By Jo Seery Professional Support Lawyer &
Neil Todd Partner, Trade Union Law Group
Background
Morton’s Rolls Ltd, a bakery business, entered into a conditional business transfer agreement with Phoenix Volt Ltd on 3 March 2023 after ceasing trading due to financial difficulties. HMRC petitioned for a winding-up order, and a provisional liquidator was appointed on 7 March 2023. All 230 employees were dismissed by reason of redundancy on the same day. Phoenix recommenced production on 21 March 2023, employing many former Morton staff. A winding-up order was granted on 31 March 2023. Around 140 former employees sought payments from the National Insurance Fund (NIF), but the Secretary of State refused, arguing that a TUPE transfer had occurred before the winding-up order, making Phoenix liable.
Key Issues
Date of Transfer under TUPE
The Employment Tribunal found the relevant transfer occurred on 21 March 2023, not 3 March 2023 when the agreement was signed. The EAT confirmed this, noting that the business was not a going concern on 3 March 2023. The bank account was frozen; employees were laid off and no premises or business vehicles had transferred under the agreement. By 21 March, Phoenix had secured occupancy rights, agreed revised payment terms, and recommenced production.
Application of Regulation 8(7) TUPE
Regulation 8(7) disapplies automatic transfer of employment contracts where the transferor is subject to insolvency proceedings instituted with a view to liquidation and under the supervision of an insolvency practitioner. The EAT held that such proceedings were instituted when the provisional liquidator was appointed on 7 March 2023, not when the winding-up order was made on 31 March. The provisional liquidator had statutory powers and was actively safeguarding assets for creditors, satisfying the conditions of Reg 8(7).
Outcome
The EAT dismissed the Secretary of State’s appeal. It upheld that:
- The transfer date was 21 March 2023.
- Regulation 8(7) applied because insolvency proceedings commenced with the appointment of the provisional liquidator on 7 March 2023. As a result, employees’ contracts did not transfer to Phoenix nor could they claim automatic unfair. In reaching this decision the EAT took a purposive approach to the legislation which is to safeguard and protect employee rights in the event of a transfer of a business. In the circumstances of this case the provisional liquidator operated under a statutory procedure the primary aim of which was to enable liquidation as a going concern to satisfy the claims of all the creditors, and preserve employment as far as possible. The case was remitted to the tribunal to consider claims for NIF payments.
Why This Matters
This decision reinforces that determining the transfer date is fact-sensitive and depends on when responsibility for the business genuinely shifts. It also clarifies that insolvency proceedings under Reg 8(7) TUPE can begin when a provisional liquidator is appointed by the court, not only when a winding-up order is made. Key for unions is whether at the time of the transfer insolvency is inevitable and the statutory procedure is invoked. If that is the case TUPE protections may not apply, and employees may need to claim against the Secretary of State for payments from the national insurance fund in the Employment Tribunal.
