions

This is the second article in our series about sponsor licences. This article focuses on the effect of an acquisition on a sponsor licence. 

When selling or acquiring a company that already holds a sponsor licence, certain reporting duties will arise in relation to that transaction. Sponsor licences are not able to be transferred between entities so a transaction will also likely trigger the need for a new licence to be applied for, which can be burdensome for a buyer who doesn’t currently have a sponsor licence in place. 

This article considers the general duties on companies with sponsor licences when they are involved in an acquisition including what they need to report to the Home Office.  

Change in ownership

If there is a change in direct ownership of the company holding the sponsor licence (for example all of  the company’s shares are sold to a buyer), the sponsor licence is revoked. This means that the buyer must then apply for a new sponsor licence (unless they already have one in place) in order to continue to employ any sponsored employees. 

If an asset purchase takes place where parts of the business are sold to a buyer and sponsored employees transfer to the buyer via TUPE, the buyer will have to take full responsibility for the sponsored employees from the date of the transfer. 

It is worth noting that the change in ownership triggering a new licence only applies where there is a change in direct ownership of the company that owns the licence. If there is a change in ownership further up the structure (e.g. the holding company is being purchased) then it is likely that the company holding the licence will only be required to report the transaction to the Home Office via the Sponsorship Management System (SMS). The rules around a change in ownership are complex and the Home Office will not always taken a consistent approach. As such, we always recommend you seek legal advice if faced with this situation. 

Reporting obligations 

When an acquisition happens, the company with the sponsor licence must report the change to the Home Office within 20 days of the change (this will normally be completion of the transaction). The report must include details of all the sponsored employees who are affected. It should also confirm whether the company needs to surrender or make dormant its sponsor licence.

The Home Office will expect supporting documents to be provided with the report. These documents will typically be a certified copy of the transaction agreement, an affidavit signed by a senior executive of the company or a letter from a practising solicitor or notary confirming the transaction and evidence of the TUPE transfer if applicable.

Restructures

Corporate groups will often carry out an internal restructure. These restructures can result in a change of ownership of a company holding a sponsor licence if, for example, a new entity is inserted into the structure which purchases all of the share capital in the company. This would technically trigger a direct change in ownership and reporting obligations under the sponsor licence. However, in this instance we would recommend legal advice is taken and ‘comfort’ is sought from the Home Office first to see whether a fresh sponsor licence does need to be applied for. It may be that the Home Office will only require the internal restructure to be reported to them, especially if there have been no changes to the day-to-day operations of the company with the licence as a result of the restructure which is certainly preferable to applying for a fresh licence. 

New licence or transfer to existing licence

If the buyer does not have its own sponsor licence and the acquisition constitutes a direct change in ownership, whether through a share or asset purchase, the buyer will need to apply for a new sponsor licence in order to continue employing any sponsored employees. 

The buyer must apply for the licence within 20 working days of the transaction taking place. If the buyer does not make this application, all of the sponsored employees will have their permission to work in the UK curtailed to 60 days. This means that unless they find a new sponsor, they will have to leave the UK after 60 days.

If the buyer has its own sponsor licence already, it can report the transaction to the Home Office and ask that the sponsored employees be transferred to its own licence. It is worth noting that sponsor licence are not portable so the seller’s existing licence cannot simply be picked up as part of the transaction and “transferred” to the buyer’s company.

What happens if the report is missed?

Sometimes a company may not be aware of its obligations in respect to its sponsor licence when an acquisition happens and reporting deadlines may be missed. If this happens, the company and buyer should take reasonable actions including making the report as soon as it becomes aware. The Home Office may accept the report but it could also trigger a compliance visit from the Home Office and therefore a wider review of a company’s licence and its usage. We recommend employers are proactive if this happens and take measures internally to ensure it doesn’t happen again in readiness for any compliant visit. Employers in this situation should consider conducting their own internal audit in readiness of a potential visit from the Home Office.

Our next article in the series will look at the effect of insolvency on a sponsor licence. 

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.

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