#4784 - Asset Sales - Private Acquisitions

Asset Sales

Pensions

= in its most basic form, a pension is simply a pot of money saved up over an e’ees working life, into which the e’ee and/or the e’er make contributions to provide the e’ee (or their estate if they die) w/income during retirement

Why use a pension to save?	tax efficient way of saving, good for e’ee because sum invested is ‘gross’ amount (this is become money is not taxed on its way into the pot) contributions from both e’er and e’ee investment gains tax-free lump sum in the end annuity (or income drawdown)
Types of pension scheme	Personal (contract between individual and pension scheme) = -> Always money purchase (basically a pot of money) eg. stakeholder (just a tightly regulated money pension scheme) [see below] Occupational (ie. thr/ your job and set up by e’er - may be for a group of cos or for a single e’ee scheme)= -> money purchase scheme (pot of money - you can get lump sum and annuities) -> final salary pension scheme (you get a percentage of your final salary) [see below]
Money purchase	known as a defined contribution scheme here, defined from eyes of e’er from e’er’s point of view, their liability is fixed e’er agrees in advance what level of contribution it is prepare to make on behalf of e’ees that join the scheme and liability is fixed to this amount on retirement, the post isn’t just handed over to e’ee as lump sum instead, the money is used to buy retirement benefits - usually in the form of a financial product called an annuity annuity = an insurance product that provides e’ee w/income till death GR - e’ers prefer money purchase because their liability is certain
Final Salary Schemes	also known as defined benefit scheme here, defined means from eyes of e’ee a good scheme will provide 1/60th of e’ees final salary for each yr of e’ent this is great for e’ees but terrible for e’ers because liability is not fixed as e’er has no idea how long e’ee will be w/company and how high their salary will be in final yr of employmeny consequently, due to loads of co’s not having enough in their pension pot to pay these out as a result of recession these don’t really exist anymore apart from for execs/fat cats an old school corporate scheme which is not popular w/e’ers
Group schemes vs single e’er schemes	this will be done on whichever is more tax beneficial for the specific co
E’ers obligations	Pensions Act (‘PA’) 2006 introduced new obligations on e’ee to provide access to, and contribute towards, pensions for their e’ees. Therefore, contemporary and important issue
s.75 PA liability - nb. doesn’t apply to money purchase schemes Personal and Occupational pension schemes - obligations on asset sale	Share sale - under s.75 PA the co ceasing to participate in a group co occupational scheme will be liable for their proportion of any deficit - concern for B. If a co participates in a single e’er occupational then liability remains w/T. There are particular issues w/final salary schemes (or other defined benefit schemes) because if the scheme is in deficit @ time of sale then “e’er cessation event” [aka leaving the scheme] makes the co liable for a huge “e’er” debt to the S group Therefore for both sales it is essential that during DD full deets of pension schemes obtained. Nb. a Asset sale - concern for S because they keep liability of any occupational pension scheme. Nb. s75 liab could also arise if selling co participated in a group final salary scheme and all of its e’ees passed to B and therefore S co is ceasing to participate in scheme. Here though, liability would remain w/selling co and wouldn’t pass to B
What transfers under TUPE?	Reg 10 transfers rights in relation to personal pension schemes NOT occupational pension rights .... but Pensions Act 2004 and Transfer of E’ent (Protection Regs) 2005: ... where S provides occupational pension scheme, B must make some but not the same contributions to: a final salary scheme; or a money pension scheme; or a stakeholder scheme (nb. a B doesn’t even need to set up occupational pension scheme particularly, just any pension scheme so not too onerous)

E’ees/TUPE

TUPE = Transfer of Undertakings (Protection of E’ent) Regulations 2006. For purpose of PA module, business sale as a going concern will always constitute a ‘relevant transfer’ for purposes of TUPE

Key TUPE points	only applies to business sales transfer of an undertaking or part of undertaking reverses old CL position no ‘dismissal’ automatic transfer of contracts to B
Relevant transfer	Reg 3(1) - TUPE applies to relevant transfers - on PA module all business sales will satisfy this
Which e’ees are affected? Botzen and Duncan Webb tests	Limb 1 Reg 4(1) e’ees will transfer if they’re in the business which is being sold - trickier to ascertain if eg. HR of T is S’s group HR What if only part is being transferred? Botzen test - court looks at e’ee’s function rather than terms of their contract Duncan Webb test - court considers following factors: amount of time spent working in one part of the business over the other, value given to each part of the business by the e’ee, contractual terms set tin out what the e’ee’s job compromises, and allocation of cost for e’ee’s service Limb 2 Reg 4(3) includes reference to e’ees employed immediately before transfer and those dismissed just before transfer. Covers: e’ees employed immediately before transfer; or those dismissed just prior to transfer to exclude Reg 4(3) as this will be unfair dismissal
Unfair dismissal	Reg 4(3) says those dismissed just prior to transfer will automatically count as unfairly dismissed if the sole/principal reason for it was: the transfer itself; or a reason connected w/ transfer that is not an ETO reason Effect will be that TUPE will operate to transfer the e’ent contract/any liability to B in respect of such an automatically unfairly dismissed e’ee on a business sale. dismissal will be potentially fair if sole/principal reason for it was an ETO reason (economic, technical or organisational reason entailing a change in the workforce) a potentially fair reason will become fair if the e’er can satisfy an e’ent tribunal that it was r’able in all the circs case law has made ETO v narrow
What rights and liabs don’t transfer automatically under TUPE?	B inherits transferring e’ees on t&c’s that existed w/S B inherits all accrued rights and liabs connected w/e’ent contracts
Changes to T&Cs	under TUPE, it is possible to make changes to e’ent terms before or after a transfer where the principal reason is either: a reason unconnected w/ the transfer; or a reasons connected w/the transfer which is an ETO reason Changes to t&cs will be void if they are not connected to above. ETO reasons have been drafted narrowly to protect e’ees.
Summary	Is sole or principal reason for the change connected to transfer? Yes? is the change: for an ETO reasons’ or entirely positive to e’ee or an insolvency rescue? If yes, B can make changes if e’ee consents. if no, B cannot make any changes, changes will be void (even if e’ee consent to them) No? the B may make changes if e’ee consents
Contractual provisions in relation to liab	schedule of employees [which parties think will transfer] Ws Is for allocation of final risk [see below]
Shared e’es - cross indemnities	S indemnifies B for any e’ees who were not on list B indemnifies S for an e’ees who was on list but didn’t transfer
Duty to Inform/Consult	Reg 13 states S and B must provide info to, and in certain circs, consult w/ representatives of e’ees who may be affected by transfer or by measure taken in connection w/it (‘affected e’ees’) B and S jointly and severally liable therefore both parties will want to make sure all steps have been complied w/prior to compl if there is a planned change [eg. to job location] there will be a need to consult and provide info if correct procedures are not followed then there apprope representative can bring a claim in the e’ent tribunal w/in 3 months of transfer Tribunal has discretion to award up to 13 wk’s actual pay per affected e’ee (protective award) B will ask for a W to the extent that all requirements to inform and consult and have been complied w/by S B will ask for an I against any clams that may be brought vs e’er following compl as a result of Reg 13 not being complied w

Assets

typically include	premises, P&M, stock and work in progress, 3rd party contracts, IP, e’ees and (possibly) debtors
Debtors	Balance sheets treat debtors as assets B’s main concern is that it won’t be able to collect in all debts are some may prove to be bad debts Several options for debts to pass to S - B is happy because they don’t have to deal w/debts but also worried that S will pursue debts aggressively as no longer a concern for them but B will need to maintain good business relationship w/them for T to retain debts but for S to collect them as agent for debts to remain in T and be collected by B
Creditors	are a liability of business creditors transfer - B assumes liability but has control over the payment of creditors and can ensure relationship is preserved liability stays w/S - B is free from liab but may be concerned that S won’t pay the 3rd party and damage business relationship between B and 3rd parties
Contracts	3 x options: assignment novation negotiation of a fresh...

#4784 - Asset Sales - Mergers and Acquisitions (Private Acquisitions)

Why use a pension to save?

Types of pension scheme

Money purchase

Final Salary Schemes

Group schemes vs single e’er schemes

E’ers obligations

s.75 PA liability -

nb. doesn’t apply to money purchase schemes

Personal and Occupational pension schemes - obligations on asset sale

What transfers under TUPE?

Key TUPE points

Relevant transfer

Which e’ees are affected?

Botzen and Duncan Webb tests

Unfair dismissal

What rights and liabs don’t transfer automatically under TUPE?

Changes to T&Cs

Summary

Contractual provisions in relation to liab

Shared e’es - cross indemnities

Duty to Inform/Consult

typically include

Debtors

Creditors

Contracts

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