Changes of ownership and acquisitions: Is your skilled worker sponsor licence up to date?

Businesses that hold sponsor licences, understandably, focus mostly on complying with the rules in respect of their skilled workers – ensuring roles satisfy the skill requirements for sponsorship, that workers are paid the correct minimum salary, completing right to work checks, reporting relevant events in respect of the worker to UK Visas & Immigration (UKVI) in time and maintaining relevant records.

These rules are fundamentally important in complying with sponsor licence duties, but another broad area of compliance for licence-holders is ensuring the licence at all times exactly reflects the corporate arrangements of the business. If UKVI identifies that a sponsor licence does not accurately reflect the present corporate arrangements, compliance action against the sponsor is likely – including revoking a licence.

Losing a licence can have a hugely negative impact on any business, including the loss of skilled worker employees, disruption of day-to-day operations, and reputational damage. So, it pays for any business with a sponsor licence, which is restructuring or expanding, to update its licence at the earliest stage possible.

Below are examples of common corporate developments and their implications on a limited company that owns and operates a hospitality business (Company A) and has a UKVI sponsor licence.

Changes of direct ownership

When Company A was granted its licence by UKVI it was not granted simply to the limited company, but was based on the ownership status of Company A at the time the licence was applied for.

Put simply, if there is a change in direct ownership of Company A – meaning a change in the controlling shareholding – the licence is no longer valid, and a new licence must be applied for. This includes instances where individual shares are transferred to a holding company, or where ownership of Company A is transferred to a different holding company within the same large group.

The rationale for this is most likely based on the presumption that a change of ownership includes new owners (an entire company or individuals) on whom UKVI did not have the opportunity to carry out checks when assessing the original application. As a result, UKVI requires an entirely new application to allow it to assess the ‘new’ owner and decide whether it should be granted a licence.

Frustrating? Yes – particularly given the ‘change’ in ownership may not represent an actual change, and that the new application will result in UKVI looking at the same individuals or corporate group it had previously when it granted the licence originally to Company A.

Is there any way around this? Alas, no. A new licence is required, and the application must be made within 20 days of the change in direct ownership.

Acquisitions by Company A

Share purchases

If Company A acquires the controlling shares of another company that also owns and operates a hospitality business (Company B), a few scenarios could arise. If Company B has a sponsor licence and skilled workers, its licence is no longer valid due to a change in direct ownership, so Company A must do one of two things:

• Have Company B added to its own licence as a ‘branch’ (linked corporate entity) and all skilled workers transferred its licence; or
• have Company B apply for a new licence because of the change of direct ownership.

One of these applications must be made within 20 days of the acquisition. In most cases, the former is likely to be the preference, so all sponsor management is centralised. The latter will be more suitable if Company B will largely operate as it did before the acquisition took place, with little oversight, or little to no centralisation of HR functions by Company A.

Whichever option is more suitable, there is one cardinal rule: the sponsor licence holder must have full responsibility in respect of its licence and the workers sponsored under it. In simple terms, if Company A isn’t satisfied it will have full control at a central level, it is unlikely to want Company B on its existing licence.

The reason? Any compliance action for a breach of duties by any entity on a licence is considered a breach by the licence holder.

If Company B does not hold a licence at the time of the acquisition, urgent action is not required. However, Company A must keep in mind that, if in future it does want to employ skilled workers into Company B, it must take one of the two actions outlined above before anyone is employed.

Asset purchase

Company A may purchase a business and staff (assets) from another company that owns and operates a hospitality business (Company C). If Company C also holds a sponsor licence, and employs sponsored skilled workers which are subject to the asset purchase, two reports must be made to UKVI:

• Company A must report that it has assumed responsibility for the skilled workers previously sponsored by Company C.
• If the skilled workers will remain working at the premises purchased, the premises must be added to the licence of Company A.

In most cases, the workers would transfer to Company A as employees under TUPE arrangements. No new licence is being applied for nor any corporate entity added as a branch (like with a share purchase), but the workers and physical premises of the company being purchased must be added to Company A’s licence.

If Company C has no licence, but Company A intends to employ skilled workers at the purchased premises, the premises must be added to Company A’s licence before anyone is employed.

There is a clear rationale for these rules:

• UKVI wants to assess who has direct ownership of the entity which holds the licence and whether they meet the fitness test to be granted a licence;
• skilled workers must always have a sponsor who has direct responsibility in respect of them; and
• skilled workers can only work at locations known to UKVI.

UKVI has significantly increased compliance checks, full inspections of licence holders and revoking licences. If any of the corporate developments set out have taken place, action must be taken to remain compliant.

Right to work checks

Any company involved in the acquisitions as set out above should also be acutely aware of the serious right to work issues that arise.

For share purchases, the acquired company (Company B) remains the direct employer and is liable for any civil penalties, but the costs of these penalties will impact the profitability of its new owner, Company A.

Regarding Asset Purchases, when Company A acquires workers under TUPE, UKVI allows a 60-day grace period for it to conduct right to work checks – but Company A thereafter becomes liable for civil penalties in respect of all transferred employees, if a breach occurs. Company A benefits from right to work checks correctly conducted by Company C but if the checks were not previously carried out correctly and the 60-day window passes, Company A is liable for any deficiencies.

Making right to work checks a key part of due diligence and carrying out an audit is strongly advised – not only to avoid civil penalties, but also to protect the licence of Company A. If any employee is identified as not having a right to work, normal practice for UKVI would be to revoke its sponsor licence.

Takeaways

It’s understandable that, in the process of corporate restructuring or acquisitions, addressing more ‘niche’ areas like sponsor licences and right to work checks may be further down the list of concerns for those involved in the transactions.

However, the consequences of not addressing these issues at the due diligence stage can create real headaches should a crisis strike. No hospitality business that relies on skilled workers can afford to lose these employees or suffer major disruption to daily operations – nor the time needed to tackle any reputational damage. It really does pay to ensure these considerations move further up the list of priorities to avoid any future issues.

How can we help?

Get in touch with a member of our expert team or contact Mark Templeton at mark.templeton@andersonstrathern.co.uk

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