If you are selling or buying a business as a sale of its assets and trade, the Transfer of Undertakings (Protection of Employment) Regulations 2006 almost certainly apply, the employees move to the buyer automatically on their existing terms, and neither side can contract out of that. If the deal is structured as a sale of the company’s shares, TUPE is not engaged at all, because the employer company does not change. That single distinction decides most of what follows, and it is the point that catches owners out more often than any other.
This article is written for business owners and directors on both sides of a transaction rather than for employees. We act for buyers and sellers on sales of owner-managed businesses, and TUPE is routinely the issue that moves a completion date. Below we set out when TUPE applies, exactly what transfers and what does not, the employee liability information deadline, the duty to inform and consult including the small employer exception, the position on dismissals and changes to terms, what the tribunal can award, and how buyers and sellers actually allocate the risk between themselves through warranties and indemnities.
When TUPE applies to a business sale, and when it does not
Regulation 3(1)(a) of the 2006 Regulations applies them to a transfer of an undertaking, business or part of a business situated in the United Kingdom immediately before the transfer, where there is a transfer of an economic entity which retains its identity. Regulation 3(2) defines an economic entity as an organised grouping of resources with the objective of pursuing an economic activity, whether that activity is central or ancillary. In plain terms, if what changes hands is a going concern that carries on doing broadly what it did before, TUPE applies.
Two features of regulation 3 widen that further than most owners expect. Under regulation 3(6), a relevant transfer may be effected by a series of two or more transactions, and may take place whether or not any property is transferred to the buyer at all. So a staged deal, or a deal where the buyer takes the trade, the goodwill and the staff but leases its own premises and buys its own equipment, is still a relevant transfer. There is no minimum size: regulation 3(4)(a) applies the Regulations to public and private undertakings alike, and GOV.UK confirms that the size of the business makes no difference.
Regulation 3(1)(b) adds a second category, the service provision change, which covers outsourcing, insourcing and a change of contractor. That is not usually the mechanism on a business sale, but it matters on deals where a function is hived out or a contract is novated to a different group company before the main transaction, because the hive-out itself can be a relevant transfer in its own right.
Why a share sale is different, and why that catches people out
On a share sale, the buyer acquires the shares in the company. The company remains the employer, the employment contracts are unaffected, and there is no change of employer for TUPE purposes. Nothing in regulation 3 is engaged, so there is no automatic transfer, no employee liability information obligation and no statutory duty to inform and consult under TUPE.
The confusion arises because a share sale is still a change of control, and change of control feels, to the people working in the business, exactly like a change of ownership. Owners frequently assume that because the business has been sold, TUPE must apply, or conversely that because they have heard a share sale avoids TUPE, no employment work is needed. Neither is right. A share sale avoids the TUPE machinery, but every employment liability in the company stays inside the company and comes to the buyer with the shares, which is precisely why employment due diligence is often heavier on a share sale, not lighter. Our comparison of a share sale and an asset sale sets out the wider consequences of that choice.
Three situations regularly produce a TUPE transfer where the parties did not expect one:
- Pre-sale reorganisations. A seller hives a division or a trade down into a new company before selling the shares in that new company. The hive-down is an asset transfer, so TUPE applies to it, with its own information and consultation obligations, even though the sale that follows is a share sale.
- Buying part of a business. Where the buyer takes one site, one division or one product line, TUPE applies to that part if it is an economic entity retaining its identity, and the arguments then move on to which employees are assigned to it.
- Unincorporated sellers. A sole trader or a partnership has no shares to sell. The deal has to be an asset purchase, so TUPE applies by default. Many smaller trade sales fall into this category.
Regulation 18 applies section 203 of the Employment Rights Act 1996 to the Regulations, so an agreement purporting to exclude or limit their operation is void except where the Regulations themselves allow it. A clause in the sale agreement saying that TUPE does not apply, or that the employees will not transfer, does not work. It can allocate cost between buyer and seller, which is a different thing, and we come back to that below.
What transfers, and what does not
Regulation 4(1) provides that a relevant transfer does not terminate the contract of employment of a person employed by the seller and assigned to the organised grouping being transferred. The contract has effect after the transfer as if originally made between that employee and the buyer. Regulation 4(2)(a) transfers all the seller’s rights, powers, duties and liabilities under or in connection with that contract, and regulation 4(2)(b) deems any act or omission of the seller before the transfer to have been an act or omission of the buyer. That deeming provision is the part that does the damage: a grievance mishandled by the seller in March becomes the buyer’s grievance, mishandled by the buyer, in October.
| Item | Position on a TUPE transfer | Source |
|---|---|---|
| Transfers to the buyer automatically | ||
| The contract of employment | Continues on the same terms, as if originally made with the buyer. Pay, hours, notice, bonus terms, contractual benefits and restrictive covenants all come across | Reg 4(1) |
| Continuity of employment | Preserved. Service with the seller counts in full for notice, redundancy pay and unfair dismissal qualification | Reg 4(1) |
| Rights, powers, duties and liabilities | Transfer in full, including unpaid wages, accrued holiday, outstanding grievances, disciplinary history and live or anticipated tribunal claims | Reg 4(2)(a) |
| The seller’s acts and omissions | Deemed to be the buyer’s. A discrimination claim arising from the seller’s conduct is defended by the buyer | Reg 4(2)(b) |
| Collective agreements | Have effect after the transfer as if made by the buyer with the union, in their application to transferring employees | Reg 5 |
| Trade union recognition | Carries over, but only where the transferred grouping keeps an identity distinct from the rest of the buyer’s business | Reg 6(1), 6(2) |
| Does not transfer | ||
| Occupational pension rights | Excluded, but only so far as the rights relate to benefits for old age, invalidity or survivors. Everything else in the scheme is outside the exclusion | Reg 10(1), 10(2) |
| Criminal liability | Liability to be prosecuted, convicted and sentenced stays with the seller | Reg 4(6) |
| Employees who object | An employee who tells either party that they object does not transfer. The contract terminates on transfer and they are not treated as dismissed, so no notice or redundancy pay is due | Reg 4(7), 4(8) |
| Employees not assigned | Only employees assigned to the organised grouping being transferred move. Central staff who merely service it generally do not | Reg 4(1), 4(3) |
The pension exception is narrower than it sounds
Regulation 10(1) disapplies regulations 4 and 5 to occupational pension scheme rights. Owners often read that as meaning pensions are simply the seller’s problem. They are not, for three reasons.
First, regulation 10(2) narrows the exclusion: provisions of an occupational scheme which do not relate to benefits for old age, invalidity or survivors are not treated as part of the scheme at all, so they fall outside the exception and transfer in the normal way. The Court of Justice held in Beckmann v Dynamco Whicheloe Macfarlane (Case C-164/00, judgment of 4 June 2002) that early retirement benefits, and benefits intended to enhance the conditions of early retirement, paid on dismissal to employees who have reached a certain age, are not old age, invalidity or survivors’ benefits. Martin v South Bank University (Case C-4/01) extended that to early retirement granted by agreement with the employer. Enhanced early retirement entitlements can therefore land on a buyer who assumed pensions were carved out entirely.
Second, the exception only covers occupational schemes. Contractual obligations to contribute to a personal or group personal pension, or to a stakeholder scheme, are ordinary contractual terms and transfer under regulation 4.
Third, sections 257 and 258 of the Pensions Act 2004 impose a separate minimum pension obligation on the buyer where, immediately before the transfer, there was an occupational scheme in relation to which the seller was the employer and the employee was an active member, was eligible to be one, or would have been but for a service requirement. In that case it becomes a condition of the employee’s contract with the buyer that the buyer provides scheme membership meeting prescribed requirements, or makes relevant contributions. Where the buyer’s scheme is money purchase or stakeholder, regulation 3 of the Transfer of Employment (Pension Protection) Regulations 2005 sets the level: the buyer must match the employee’s contributions, up to a minimum of 6 per cent of remuneration where the employee contributes at least that much, or alternatively match what the seller had been required to contribute. Automatic enrolment duties sit on top of that and are unaffected by the transfer.
Employee liability information and the 28 day deadline
Regulation 11(1) requires the seller to notify the buyer of employee liability information for every person assigned to the grouping being transferred, in writing or in a readily accessible form. Regulation 11(2) sets out what that covers: the identity and age of each employee; the particulars of employment that must be given under section 1 of the Employment Rights Act 1996; disciplinary action taken against the employee and grievances raised by the employee in the previous two years where the relevant Acas code applies; any court or tribunal claim brought by the employee against the seller in the previous two years, and any claim the seller has reasonable grounds to believe the employee may bring against the buyer; and any collective agreement that will have effect after the transfer.
Two timing rules apply and they are different from each other. Under regulation 11(3), the information must be accurate as at a date not more than fourteen days before it is given. Under regulation 11(6), as amended with effect for transfers taking place on or after 1 May 2014, it must be given not less than 28 days before the transfer, or as soon as reasonably practicable afterwards where special circumstances make that not reasonably practicable. Regulation 11(5) then requires the seller to notify the buyer in writing of any change to the information after it has been given, and regulation 11(7) allows it to be supplied in instalments or through a third party.
If the seller does not comply, regulation 12 allows the buyer to complain to an employment tribunal. The tribunal may award such compensation as it considers just and equitable, having regard to the buyer’s loss and to any contractual remedy the buyer already has against the seller, subject to a floor under regulation 12(5) of not less than £500 per employee affected unless the tribunal considers it just and equitable to award less. For transfers completing on or after 1 October 2026, the time limit for that complaint is six months from the date of the transfer, increased from three months by Schedule 12 to the Employment Rights Act 2025.
In practice the 28 day deadline is a diligence deadline, not a completion-day formality. It sits well inside the period when a buyer is still pricing the deal, which is why employee information should be requested at the start of legal due diligence rather than left to the employment schedule of the sale agreement. Sellers who prepare the information early as part of vendor due diligence remove one of the most common causes of a slipped completion date.
The duty to inform and consult
Regulation 13(2) requires the employer of any affected employees, which means both the seller and the buyer in respect of their own staff, to inform the appropriate representatives long enough before the transfer to enable consultation to take place. The information to be given is the fact that the transfer is to take place, its date or proposed date and the reasons for it; the legal, economic and social implications for affected employees; the measures the employer envisages taking in connection with the transfer, or that it envisages none; and, in the seller’s case, the measures it envisages the buyer will take in relation to the transferring employees. Regulation 13(2A) adds information about the employer’s use of agency workers.
Regulation 13(4) makes the buyer responsible for giving the seller the information about its intended measures, at a time that lets the seller comply. Buyers who decline to confirm their plans put the seller in breach and, under regulation 15(5), the seller can join the buyer to the tribunal proceedings and have the award made against it.
Consultation itself is triggered by regulation 13(6): where an employer envisages taking measures in relation to an affected employee, it must consult the appropriate representatives with a view to seeking agreement to those measures. Measures means any substantive change of practice, not only redundancies: a payroll date change, a new reporting line, a different holiday year or a move of site all qualify. Where no measures are envisaged, the duty is to inform only.
There is no prescribed minimum consultation period under TUPE. The statutory test in regulation 13(2) is simply that information must be given long enough before the transfer to enable consultation, which means the timetable is driven by the number of employees, the complexity of the measures and whether representatives have to be elected first.
Inform and consult: the sequence on a business sale
| 1 | Heads of terms agreed Both sides confirm the deal is an asset purchase, identify who is assigned to the business being sold, and fix who tells the workforce and when. Confidentiality and the timing of any announcement are agreed here, not later. |
| 2 | Representatives identified or elected If a union is recognised, its representatives are the appropriate representatives. If not, and the regulation 13A exception does not apply, existing or newly elected employee representatives are needed. An election takes time and must be invited early enough, under regulation 13(10), for the employer to be treated as compliant. |
| 3 | Buyer confirms its measures to the seller Required by regulation 13(4), and the gating item for the seller’s regulation 13(2)(d) duty. If the buyer will not commit, the seller should say so in writing and keep the correspondence. |
| 4 | Not less than 28 days before transfer: employee liability information The seller notifies the buyer under regulation 11, accurate as at a date no more than fourteen days earlier, and updates it in writing as things change up to completion. |
| 5 | Information given, long enough before the transfer Each employer informs its own affected employees’ representatives of the fact, date and reasons for the transfer, the implications, its own envisaged measures and, for the seller, the buyer’s. No statutory minimum period applies, so the period must be justifiable on the facts. |
| 6 | Consultation where measures are envisaged Meetings held with a view to seeking agreement, representations considered, and reasons given in writing for any rejected. Minute everything. If 20 or more redundancies at one establishment are proposed within 90 days, the separate collective redundancy regime under section 188 of the 1992 Act runs alongside, with its own 30 or 45 day minimum. |
| 7 | Completion and transfer Employees transfer automatically. Payroll, holiday and benefits are apportioned as agreed in the sale agreement, and the buyer issues written confirmation of the change of employer while leaving existing terms intact. |
The small employer exception, and the conditions attached to it
Regulation 13A allows an employer to inform and consult affected employees directly, as if each of them were an appropriate representative, instead of going through elected representatives. Since 1 January 2024 the entry condition has been widened: the exception applies if at least one of two conditions is met, namely that the employer employs fewer than 50 employees, or that there are fewer than 10 transferring employees. Before that date only the first limb existed, so a large employer transferring a handful of staff could not use it. Regulation 13A(1A) defines transferring employees as those who work for the seller and are to be, or are likely to be, transferred.
Two further conditions have to be satisfied at the same time, and they are the ones employers forget. Under regulation 13A(1)(b) there must be no appropriate representatives within the meaning of regulation 13(3), which includes any pre-existing representatives with authority to be consulted, as well as union representatives where a union is recognised. Under regulation 13A(1)(c) the employer must not already have invited affected employees to elect representatives. An employer that starts an election and then changes its mind cannot fall back on regulation 13A. If a complaint is brought, regulation 15(3A) puts the burden on the employer to show those conditions were met.
The exception removes the election step. It does not remove the duty. The same information must still be given, and consultation must still happen where measures are envisaged. For most owner-managed businesses this is the practical route, and it is why TUPE on a small trade sale is manageable in weeks rather than months, provided it is started early enough.
Dismissals and changes to terms connected with the transfer
Regulation 7(1), in the form substituted with effect from 31 January 2014, provides that an employee dismissed before or after a relevant transfer is automatically unfairly dismissed if the sole or principal reason for the dismissal is the transfer. The earlier wording also caught a dismissal for a reason merely connected with the transfer, and a good deal of online commentary still quotes it. The narrower current test matters, because a dismissal for a reason that exists independently of the deal is now easier to defend.
Where the sole or principal reason is an economic, technical or organisational reason entailing changes in the workforce, regulation 7(2) and 7(3) take the dismissal out of the automatic unfairness rule and treat it as a redundancy or as some other substantial reason, leaving ordinary fairness under section 98(4) of the Employment Rights Act 1996 to be judged in the normal way. Regulation 7(3A) confirms that changes in the workforce include a change to the place where employees are employed, so a genuine site relocation can found an ETO reason.
Changes to terms are governed by regulation 4(4), under which any purported variation is void if the sole or principal reason for it is the transfer. The exceptions in regulation 4(5) are narrow: an ETO reason entailing changes in the workforce where employer and employee agree the variation, or a variation the contract itself already permits. Regulation 4(5B) adds a limited route for terms incorporated from a collective agreement, where the variation takes effect more than one year after the transfer and the employee’s rights and obligations, taken together, are no less favourable afterwards. Harmonising inherited terms onto the buyer’s standard contract is the single most common mistake we see, and agreement from the employee does not save it where the reason is the transfer.
Employees have their own lever. Under regulation 4(9), where the transfer involves or would involve a substantial change in working conditions to the employee’s material detriment, the employee may treat the contract as terminated and is treated as dismissed. Under regulation 4(7) and 4(8), an employee who objects to transferring simply does not transfer and is not treated as dismissed at all, which can leave a buyer short of the key people it was paying for.
Two forthcoming changes alter the arithmetic of any post-completion restructuring. For dismissals from 1 January 2027, the government’s implementation timeline, last updated on 25 September 2026, confirms that the qualifying period for ordinary unfair dismissal falls to six months and the compensatory award is uncapped. These are not day-one rights, but a six month qualifying period combined with transferred continuity of service means that almost every inherited employee will be protected from the moment they arrive. Fire and rehire protections are due in the same month. Any acquisition model that assumes a two year qualifying period gives the buyer room to restructure needs repricing.
What a tribunal can award, and the two awards people confuse
Failure to inform or consult under TUPE and failure to consult on collective redundancies are different claims with different maximums, and conflating them produces wildly wrong risk numbers in deal negotiations.
| Claim | Maximum | Who pays | Time limit |
|---|---|---|---|
| Failure to inform or consult under TUPE, regulation 15 | Appropriate compensation of up to 13 weeks’ pay per affected employee, under regulation 16(3) | The defaulting employer, with the buyer jointly and severally liable for compensation ordered against the seller under regulation 15(9) | Six months from completion of the transfer, for transfers completing on or after 1 October 2026 |
| Failure to consult on collective redundancies, section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 | A protective award for a protected period of up to 180 days’ pay per affected employee, raised from 90 days with effect from 6 April 2026 | The employer proposing the dismissals | Six months from the date the last of the dismissals takes effect, for dismissals on or after 1 October 2026 |
| Failure to provide employee liability information, regulation 12 | Just and equitable compensation, subject to a floor of £500 per employee under regulation 12(5) | The seller, payable to the buyer | Six months from the date of the transfer, for transfers completing on or after 1 October 2026 |
Three points of detail are worth having right. First, the 13 week figure under regulation 16(3) is calculated using sections 220 to 228 of the Employment Rights Act 1996, but the statutory cap on a week’s pay in section 227(1), currently £751 from 6 April 2026, applies only to the awards listed in that subsection, which are the basic and additional awards for unfair dismissal and a statutory redundancy payment. Compensation under regulation 15 is not among them, so it is calculated on actual pay. For a transfer involving well-paid staff that is a materially larger number than employers assume.
Second, the increase in the collective redundancy protective award to 180 days was made by section 30(2) of the Employment Rights Act 2025, amending section 189(4) of the 1992 Act, and came into force on 6 April 2026. It does not apply to dismissals taking effect before that date. The trigger for collective consultation remains a proposal to dismiss 20 or more employees as redundant at one establishment within 90 days or less, with minimum consultation periods of 30 days, or 45 days where 100 or more are proposed. A further change to that threshold is on the government’s timeline for 2027 but is not yet in force.
Third, the six month tribunal time limits are new. Section 152 of and Schedule 12 to the Employment Rights Act 2025 doubled the ordinary three month limits with effect from 1 October 2026, and the transitional rules mean the old three month limit still applies where the relevant date, for TUPE claims the date of the transfer, fell before that day. Buyers negotiating indemnity claim periods and sellers negotiating warranty limitation periods should both be working to the longer window.
Allocating TUPE risk between buyer and seller
Because regulation 18 prevents the parties from excluding the Regulations as against employees, the sale agreement cannot change who the employees’ claims lie against. What it can do, and what it is for, is decide which of the buyer and the seller ultimately bears the cost. On an asset sale this is done through the employment provisions of the asset purchase agreement, which pair warranties with mutual indemnities.
The warranties a buyer should expect from a seller cover the completeness and accuracy of the employee list and of the employee liability information; that there are no outstanding claims, grievances or disciplinary processes beyond those disclosed; that no changes to terms, pay rises or bonuses have been agreed in the run-up to completion other than in the ordinary course; that there is no recognised union or collective agreement beyond those disclosed; that there are no outstanding sums owed to employees including accrued holiday; and that the seller is not aware of any employee intending to object to the transfer or to resign. Those warranties work in the ordinary way against the disclosure letter, and our guides to warranties and indemnities and the disclosure letter explain how that interaction limits a seller’s exposure.
Indemnities do the heavier lifting, because a warranty claim requires the buyer to prove a reduction in the value of what it bought, whereas an indemnity pays pound for pound. The usual split is as follows:
- Seller indemnifies the buyer for all employment liabilities relating to the period before completion, including unpaid wages, accrued holiday, PAYE and national insurance, pension contributions, and any claim arising from the seller’s own acts or omissions that transfers to the buyer under regulation 4(2)(b).
- Seller indemnifies the buyer for its own failure to inform and consult, and for the cost of any employee who was not disclosed but who turns out to be assigned to the business and therefore transfers.
- Buyer indemnifies the seller for liabilities relating to the period after completion, for the consequences of the buyer’s failure to supply its measures information under regulation 13(4), and for any award made against the seller because of measures the buyer took or proposed.
- Both sides address objectors and non-transferring employees expressly, so that the cost of an employee who objects, or of an employee the parties wrongly assumed would not transfer, falls where the commercial deal says it should rather than where it happens to land.
Regulation 15(9), which makes the buyer jointly and severally liable with the seller for compensation ordered against the seller for failure to inform and consult, is the clearest illustration of why an indemnity rather than a warranty is needed. The buyer can be pursued directly by employees for a failure it had no part in, so its only route back is a contractual one. Buyers should also insist on a conduct of claims provision, because the party with the money at stake is frequently not the party holding the paperwork.
The commercial counterpoint is that these indemnities are usually uncapped or capped well above the general warranty cap, and are often supported by a retention or escrow. A seller who has prepared properly, run the regulation 11 information to time, and consulted on a documented timetable has a strong argument for a lower retention, which is a direct cash benefit at completion.
Common questions
Does TUPE apply to a share sale?
No. The company remains the employer, so there is no relevant transfer and no TUPE duties. The employment liabilities stay in the company and pass to the buyer with the shares, so they are dealt with through due diligence, warranties and indemnities in the share purchase agreement instead. Our guide to buying a business and our guide to selling a business set out how that works in each structure.
What is the 28 day rule in TUPE?
It is the deadline in regulation 11(6) for the seller to give the buyer employee liability information: not less than 28 days before the transfer. It is a separate obligation from the duty to inform and consult employees, which has no fixed minimum period, and from the requirement in regulation 11(3) that the information be accurate as at a date no more than fourteen days before it is given.
Can a buyer change terms after a TUPE transfer?
Only in limited circumstances. A variation is void under regulation 4(4) if the sole or principal reason for it is the transfer, whether or not the employee agrees. Changes are possible where the reason is an economic, technical or organisational reason entailing changes in the workforce and the employee agrees, where the contract already allows the change, or under the limited collective agreement route in regulation 4(5B) more than a year after the transfer. There is no point after which the transfer simply stops being the reason, so the longer the gap and the clearer the independent business reason, the safer the change.
Can the sale agreement say that TUPE does not apply?
No. Regulation 18 applies the contracting out restriction in section 203 of the Employment Rights Act 1996, so such a clause is void as against the employees. The agreement can only allocate cost between buyer and seller through indemnities.
What this means for you
TUPE is not a reason to avoid an asset sale, and it is not a formality to be dealt with in the fortnight before completion. It is a timetable. Settle the structure early, work out who is assigned to the business being sold, get the regulation 11 information ready in time for the 28 day deadline, run the information and consultation process on a documented basis, and use the sale agreement to put the cost of any failure where the commercial deal says it belongs. Done in that order, it rarely delays a completion. Left to the end, it almost always does.
The 2026 and 2027 changes make the cost of getting it wrong higher than it has been: a doubled protective award for collective redundancy failures since 6 April 2026, six month tribunal time limits since 1 October 2026, and from 1 January 2027 a six month unfair dismissal qualifying period with an uncapped compensatory award. Buyers planning a post-completion restructure should price that in now.
We act for both buyers and sellers on business sales across London and nationally, and our corporate and employment teams work on the same deal rather than in sequence. If you are preparing to sell, see our page on selling a business; if you are acquiring, see buying a business; and for the consultation process, contracts and post-completion restructuring, see our employment practice. Where the deal is part of a wider corporate reorganisation, our mergers and acquisitions team can advise on the structure as a whole.
If you are buying or selling a business and want the employee position worked out before it holds the deal up, talk it through with us. Call +44 207 566 1188 or email info@gurvelegal.com and we will tell you plainly what applies to your transaction and what the timetable needs to be.
