TUPE Does Apply To Transfers Of Companies In Administration

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

The Court of Appeal issued its long-awaited Judgment in the case of Key2Law (Surrey) LLP -v- De' Antiquis, confirming that businesses which are in administration are not exempted from TUPE.

Under Regulation 8(7) of TUPE, in circumstances where there is a "relevant transfer" involving a transferor which is "subject to bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor", then Regulations 4 and 7 of TUPE will not apply. Regulations 4 and 7 of TUPE are the provisions which operate to automatically transfer employees from the transferor to the transferee and which prohibit dismissals connected with the transfer. Therefore, where Regulation 8(7) applies, there is no automatic transfer of employees under TUPE, meaning that the transferee can acquire the insolvent business and its assets without also necessarily taking on the business's employee related liabilities.

The EAT considered the application of Regulation 8(7) to administrations in Oakland -v- Wellswood (Yorkshire) Limited. In that case, the EAT determined that Regulation 8(7) could apply to the purchase of a business in administration in certain circumstances (including pre-pack sales), the determinative factor being the intention of the administrator at the beginning of the insolvency proceedings.

Subsequently, however, in OTG Limited -v- Barke & ors, the EAT adopted an "absolute" approach, whereby all administrations, including pre-pack administrations, fall outside the scope of Regulation 8(7). Under this absolute approach, Regulations 4 and 7 of TUPE will always apply to the purchase of a business in administration.

Following OTG Limited -v- Barke & ors, we were left with two conflicting decisions from the EAT. However, the Court of Appeal has now clarified matters and confirmed that the EAT's approach in OTG Limited -v- Barke & ors was the correct one.

In the Court of Appeal's Judgment, relying on the evidence of...