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Can TUPE apply on a Share Aquisition?

Possibly, in certain circumstances was the (slightly worrying) view of the High Court in the recent case of ICAP Management Services Ltd -v- Berry [2017]. Mr Berry was a senior executive in electronic broking with ICAP Management Services Ltd. He was placed in the garden (for his 12 month notice period) when he gave notice to join ICAPs main competitor; BGC.

Tullett Prebon plc (‘Tullett’) then purchased ICAP in a share purchase acquisition. He was 7 months into his 12 month notice period, when Mr Berry sought to allege that actually, in respect of the integration of Tullett and ICAP, there had been a TUPE transfer and accordingly he was entitled to object to it [TUPE Reg 4(7)].

Such an objection, if valid, would have the effect of terminating his contract and so would have enabled Mr Berry to be immediately released from his employment.

ICAP rejected this proposition and issued an injunction to enforce the period of his garden leave. Mr Berry was also subject to a non-compete restriction for the duration of 6 months. However this was subject to garden leave set off and so had already been extinguished.

It has always been fairly clear that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) applies to most business asset transfers. However, a share acquisition; where the shares in the company (only) change ownership, does not invoke this (in) famous piece of legislation.

Equally well known has been the position that immediate consolidation and centralization of a newly purchased company into an existing group of companies could give rise to potential TUPE scenarios ‘within’ the ambit of the share acquisition; but does this case take the application of TUPE to share acquisitions even further?

BGC and Mr Berry argued here that TUPE applied because (among various other alternative arguments) the part of the business for which he worked had transferred from ICAP plc to the newly created parent entity of TP ICAP Plc; the former having been closed down and its management structure which operated it; dismantled on completion of the share transaction.

ICAP contended there was no application of TUPE as there had been no change to Mr Berry’s employer; there was no transfer of an economic entity to another person within the meaning of Regulation 3.

Whilst it was correct that Tullett and ICAP were integrating support and some strategic parts of their respective groups, this remained far from complete even at the date of the trial. Specifically; Mr Berry’s area of the business remained intact and unchanged and operated exactly as it had before the merger.

If anything, each of ICAP and Tullett, although now in common ownership, remained distinct and competing brands.

The High Court agreed that TUPE requires a change of employer. A share sale does not generally involve a change of employer unless there is a de facto TUPE transfer because of the control then exercised by the new owner.

In this instance, there was no such overarching control exerted; business in the acquired ICAP companies carried on in just the same way as before. The test which the Judge advocated was tripartite; had the Newco (in this instance TP ICAP Plc)

  1. Become responsible for carrying on the business?
  2. Incurred the obligations of the employer?
  3. Taken over the day to day running of the business.

In more colloquial terms, the High Court was asking:’Has the new party stepped into the shoes of the employer?’.

It was decided TP ICAP Plc had not, so Mr Berry was not able to object as there was no TUPE transfer and ICAP was successful in its enforcement of Mr Berry’s garden leave.

So what now for parties involved in a share acquisition? Has the position been clarified or is it even more uncertain? Simply, whilst this case is clearly going to be a precedent- it will be a highly fact-sensitive one.

Going forwards; on a share transaction, the parties need to be aware that it remains possible that TUPE could indeed play a part where there is an centralization or integration of the incoming with the existing businesses, the purchaser immediately seeks to take over control of day to day operations management or otherwise ‘incurs the obligations of the employer’.

Ultimately therefore, whilst a simple acquisition of control of shares does not constitute a transfer within TUPE; it may occasion such a transfer.

For any further guidance or information on this matter or any other employment-related enquiries, please contact Andrea London, Partner and Head of Employment.


The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.