“Despite the recent downturn my business has been doing ok. One of our competitors has just gone into administration and I’ve been approached to see whether I would be interested in acquiring part or possibly all of the business. In my view the business was overstaffed and I would not want to be lumbered with the employees. Is that likely to be a problem?”

As you are obviously aware given your question anytime you acquire another business you might end up also acquiring all of its staff. This is due to the Transfer of Undertakings (Protection of Employment) Regulations (TUPE).

There is an exemption under TUPE where you are buying out of an insolvency. Whether that would apply in your case is not clear. TUPE is based on European regulations and provides that if a business is transferred out of ‘relevant insolvency proceedings’, the staff do not automatically transfer. The UK government took the view that this meant liquidation proceedings but did not include administration. However they did not spell this out in the legislation only in a guidance note.

An Employment Appeal Tribunal decision last year held that administration could trigger the exemption. That was overturned in the Court of Appeal – but on other grounds. It did not decide whether administration could trigger the exemption although it did say that it doubted that it could – without giving any reasons for its view.

This rather unhelpful approach means that you may acquire new staff if you buy any part of the business. TUPE imposes several strict requirements and harsh penalties if you fail to comply. You can be liable for failures by the seller so be careful and take proper legal advice.