Can a company sell a part of its business and transfer the employees to the new business?

Shops Ltd has 3 separate shops. One limited company owns all three shops. They rent the shops from three separate landlords.

They have a good offer from B Limited to buy the shop in Cork. B Ltd will run the shop and take over the lease.

They will obviously not buy Shops Ltd but instead will buy the goodwill and lease owned by the company.

The 5 employees will transfer to becoming employees of B Limited and all their rights will be preserved under TUPE.

B Limited is "acquiring" the contingent redundancy liability of Shops Ltd. In other words, if it does not work out and they close the shop, they will have to pay the very substantial redundancy payments to the 5 employees they took over.

Would Shops Ltd have any liability to its former employees?

Could B Limited set up a new company C Limited to take over the shop so that if it does not work out, it won't be faced with large statutory redundancy payments?

No
No

Thanks Towger

So it's normal business practice for a limited company to sell part of its business and transfer its employees to a new company? The employees have to be notified but can't say "We don't want to work for the new company". Well they can say it but their only recourse would be to leave without any redundancy payments?

Yes. Google 'TUPE' for details.

Louis said:

Would Shops Ltd have any liability to its former employees?

Could B Limited set up a new company C Limited to take over the shop so that if it does not work out, it won't be faced with large statutory redundancy payments?

Click to expand...

To the first question, providing TUPE is done correctly, no.

In terms of the 2nd question, yes, they can set up a new company but the staff would then TUPE to that company as well.

As for what happens if staff decide not to transfer to the new company, they will be deemed to have resigned and will not be entitled to any payment, statutory or otherwise, from any company.

Louis said:

Could B Limited set up a new company C Limited to take over the shop so that if it does not work out, it won't be faced with large statutory redundancy payments?

Click to expand...

No. As @Peanuts20 has said, the TUPE provisions that apply from Shops Ltd to B Ltd apply equally to the move from B Ltd to C Ltd.