Immigration: Sponsor Licence Duties Arising From Corporate Transactions

Organisations that hold a sponsor licence enabling them to sponsor workers are subject to extensive sponsorship compliance duties and responsibilities. These duties are summarised in my earlier blog that can be accessed here.

As you’ll note from my earlier blog, certain changes to an organisation must be reported to the Home Office via the Sponsorship Management System (SMS); this includes reporting corporate transactions, and then undertaking any necessary action in relation to the transaction. Corporate transactions that must be reported via the SMS include those relating to the ownership of the organisation; for example, if an organisation is the subject of a change of ownership, merger, de-merger, takeover or similar change.

In this blog, we’ll be looking at the sponsorship duties that arise when a sponsor licence holder is the subject of a corporate transaction in relation to ownership.

Sponsor licences are not transferable, so if a company involved in a relevant corporate transaction holds a sponsor licence or is acquiring a company that holds a sponsor licence, the organisations involved must undertake certain steps to ensure compliance with sponsorship duties following the transaction. The actions an organisation must undertake will depend on the transaction occurring.

Complete takeovers / mergers

If an organisation is completely taken over or merges into another organisation, a change in direct ownership will likely occur, and sponsored workers may be transferred to the new company with reference to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

The new sponsor must secure a sponsor licence (if they don’t already hold one), and the former and new sponsors must update the SMS to confirm the transfer of the workers. The new sponsor must also accept full sponsorship responsibility for the workers. The former sponsor must confirm they wish to have their licence made dormant, and the new sponsor will be granted access to the former sponsor’s records, so they can undertake necessary SMS reporting in relation to the workers transferred to them going forward.

Partial takeovers / de-mergers

If an organisation is subject to a partial takeover or splits out to form one or more new organisations, the action to be undertaken will depend on whether the organisation has any sponsored workers following the takeover / de-merger. If the organisation will end up with no sponsored workers, the fact that the workers have been transferred to a new organisation will need to be updated on the SMS, and the organisation will need to consider whether they should surrender their licence (if they don’t propose to sponsor any workers going forward, for example).

If the organisation will still have sponsored workers, the change must still be reported via the SMS, including information about the workers who will be moving to a new organisation. However, the organisation will need to retain its sponsor licence, so must still ensure that compliance duties in relation to the sponsored workers it is still employing are met.

The new sponsor of any workers transferred will need to apply for a sponsor licence within 20 working days of the date the workers were transferred (if a licence isn’t already held), and must report the change via the SMS, including details of any workers the organisation has accepted full sponsorship responsibility for. Future reporting on the workers will need to be emailed to the Home Office.

Change of ownership one removed from the sponsor

If the change of ownership doesn’t affect the organisation that holds a sponsor licence (it is one removed from the sponsor), workers shouldn’t need to be transferred from one sponsor licence to another. However, the company that holds a sponsor licence must still report the change of ownership via the SMS.

Many of the above duties must be reported to the Home Office within 20 working days of the change taking place; for example, if a new sponsor licence is needed, the application must be made within 20 working days, or if the SMS needs to be updated about the change, the SMS should be updated within 20 working days. Late reporting is most certainly better than failing to report a change; failure to report could result in a licence rating being downgraded, or the licence being revoked. Revocation will prevent an organisation from sponsoring any workers, so is certainly an outcome organisations will want to avoid.

Corporate transactions can often be extremely complex; depending on the restructure taking place, we may need to seek further guidance in relation to the course of action to follow. Furthermore, organisations involved in corporate transactions must also consider their duty to prevent illegal working in relation to any workers transferred to them.

Other immigration, employment and corporate requirements will also apply to these transactions, so it is important that organisations seek legal advice in relation to the steps that must be followed when involved in a merger, acquisition, de-merger or restructure.