TUPE and Companies in Administration

Key2Law (Surrey) LLP v De'Antiquis [2011] EWCA Civ 1567

In this case the Court of Appeal held that, as a general rule, administration does not fall within regulation 8(7) of TUPE 2006 (which disapplies the automatic transfer principle meaning that employees do not transfer) and instead falls within regulation 8(6) of TUPE 2006 (which is much narrower in scope and only protects a transferee against the transfer of certain liabilities to employees).

The court held that it was preferable to adopt the general approach that administrations do not benefit from the regulation 8(7) exemption, rather than to say that the application of regulation 8(7) will depend on whether the administrator intends to liquidate the assets of the company. To make the determination of the position dependant upon identifying the intentions of the administrator would leave too much room for uncertainty.

Implications

This case overturns the controversial EAT decision in Oakland v Wellswood (Yorkshire) Limited.  The decision represents something of a double-edged sword for insolvency practitioners and the buyers and sellers of business via so called “pre-pack” administrations.  It provides valuable certainty as to the application of regulation 8 of TUPE to administrations, removing the confusion that was caused by earlier conflicting EAT decisions in this area. However, in doing so, it marks the end of any potential argument that regulation 8(7) can apply to a business put into administration (even where the administration might eventually lead to a liquidation of the business).

For further information on this article please contact Adam Williams adam.williams@dmhstallard.com or T: 020 7822 1587

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