Immigration consideration to look at if you are selling your business!
Any UK based companies are mandatorily required to hold a sponsor licence in order to employ non-European nationals on Tier 2 visas – both Tier 2 (G) and Tier 2 Intra-Company Transfer categories.
A sponsor licence is a process whereby an employer needs to complete an online application form, pay an application fee and demonstrate to the Home Office that they have certain procedures/processes in place in line with the Home Office’s stringent requirements e.g. record keeping and reporting amongst other requirements. Once a sponsor licence application is submitted, the Home Office carries out extensive background checks on the employer and are very likely to carry out a pre-licence audit at the employer’s premises. Once the Home Office is satisfied that the company is eligible to hold a sponsor licence, they would grant them a licence. Subsequently, companies can recruit individuals from overseas (non-EEA nationals) on Tier 2 visas.
An important point to note is as to what happens when the company holding a sponsor licence goes through sale of its shares or an asset sale?
Here we have highlighted relevant considerations which employers must take note of.
Share and asset sales
If a UK company which holds a Tier 2 sponsor licence and employs Tier 2 migrant workers sells all or part of their business by way of an asset sale, the purchasing company must apply for a sponsor licence within 20 working days of completion of the sale and transfer the Tier 2 migrants’ visas on their Sponsor Management System (SMS).
It is important to note that the same requirements apply to sale of shares. The Home Office has confirmed that this rule applies to the sale of shares in not only the sponsor, but also to the sale of shares in the sponsor’s parent company or even an ultimate parent company.
Paragraph 13.5 of the sponsor guidance states the following:
“If there is a change in ownership of your organisation or business, for example if it is sold as a going concern or a share sale results in the controlling number of shares being transferred to a new owner, your sponsor licence will be revoked. The new owners must then apply for a new sponsor licence, unless they already have one, if they wish to continue employing any migrants that you were sponsoring.”
If the purchasing company does not apply for a sponsor licence, they will not be able to employ individuals on Tier 2 visas. If however they still go ahead and employer Tier 2 migrant workers without obtaining a sponsor licence, the Home Office has the power to levy a fine of £20,000 on the employer for each illegal worker they employ (the fine can be unlimited if the company is considered to have knowingly employed a migrant worker). In extreme circumstances, the Home Office has powers to send company directors to prison.
Consequences of not complying and next steps
The Home Office has confirmed that if a sponsor does not apply for a new sponsor licence in accordance with paragraph 13.5 of the Tier 2 & 5 sponsor guidance, they would revoke the existing licence, and curtail leave to remain for all Tier 2 sponsored migrants. Consequently, these Tier 2 workers will either have 60 days to find a new employer or leave the UK. If they leave the UK, they will not be able to return under the Tier 2 category for a 12 month period known as the “cooling-off” period.
Therefore, in case of an asset sale, we would advise that the purchasing company submits a sponsor licence application to the Home Office along with the relevant supporting documentation. If however, a parent company or another shareholder’s shares are being sold, the company must notify the Home Office of the proposed change to the sponsor’s share structure on the Sponsor Management System (SMS) in advance of completion. The Home Office will then be able to confirm if a new licence is required or not.
You will note that the repercussions of not following the Home Office guidance are severe and a timely intervention can go a long way in saving the hassles which a company may go through.
If you require more information or assistance with the above, please contact one of our London Immigration Lawyers on 020 3318 5794 or via email at firstname.lastname@example.org. The firm’s website can be accessed at www.hudsonmckenzie.com.