Sponsor Licence Change of Business Ownership
On 01 December 2020, the Immigration Rules were changed to remove the 10% cap on shareholding ownership for sponsored migrants which was previously in place under the Tier 2 (General) route (unless a migrant was a high earner). This has opened up the possibility of sponsorship to many more companies and migrants. However, the ownership of a company is still very relevant to sponsor licences. This article explores how changes in the ownership of a company can affect their sponsor licence.
What Business Structure Changes Should We Be Aware Of?
Businesses that hold sponsor licences should be aware of how changes to their business structure can affect their sponsor licences. Sponsor licences are not transferable, which means that sponsor licence holders should be very clear about how the following changes to a business could affect their licence and, accordingly, any sponsored workers:
- Change in direct ownership;
- You sell all or part of, or the controlling number of shares in, your organisation;
- You are partly or wholly taken over by another organisation; or
- You are splitting out to form new organisations.
What Should We Do if Our Business Changes in One of the Above Ways?
You should report any of the above changes via the Sponsor Management System (SMS) within 20 working days of the change taking place. A failure to do so could result in the licence being revoked or downgraded. Any requests by the Home Office to provide documents to verify the change should be complied with.
If a licence is revoked, any sponsored workers may have their permission cancelled. If a licence is downgraded from an A-rating, the sponsor licence holder is not permitted to sponsor any new workers. Therefore, the consequences of not complying with this duty to report can be severe.
What Happens Where There Is a Change in Direct Ownership?
Where there is a change in the direct ownership (either by virtue of a complete sale, or a sale of shares resulting in a change of controlling ownership), the licence will be revoked. Where sponsored workers have been transferred to another sponsor licence, the licence will be made dormant. As above, sponsor licences cannot be transferred, therefore the new owner must apply for a new sponsor licence in order to sponsor any existing (or new) sponsored workers.
Businesses looking to make a sponsor licence application, who know they will undergo a funding round, should be particularly alive to this. Where possible, businesses should consider their shareholding before making a sponsor licence application to avoid having to make an additional sponsor licence application in future as a result of change in ownership.
What Will Happen to Our Sponsored Employees?
What will happen to sponsored workers will depend on the circumstances of the sale.
Where a worker is protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended) (‘TUPE’) this, in general, means that their job is transferred to the new company and the terms and conditions of their employment remain the same. Workers who change employers under TUPE do not need to make a change of employment application provided that:
- The new sponsor has a valid sponsor licence in the relevant route and has confirmed that it accepts responsibility for the worker; and
- The worker’s duties remain unchanged.
It is, therefore, essential that legal advice is sought to determine whether TUPE applies.
What Happens if a Worker Is Being Transferred to Our Company Under TUPE but We Do Not Have the Relevant Licence?
If the new company does not have a sponsor licence, they must make an application for a sponsor licence within 20 working days of the TUPE transfer taking place. Failure to do so will result in the migrant’s permission being cancelled.
What Happens if We Take Over or Merge With Another Company and They Have Sponsored Workers?
If your business does not already have a sponsor licence, you will need to make an application for a sponsor licence within 20 working days. If you already hold a licence, you must report the change within 20 working days of the change taking place and confirm that you are taking sponsorship responsibility for the workers. You must also request that the previous sponsor’s licence is made dormant. This will enable you to have limited access over this licence to report worker activity.
What Happens if We Are Taken Over or Merge With Another Company and Our Sponsored Workers Are Moving to a New Organisation?
This must be reported within 20 working days. You must provide details of the sponsored workers who are moving to the new organisation. If the workers are not moving to a new sponsor, then their permission will be cancelled. You must also confirm whether you need to surrender the licence.
What if Our Business Undergoes a Partial Takeover or De-merger?
Where the business is partially taken over, or is splitting out to form one or more new organisation, the steps that you should take will depend on whether you are the new sponsor, or the old sponsor, and if you still have any sponsored workers.
No Longer Have Any Sponsored Workers
This change must be reported within 20 working days.
In terms of the licence, you should decide whether to surrender or retain it. This will depend on whether you wish to sponsor any new workers in the future.
Still Have Sponsored Workers
This change must also be reported within 20 working days. You will still have responsibility for reporting on these workers.
If you are the new sponsor, you must make a valid sponsor licence application within 20 working days of the date the workers move to you, if you do not already hold a sponsor licence. You must provide details of the workers you have accepted sponsorship responsibility for. You will not be able to report on the workers who have transferred to you on the SMS as you will not have their SMS records. You will need to email the reporting mailbox instead.
Contact our Business Immigration Barristers
As above, it is essential that businesses with sponsored employees properly consider the impact that any change in ownership will have on their migrant workers. They should seek legal advice and plan accordingly.
For expert advice and assistance in relation to the effect of changes in business ownership on sponsor licences and how this might affect sponsored workers, contact our business immigration barristers in London on 0203 617 9173 or via the enquiry form below.