employment / business law question

[guydewdney]

knowing the clever bods on here someone will have had a similar situation.

is it legally possible to take over a small business (2 permanent employees) and refuse to take them on? replacing them with near identical employees, as the originals are, as far as we are concerned, utterly useless, but have no 'warnings' from previous owner (whos losing 10k pa)

can we make the removal of said people a condition of sale?


thanks, free solicitors ;-)

 

[st13phil]

AIUI, the short answer is no. They are employed by the company, which would still exist as an entity. The fact that you have purchased 100% of the share capital isn't relevant.

However, I'm happy to be corrected by someone more knowledgeable.

 

[markjay]

In a nutshell, no. The employees work for the legal entity which is their employer, if you buy the 'employer legal entity' then the employees come with it.

The employer-employee relationship is between the employee and the 'employer legal entity', and not between them and any shareholder as such.

If it's a company, you can create a new company, and sell or transfer the business from the old company to the new, then dissolve the old company and make everyone working for the old company redundant.

Keep in mind that the courts will not enforce an illegal civil contract. If the contract says that the current employer should do something which is in contradiction to employment law, then if he does not deliver you will not be able to get the courts to rule in your favour.

You can make it a condition of sale, if he agrees, it is then down to the current owner to get this done legally - e.g. by offering the employees a tempting package if they leave voluntarily etc - and if he can't do this - again, legally - then the deal is off.

 

[guydewdney]

ill see if i can buy it without the employer legal entity then....

 

[StuartK]

Buy company. Manage people out. Simple.

 

[markjay]

ill see if i can buy it without the employer legal entity then....

You can set up a new business, then buy the contracts / customer list / stock from the existing business.

The immediate issue will be credit - without trading history, it may be difficult for the new company to get unsecured credit from suppliers and/or banks. Not sure if this is an issue for you in this case though - not everyone needs credit facilities.

The other potential downside is that the if the existing business is running a loss then it may be possible to offset this against profits and reduce the tax liability under the new (presumably profitable) management, but this benefit is lost if the business activity is transferred to a new/different company.

 

[Red C220]

Purchasing or taking over without payment and restructuring?

That might be material and you'll need real advice on that not forum as employment law changes so quickly it's difficult to keep (even as an employer).

 

[Swotty]

If you are buying an "undertaking", it is covered by the EU Transfer of Undertakings Directive (1977 as amended). That is the relevant legislation.

Research this and understand what the UK courts consider an "undertaking". Sorry, I retired in 2004 and have deliberately taken little interest in my former profession since.

Much easier to take over the whole things and then change the structure. That then becomes a redundancy, but you still have to ensure that it is not a reason connected with the transfer.

Failing that, set targets and manage them out.

Stuart

 

[guydewdney]

i have reason to think they will be malicious and possibly destructive when they find out its me.... so the shorter time they are around the better. Gardening leave?

tupe does seem to apply.

they are of retirement age so theres a fair chance they will bu66er off on their own accord.

cant we just pay them off?

 

[st13phil]

Yes, you can pay them off. It's called a redundancy payment.

 

[Peter103]

Buy the business give them warning of incompetence in writing, sack them.Done.

 

[NOMONEYBUTAMERC]

If the owner is losing 10k a year with 2 employees who have not been given warnings , it rather begs the question of where the incompetence stops. Or whether the business is worth buying? Any reason you cannot just start a new business in competition?

 

[Red C220]

If the owner is losing 10k a year with 2 employees who have not been given warnings , it rather begs the question of where the incompetence stops. Or whether the business is worth buying? Any reason you cannot just start a new business in competition?

If it's losing £10Kpa I'd assume there's no buying as such, unless there are fixed assets or paying for some for of goodwill, or possibly buying customers that tie in with an existing business owned. It wouldn't be logical otherwise.

 

[StuartK]

If the owner is losing 10k a year with 2 employees who have not been given warnings , it rather begs the question of where the incompetence stops. Or whether the business is worth buying? Any reason you cannot just start a new business in competition?

There is this little thing called inland revenue. Just because the business is making a loss doesn't necessarily mean it's not worth buying.

 

[guydewdney]

haha, yes, it has massive assets, and we can easily see how to improve its business. basic advertising is one. like any advertising at all. any. having a less than 5 yr old website.....

all will become clear if it goes ahead, or indeed if it doesn't.

 

[Alex]

You should ask an employment solicitor as suggested above. It's not a 'yes/no' question, there's a lot of factors involved. My wife is in the process of buying a business with 5 employees and it's a minefield when it comes to making someone on a permanent contract redundant.

 

[Peter103]

There is this little thing called inland revenue. Just because the business is making a loss doesn't necessarily mean it's not worth buying.

And it doesn't necessarily mean its not making a profit either.

 

[moonloops]

1. Buy company
2. Strip assets
3. Take control of Intellectual Property
4. Dissolve business
5. Start new business with new staff

A bit like Phoenixing a business I guess, not a thing most people approve of.

I do support getting rid of "feebs" in any company though.

p.s. sounds like the current owner is trading whilst being a insolvent company, a thin line to tread, and the directors can be prosecuted.

 

[Red C220]

haha, yes, it has massive assets, and we can easily see how to improve its business. basic advertising is one. like any advertising at all. any. having a less than 5 yr old website.....

all will become clear if it goes ahead, or indeed if it doesn't.

In which case get some proper advice as the employment situation could potentially sink the prospective venture if you get it wrong.

Also remember that the valuation of a business is quite often subjective.

I generally work on 5 x annual net profit + fixed realisable assets.

So if it's a £10K per annum loss plus baggage (staff) you could technically be discounting the fixed asset value.

That said, talk to an employment solicitor, it's an absolute minefield.

 

[Deleted member 11979]

Depending upon why the employees are thought of as no good and the nature of the business, removing them can be very tricky indeed.

Redundancy is not straight forward and needs to have proper procedures followed.

Managing someone out due to poor performance is harder yet, and takes some time and is also pretty horrible for both parties involved.

We use a company called 'hand over hr ' who provide hr support for small businesses , they've not failed us yet.

It could be with proper management the under performers will perform, in my experience most people don't enjoy doing a bad job.

Good luck and make sure you know all the employment law facts before you start a procedure as a wronged employee can take up a lot of your time and cash if they decide to come back on a incorrectly carried out dismissal