When a business is in the process of restructuring, seeking new investment, or even entering into an insolvency process, there are a lot of factors to take into consideration but many people don’t realise that an employee's immigration status can be an important one to consider.
In any business, when a new owner takes control it is important they make sure that all existing employees have the legal right to work. The business remains liable for any right to work fines, and can be closed while the Home Office investigate right to work issues. However, immigration is an even more important factor when the company in question has a Sponsor Licence.
A Sponsor Licence, also known as a Tier 2 or Skilled Worker Licence, is a special status given to some companies in order to allow them to hire staff from outside the UK. Before January 2021, Licences were only necessary when hiring workers from outside the EU, but after Brexit they became necessary to hire EU nationals who weren't already living in the UK.
However, a Licence isn’t an asset that appears on a balance sheet and it can easily be overlooked during the due diligence process. Unfortunately, overlooking the existence of a Licence isn't something which will correct itself, as Licences do not transfer with ownership of a company and there are special measures which need to take place if a Licence holder goes into administration.
The reason a Licence cannot transfer is simple, the Home Office want to ensure that only people they trust can support visa applications from non-EU nationals. They want to avoid a situation where someone sets up a company, obtains a Licence and then sells the company and Licence to an individual who has been involved in illegal working.
It is for this reason that within any restructuring or insolvency procedure consideration needs to be made if a company has a Sponsor Licence. There are some important principles that need to be considered including:
- A new Licence may be needed even where ultimate control of the business remains with the same individual(s). The Home Office look at the immediate ownership of the company, so the introducing of a holding company can trigger the need for a new Licence.
- Even changes further up the corporate structure, and not affecting the immediate ownership of the company, need to be notified to the Home Office.
- Any Company Voluntary Arrangements must also be reported to the Home Office within 20 working days.
- Where a new Licence is needed, it must be applied for within 20 working days of the change in ownership.
- Where, during any restructuring, employees transfer to a new company via TUPE there is a risk of illegal working penalties if a new Licence application is not submitted.
- Administrators or other insolvency practitioners do not need to apply for a new Licence, but must report their appointment to the Home Office and be added to the licence.
Although these principles are clear, in practice the situation can be complicated. For example, last year we dealt with a case where the Home Office had told our client they needed a new Licence. However, when we reviewed the case it was our view that the guidance allowed the company to use their existing Licence. We entered into discussions with the Home Office and were able to change their mind, saving our client the cost, and hassle, of a new Licence application.
If the correct process isn't followed, the Home Office can revoke the Sponsor Licence and curtail the visas of any sponsored employees.
If you are a business considering your options, an investor looking to purchase shares or an insolvency practitioner dealing with a licensed company, please get in touch to find out how we can help you navigate the Home Office guidance and avoid any potentially costly surprises.
