The usual principles of the Regulations are modified in various respects if the old employer is insolvent. Which special rules apply depends upon whether the employer is subject to bankruptcy proceedings or other insolvency proceedings that are aimed at liquidating the business’s assets and winding it up, or whether the aim of the insolvency proceedings is to ensure the survival of the business.
If the aim is to liquidate the business’s assets, then the Regulations will apply only where that involves selling off part of the business as an economic entity transferred as a going concern. Where there is such a sale, all the usual rules apply, save that the employees do not automatically transfer to the new owner and transfer-related dismissals are not automatically unfair.
On the other hand, if the aim of the insolvency proceedings is to ensure the survival of the business, there are two different special rules. The first is that not all of the old employer’s liabilities towards its employees transfer to the new employer: the National Insurance Fund picks up liability for any statutory redundancy payments it owes and for any other sums, such as up to eight weeks’ arrears of pay, that would normally be payable from the Fund in the event of an employer’s insolvency ( Redundancy and insolvent companies ).
The other special rule is that either the old employer (or the insolvency practitioner dealing with the insolvency proceedings) or the new employer can make legally binding changes to the terms and conditions of the employees that transfer, even if the reason for the change is related to the transfer and is not an ETO reason, provided two conditions are met. The first is that the change is designed to save jobs by ensuring the survival of the business; the second is that the change has been agreed by the employees’ representatives (whose identity is determined in the same way as employee representatives for the purpose of information and consultation ( Identifying the appropriate representatives ). If the appropriate representatives are not union representatives, then the agreement must be in writing and the employer must provide all employees with a copy of it, and guidance on what it means, before it is signed.