Mergers, acquisitions or any type of organisational restructure are inherently complex projects.
While resources and attention for the restructuring process are typically focused on finance, taxation and stakeholder communications, one area which is commonly overlooked is immigration compliance.
If your organisation is undergoing a change in ownership or a change in structure due to a merger or acquisition, it’s vital that you consider the impact on your sponsor licence and on sponsored migrants that you employ, or may acquire, before the changes occur. You also need to be aware of your duty to report such changes, and the deadlines for reporting.
Failure to deal with the implications of organisational change on the sponsor licence’s validity creates significant business risk. Any issues with your sponsor licence could lead to it being downgraded, suspended or revoked – a scenario employers will want to avoid.
So how will changes to your organisation’s structure affect your sponsor licence? And what can HR teams do to ensure your organisation remains compliant and retains its sponsor licence following the change process?
Duty to notify of organisational change
As part of their licence compliance duties, sponsors must notify the Home Office of certain changes in their circumstances.
This includes reporting a merger, takeover or change of ownership via their Sponsorship Management System within 20 days of the change taking place.
The change on the SMS is to be made by the appointed sponsor licence level 1 user. The Home Office may then request supporting documents be provided to evidence the change.
Examples of documents that could be requested include:
- Evidence of the sale or purchase such as a letter from a practising solicitor or notary or an affidavit signed by one of the partners or senior executives at the relevant sponsor
- Employment contracts confirming that sponsored workers’ employment is maintained and working arrangements are unchanged as per each migrant worker’s Certificate of Sponsorship.
- A certified copy of the purchase agreement.
- An original or certified copy of the TUPE agreement or contract effecting the transfer of sponsored workers’ employment.
- A signed letter from the sponsor’s authorising officer confirming they are assuming full sponsorship responsibility for the transferred sponsored workers.
Failure to notify of a change of ownership, merger, takeover or de-merger can give grounds for the Home Office to take enforcement action against the sponsor, which may result in its sponsored workers’ leave in the UK being curtailed.
It’s an easy mistake to make to assume that a ‘simple’ change of share ownership doesn’t need reporting if it doesn’t result in any visible changes to the corporate structure or employee contracts. However, any form of change of ownership comes with reporting requirements, and may even also require a new licence application.
How will a corporate restructure impact my sponsor licence?
Fundamentally, a sponsor licence is not transferrable between organisations. How the organisational change will impact the licence will depend on whether the organisation:
- Sells all or part of, or the controlling number of shares in the organisation.
- Is being taken over completely or in part by any other organisation.
- Acquires a controlling interest in another organisation.
- Is splitting out to form new organisations.
For example, where an organisation is sold as a going concern, resulting in a change of ownership, its sponsor licence will either be revoked or rendered ‘dormant’.
Acquiring sponsored migrants under a TUPE transfer
If TUPE is triggered, or a similar arrangement exists, and sponsored workers are transferred to a new employer, the new employer will assume full responsibility for the migrant workers from the date of the transfer.
To lawfully employ the transferring sponsored workers, the new employer must either:
- already hold a valid sponsor licence to sponsor the transferring workers, or
- apply for a new licence within 20 days following completion.
Details must be submitted via the SMS of all sponsored migrants who are transferring from one sponsor to another.
Failure to meet this requirement can result in sponsored workers’ leave being curtailed to 60 days.
Impact of a restructure on sponsored migrants’ leave
Sponsored migrants involved in a merger, de-merger or takeover do not need to submit a new visa application and the new sponsor does not have to assign a new Certificate of Sponsorship to them. The only exception is where the move involves the migrant changing their job or the migrant does not have TUPE or similar protection.
If appropriate reports are not submitted, and where required a new licence application is not made, sponsored migrants may have their leave reduced to 60 days.
If a sponsored worker’s role changes as a result of the organisational change, a determination will be needed to as to whether a new application for leave to remain is required. This will involve assessing the proposed changes to visa requirements such as the role and salary. Where a new application is needed, a new Certificate of Sponsorship will also be required to be assigned.
Prevention of illegal working obligations
In addition to the compliance duties under the terms of its sponsor licence, the organisation must also consider its obligations under the prevention of illegal working regime.
Failure to conduct appropriate document and identity checks on new employees can result in a civil penalty fine of £20,000 per breach.
Practical steps for HR teams to ensure compliance
Since every transaction is different, the implications on the licence can also vary depending on the specific circumstances of the organisational change. To mitigate the complexities of the compliance and reporting requirements, as well as taking professional advice to avoid non-compliance and enforcement action, we recommend HR teams and those responsible for assessing immigration compliance issues take the following practical steps:
- Immigration issues should be considered at an early stage of a restructure. This creates a challenge for HR teams to ensure they are involved in, or at the very least informed of, initial discussions about any restructure affecting the organisation, but is critical to allow for effective planning and risk management.
- As soon as the nature of the restructure becomes clear, ascertain the impact of the changes on the licence. Which of the organisations involved already have a sponsor licence? If there is an existing licence, is it valid, and if so for how long? Will a new licence need to be applied for?
- If you are required to apply for a new sponsor licence, diarise the deadline for applying, with all supporting documents, within 20 days.
- Has a recent immigration audit been conducted to assess compliance with licence and prevention of illegal working duties and to avoid Home Office issues?
- Ensure all relevant notifications in relation to the transaction are made within 20 days, for example, changes to migrants’ circumstances.
- Compile a list of all sponsored workers that will be affected by the change, and identify what the impact will be on their status and leave.
- Carry out right to work checks within 60 days of acquiring new employees through acquisition or TUPE transfer of services.
Corporate transactions are inherently complex, but overlooking the immigration compliance aspects can cause operational disruption and have a devastating effect on migrant workers and their permission to remain lawfully in the UK.
While planning is critical to mitigating risk, and although most of the compliance duties are undertaken post-transaction (within the required timeframe), it may be advisable to liaise with the Home Office in advance of the transaction completing to inform, and potentially seek approval, on the proposed course of action. We can assist in corresponding with the Home Office on your behalf to notify and liaise, and ensure continued compliance with the regulations.
If your organisation is planning or undergoing a restructure, contact us for expert advice and guidance.
How a merger will impact your sponsor licence: FAQs
Is a sponsor licence transferable?
No, sponsor licence cannot be transferred to a different organisation, for example, following a merger or acquisition. Where sponsored workers are transferring to a new employer, the new employer must hold or apply for a sponsor licence.
When do organisational changes need to be updated on the SMS?
Sponsors have 20 days to notify the Home Office of organisational changes by updating their sponsor licence on the Sponsorship Management System.
What if sponsored workers transfer to a new employer under TUPE?
Under the TUPE requirements, the new employer assumes full responsibility for transferring sponsored workers from the date of the move. The new employer must therefore hold a valid and suitable sponsor licence to employ the sponsored workers, or apply for a new licence within 20 working days.
Last updated: 3 February 2023