Sponsor Licence Under New Ownership: A Founder's Guide to M&A and TUPE
- 🚨 The Mandatory Reporting Duty
- 🔍 The TUPE Misconception
- 🗺️ Navigating the Transaction: Key Scenarios
- ✅ Your Pre-Transaction Sponsor Licence Checklist
- 🛑 The Consequences of Getting It Wrong
- 🤝 How We Help: From Due Diligence to a Smooth Transition
The most important rule is that a UK sponsor licence is non-transferable. The new entity cannot simply inherit and use the old company's licence. Failure to navigate the Home Office's strict rules during a change of ownership can lead to the revocation of your licence and the loss of your sponsored workforce, jeopardizing the very value of your deal.
This guide provides a clear framework to manage sponsor licence compliance during M&A activities.
🚨 The Mandatory Reporting Duty
When a merger, takeover, or similar change of ownership (including changes in Persons with Significant Control) takes place, you have a mandatory duty to report the change to the Home Office via the Sponsor Management System (SMS) within 20 working days. Failure to report this is a serious breach of your sponsor duties.
🔍 The TUPE Misconception
A frequent point of confusion is the interaction between sponsor licence rules and the Transfer of Undertakings (Protection of Employment) Regulations (TUPE).
TUPE protects employees' rights, automatically transferring their employment contracts to the new employer. However, it is crucial to understand that TUPE does not automatically transfer sponsorship responsibility. While an employee's job is protected, the new employer must independently hold a valid sponsor licence and formally assume sponsorship duties.
🗺️ Navigating the Transaction: Key Scenarios
The action you must take depends on the nature of the transaction.
Scenario 1: The acquiring company already holds a sponsor licence.
The new owner must report the acquisition via its SMS account and confirm that it is taking full sponsorship responsibility for any sponsored workers who have transferred. The employees can then be moved onto the acquirer's existing licence.
Scenario 2: The acquiring company does not hold a sponsor licence.
The new owner is legally obligated to apply for a sponsor licence within 20 working days of the transfer taking effect. If they fail to apply, or if their application is refused, the visas of the transferred sponsored workers will be curtailed, usually to 60 days.
Scenario 3: A share sale resulting in a change of control.
A point frequently missed is that a share sale that results in a change of control (typically 51% or more) also triggers the requirement for a new licence application, even if the company's name and operations remain the same.
✅ Your Pre-Transaction Sponsor Licence Checklist
- Identify All Sponsored Workers: Create a clear list of every employee under sponsorship, including their visa expiry dates.
- Conduct Due Diligence: Scrutinise the seller’s compliance history. Any past breaches can become your liability.
- Verify the Buyer’s Licence: Confirm if the acquiring entity holds a valid sponsor licence. If not, their application must become a critical part of the transaction timeline.
- Allocate Responsibility: Clearly define in the sale agreement who is responsible for making the necessary Home Office reports and applications.
- Communicate with Staff: Keep your sponsored workers informed about the process to provide reassurance.
🛑 The Consequences of Getting It Wrong
If the required actions are not taken, the Home Office can revoke the existing licence. This means:
- Your business immediately loses the ability to sponsor new overseas workers.
- All existing sponsored employees will have their visas curtailed to 60 days, forcing them to find a new sponsor or leave the UK.
- The business will be subject to a "cooling-off" period, typically 12 months, before it can reapply for a licence.
🤝 How We Help: From Due Diligence to a Smooth Transition
Navigating corporate law, employment regulations, and immigration rules during an M&A transaction is a high-stakes challenge.
At Nation.better, we provide the expert guidance and technology to ensure a smooth transition. Our platform gives both buyer and seller a complete, real-time overview of all sponsored employees, visa expiry dates, and reporting duties, making due diligence seamless. We help you manage the reporting process and ensure your corporate restructuring is fully compliant.
Planning a merger or acquisition? Contact us today to ensure your sponsor licence is a strength, not a liability in the deal.
FAQ: Sponsor Licences in M&A
No. This is the most critical rule. A sponsor licence is granted to a specific legal entity and is non-transferable. When a business is acquired, the new owner cannot simply inherit or use the seller's existing licence. A formal application or report to the Home Office is always required.
No. This is a common and dangerous misconception. While the TUPE regulations protect an employee's contract and terms of employment, they do not transfer the legal responsibility of sponsorship. The new employer must independently hold a valid sponsor licence to legally employ the transferred workers.
When a company with a sponsor licence is acquired, the new owner has a mandatory duty to act within 20 working days of the transaction. The specific action depends on whether the acquiring company already holds a sponsor licence. If the new owner already has a licence, they must report the acquisition via the Sponsor Management System (SMS) and formally assume sponsorship responsibility for all transferred employees. Conversely, if the new owner does not have a licence, they are legally obligated to apply for their own new sponsor licence within that same 20-working-day period.
The new owner is legally required to apply for its own sponsor licence within 20 working days of the transfer. If they fail to apply in time, or if their application is refused, the visas of all transferred sponsored workers will be curtailed (usually to 60 days), and they will lose their right to work for the company.
Yes. Even if the company's name and day-to-day operations remain the same, a share sale that results in a change of overall control (typically 51% or more) is treated as a change of ownership by the Home Office. This also triggers the requirement for a new licence application.
The consequences of failing to handle the licence correctly during an M&A deal are severe and can jeopardize the value of the deal. If the required actions are not taken, the Home Office can revoke the sponsor licence, which means three critical outcomes: first, the business immediately loses the ability to sponsor new overseas workers; second, all existing sponsored employees will have their visas curtailed to 60 days, forcing them to find a new sponsor or leave the UK; and third, the business will be subject to a "cooling-off" period, typically 12 months, before it can reapply for a licence.
Generally, no. You are required to report a change of Persons with Significant Control in the SMS. You need to apply for a new Sponsor Licence if this change represents a transfer of controlling interest (direct ownership) of the company.
