Furlough and Coronavirus Job Retention Scheme

Update: Pre-Pack Sale Administrations of Companies With Furloughed Employees and the Coronavirus Job Retention Scheme

14th April, 2020

This is an update to our article of 6 April 2020 which can be read here.

On the eve of the Easter weekend, 9 April 2020, the Government published updated guidance in relation to the TUPE question. The updated guidance confirms that employees that have been transferred under TUPE will be eligible for the Coronavirus Job Retention Scheme.

This is good news for insolvency practitioners in the context of a pre-pack sale of a company in administration. The latest guidance means that if either the TUPE or PAYE business succession rules apply to the change in ownership of a company, the purchaser of a company in administration is eligible to claim under the Scheme in respect of the seller’s employees, even if the transfer occurs after 28th February 2020.

The Government’s updated guidance confirms the following:

If in a pre-pack sale, the selling company has furloughed its employees, then the purchaser can continue the furlough of the employees even if the date of the transfer is after 28 February 2020; and
If in a pre-pack sale, the selling company has a number of employees on its payroll as at 28 February 2020, then after the date of the transfer, those same employees may be considered for furlough if it makes commercial sense for the buyer, even if the date of the transfer is after 28 February 2020. The employees will be eligible for the Scheme and the purchaser will be able to benefit and claim their wages under the existing criteria.

This is a positive initiative from the Government and in particular for administrators in potential negotiations for a pre-pack sale in the efforts to ensure that more jobs can be retained.

If you would like any further guidance or assistance on this point or any other insolvency related issues brought about by Covid-19 please do not hesitate to contact our dedicated insolvency partners on the details below:

Katie Summers ([javascript protected email address] / 01604 258018)

Deborah Nigh ([javascript protected email address] / 01604 258033)

The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.

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