Secretary of State for Business and Trade v Simran Sahonta & Ors

The date of a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 is the date on which responsibility as employer for carrying on the business passes to the transferee. It is a fact-sensitive question requiring consideration of all the circumstances. A conditional business transfer agreement is relevant but is not conclusive.

Regulation 8(7) may apply before a winding-up order. Where a creditor's winding-up petition leads to the court appointment of a provisional liquidator, the proceedings may already have been instituted with a view to liquidation and be under an insolvency practitioner's supervision. The question is one of substance and statutory purpose, not domestic procedural form alone.

Morton's Rolls Ltd ceased trading after financial difficulties. On 3 March 2023 it entered a conditional agreement to transfer part of its bakery business to Phoenix Volt Ltd. A creditor's winding-up petition led to the appointment of a provisional liquidator on 7 March. Phoenix recommenced bakery production on 21 March, and Morton was wound up on 31 March.

About 140 former employees claimed payments from the National Insurance Fund. The Employment Tribunal held that the relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 occurred on 21 March and that regulation 8(7) applied. The Secretary of State appealed, contending that the transfer occurred on 3 March and that insolvency proceedings within regulation 8(7) began only upon the winding-up order.

The central issues were the transfer date and whether appointment of a provisional liquidator could satisfy regulation 8(7).

1. Appeal dismissed. The Employment Tribunal made no error of law in fixing 21 March 2023 as the date of the relevant transfer. The governing question was when responsibility as employer for carrying on the transferred business moved to the transferee. That required an assessment of all the circumstances, rather than treating the conditional agreement of 3 March as decisive.

2. The Tribunal had considered the agreement and its terms, but was entitled to attach weight to the absence of a going concern on 3 March, the lack of occupancy rights, the subsequent arrangements concerning assets and premises, recruitment, and Phoenix's commencement of production. Its conclusion was one a reasonable tribunal properly directing itself could reach. The appeal impermissibly challenged the Tribunal's evaluation of the evidence.

3. The Tribunal also correctly held that regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 applied. The provision calls for a purposive, substance-based assessment of whether proceedings were instituted with a view to liquidation and under the supervision of an insolvency practitioner. Definitions in the Employment Rights Act 1996 and the Insolvency Act 1986 were not incorporated into regulation 8(7).

4. On the facts, the creditor's petition, the court appointment and active role of the provisional liquidator, the powers exercisable for beneficial winding up, and the ensuing compulsory liquidation entitled the Tribunal to find that qualifying proceedings had been instituted on 7 March. Regulations 4 and 7 were therefore disapplied. The matter was remitted to the Tribunal to determine the employees' National Insurance Fund claims.

• Employment Appeal Tribunal: Appeal dismissed. The preliminary decision of the Employment Tribunal was upheld and the case remitted for determination of claims against the National Insurance Fund.
• Employment Tribunal: On 8 November 2024, it held that the relevant transfer occurred on 21 March 2023 and that regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 disapplied regulations 4 and 7.