TUPE (08): insolvent businesses

by Practical Law Employment

A note examining the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) when a business is insolvent. This practice note outlines how TUPE's insolvency provisions, originally derived from the Acquired Rights Directive (Directive 2001/23/EC), modify the standard TUPE rules to facilitate the rescue of failing businesses. It details the critical distinction between "non-terminal" insolvency proceedings, which aim to rescue the business, and "terminal" proceedings, instituted to liquidate assets. For non-terminal procedures such as administration, this practice note explains how certain employee protections are preserved while allowing for greater flexibility, including permitted variations to employment terms and relief from some pre-existing debts. In contrast, it explores the more significant consequences of terminal proceedings like liquidation, where key TUPE protections, including the automatic transfer of employees, are disapplied. The note also addresses the ongoing duties to inform and consult, the role of the insolvency practitioner, and the impact of key case law in this complex area of employment law.