TUPE revision is good news but won't stop phoenixes

Darryl Danielli
Thursday, March 10, 2011

The thorny issue of pre-packs has raised its head again, following last month's Employment Appeal Tribunal ruling that means staff at a company bought out of administration in a pre-pack deal are now protected by TUPE.

Good news for employees, but the question is will it stamp out pre-packs wholesale? The answer is probably not.

But then why should it? A company that legitimately buys a failed or failing business in pre-pack deal would in all likelihood have honoured TUPE anyway. And one of the advantages of pre-pack is that it enables a more thorough due-diligence process. So, in theory at least, the buyer should be fully aware of what the liabilities could be.

But let’s be honest, when we talk about pre-packs it’s not the legitimate ones that we are referring to.

The problem is when it comes to pre-packs that involve the directors of the ‘old’ company creating a new company and buying the assets to start afresh, debt free. If these phoenix deals are the pre-packs that the industry hopes will be curtailed by the closing of the loophole then again, unfortunately in this instance, that seems unlikely.

Call me a cynic (you won’t be the first), but I fear that the harsh reality will be the companies that go down the phoenix path will simply find new, ‘interesting’ ways to circumnavigate TUPE rules.

Sadly, while the closing of the TUPE loophole has to be good news, it’s not the silver bullet that will eliminate phoenix companies. That will need to be fired by either government or the industry itself, and I’m not sure which is the more unlikely assassin?

Darryl Danielli, Editor, PrintWeek

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