During a Merger & Acquisition (M&A) transaction, your business may be dealing with multiple crucial factors such as corporate strategy, financials, taxation, and logistics. One aspect that is often left until later in the process is the possible immigration implications.
In this article, Fozia explores how M&A transactions can impact your company and gives you some pointers to look out for as soon as there are discussions about a partial or complete takeover or other restructuring changes.
This is an important factor to consider at all levels of the business, from the senior stakeholders to the HR team. Even though immigration might not appear to be an important factor in the grand scheme of events, the consequences of failing to take timely and appropriate action can be detrimental. In extreme cases, this could involve the revocation of a sponsor licence and the curtailment of sponsored migrant employees’ UK visas.
Contents:
- How does M&A impact a company from an immigration perspective?
- Are there any differences in complete or partial takeovers?
- What are the implications for the current sponsored migrant employees?
- What are the main steps and reporting duties a company must comply with?
- What are the timescales?
- What steps can you take?
How does M&A impact a company from an immigration perspective?
Has there been a change in ownership?
One of the key points to establish is that a sponsor licence is not transferrable between entities. If you or your team have submitted a sponsor licence application for your company, you will know that it requires details of that specific entity and its linked subsidiaries. If there are any changes to the ownership of that entity because of a merger, acquisition, or restructuring, then in most cases a new sponsor licence is required. In cases where a new licence is not needed, there are reporting duties that must be complied with to ensure the UK Visas and Immigration (UKVI) is updated.
Some of the common scenarios in corporate changes have been listed below with the possible outcomes from an immigration perspective:
| Change in direct ownership | When there is a direct change of ownership of a business by acquisition, merger, or another restructuring change, the licence cannot be transferred and a new licence is required. |
| Change in ownership structure | When the ownership structure of a business changes and results in the entity becoming separated or a subsidiary of another entity, a new licence will be required. However, if the change is one removed from the sponsor, for example, the parent company of the company holding the licence changes their ownership but continues to own their subsidiaries, a new licence will not be necessary. |
| Corporate restructuring | When a business undergoes major corporate restructuring, for example, converting from a limited company to a partnership or vice versa, a new licence will be required. |
| Change in type or nature of business | When the type or nature of a business is significantly changed, such as a food manufacturing company changing its business to become a restaurant, a new licence is likely to be required. This depends on the nature of the change and must be assessed on a case-by-case basis. |
How does this impact the existing sponsor licence?
If you have an existing sponsor licence, it will need to be examined to assess whether it remains valid and requires updating or whether a new licence is required and the previous licence must be surrendered and rendered ‘dormant’. In each scenario, the UKVI must be updated. This is why it is essential to consider the immigration implications before the transfer is complete and ideally before any change is agreed.
This exact question depends on which entity is examining its licence. If you are acquiring another entity, in most cases, you can notify the Home Office of the change to update your licence and add the new entity if you wish for the licence to cover this. However, if you prefer to have separate licences, a new licence application of the transfer must be submitted.
If you are the company that is acquired and you have an existing licence, due to the direct change of ownership, you will need to either apply for a new licence or be added to the acquiring company’s licence (if they have a valid sponsor licence and wish to have one licence covering both entities).
The decision on whether a new licence is more suitable compared to the acquired entity being added to an existing licence depends on the structure of the company and its operation, such as how the HR team is structured. There are numerous factors that will need to be discussed, and a professional immigration advisor can assist you in outlining the different options and the advantages and disadvantages of each option.
Are there any differences in complete or partial takeovers?
The UKVI does provide provisions for complete and partial takeovers in the rules. Complete takeovers normally result in the entity ceasing to exist, and the new legal entity will need to apply for a new licence.
Partial takeovers can sometimes allow the existing licence to remain valid depending on the level of change to the ownership and control of the company. Normally, if the company’s controlling number of shares (typically more than 50%) is acquired, a new licence will be required. Even if the licence can remain valid, the UKVI must be notified of the change.
What are the implications for the current sponsored migrant employees?
If you have a sponsor licence that is affected by any of the changes discussed, it will impact the migrant employees who are sponsored under that licence.
In cases where a new licence is required or the entity can be added to the sponsor licence of the acquiring business, in most cases a new visa application for the transferring employees is not required. This is subject to the migrant employees’ roles remaining the same and the transfer of the employees being under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations or similar arrangements.
This will, however, require an update to the UKVI to ensure that either the new licence or the acquiring company’s licence is linked to the migrant’s visas. The reporting duties will continue and, instead of making these on the Sponsor Management System (SMS), they will need to be emailed to the relevant UKVI team. Any subsequent extension or change of employment applications will need to be made on the new licence.
Timing is crucial to minimise any disruptions to your sponsored employees and allow the sponsored employees’ visas to remain valid during the processing of the new licence application.
It is also important to note that if you are the acquiring company that will have the new employees transferred to you, it is best practice to review their existing Right to Work (RTW) checks to ensure they are working lawfully for your organisation and that you remain compliant.
What are the main steps and reporting duties a company must comply with?
Processes
If you hold a sponsor licence, as part of your compliance duties, any change impacting your organisation and the licence must be reported to the UKVI. With M&As and the scenarios outlined in this article, the licence holder must notify the UKVI on the Sponsorship Management System (SMS). If you no longer have access to the licence, it is best to seek professional advice in contacting the UKVI to inform them of this change. It is a requirement to have an appropriate Authorising Officer and a suitable individual to have level 1 access to the licence at all times, and no longer having access is in itself non-compliance.
Within the notification, details of the change to the organisation must be outlined, including whether there are any sponsored employees being transferred.
If you are the acquiring company, the same duties will apply in notifying the UKVI of the acquisition and whether any employees will be transferred to your existing licence.
If a new licence is required, a new sponsor licence application must be submitted and due to the processing times involved, it is best to obtain all supporting documents needed for the application in advance to avoid delays in making the application.
Supporting documents
The exact supporting documents will depend on the nature and details of the transfer. Commonly these include the following documents (this is not an exhaustive list and does not apply to every scenario):
- Companies House registration certificate
- Updated organisation structure
- Evidence of sale/purchase, such as copies of contracts or agreements, letters from a practising solicitor, or notary, or an affidavit signed by one of the partners or senior executives detailing the transfer
- Copy of the TUPE agreement
- A signed letter from the acquiring company’s Authorising Officer assuming responsibility for all transferred sponsored employees
- Employment contract of sponsored employees that are transferred, along with copies of their Certificates of Sponsorships
What are the consequences of non-compliance?
If the relevant notifications are not submitted or a new sponsor licence is not obtained where necessary, the consequences can be detrimental.
As a licence cannot be transferred to a new entity, if the necessary steps are not taken, the licence can be suspended or revoked, and this can result in the curtailment of existing sponsored employees, which jeopardises their stay in the UK.
If your company has acquired another company and you have a sponsor licence, failing to notify the UKVI can impact your existing licence and lead to suspension or, in extreme cases, revocation. So not only does this impact new employees that are transferred, but also your existing sponsored employees.
It is also important to be aware of the consequences of having illegal employees, which can result in a fine of £45k for a single offence and £60k for multiple offences. The Authorising Officer also holds responsibility for ensuring that the reporting duties are complied with. Failure to comply can lead to civil penalties for the company, licence suspension, or revocation.
What are the timescales?
It is important to note that as a general rule, any new licence applications, or changes must be completed or reported within 20 working days of the transfer.
What steps can you take?
Ensure that discussions about immigration implications are started at the early stages of restructuring and that this is reassessed as the details of the transfer are finalised. If a new licence is needed, ensure all documentation is ready so this can be submitted as soon as the transfer is complete. If you are taking over transferred employees, ensure all relevant Right to Work checks are checked and that everyone has the necessary permission to work in your organisation in their role.
This is a complex area that is interlinked with various other areas of law, mainly corporate and employment law, and it is key to seek professional assistance and ensure the team supporting you is in sync. Our experienced team is available to assist and answer any questions. Every transaction will be different and will need to be assessed individually, together with the structure of your business, in order to advise you on the most effective solution, to ensure you remain compliant, and to flag any issues as early as possible to minimise delays and detrimental outcomes.
