Mergers, Acquisitions & Sponsor Licences

Mergers, acquisitions or any type of organisational restructure are inherently complex projects.

While resources and attention for the restructuring process are typically focused on finance, taxation and stakeholder communications, one area which is commonly overlooked is immigration compliance.

If your organisation is undergoing a change in ownership or a change in structure due to a merger or acquisition, it’s vital that you consider the impact on your sponsor licence and on sponsored migrants that you employ, or may acquire, before the changes occur. You also need to be aware of your duty to report such changes, and the deadlines for reporting.

Failure to deal with the implications of organisational change on the sponsor licence’s validity creates significant business risk. Any issues with your sponsor licence could lead to it being downgraded, suspended or revoked – a scenario employers will want to avoid.

So how will changes to your organisation’s structure affect your sponsor licence? And what can HR teams do to ensure your organisation remains compliant and retains its sponsor licence following the change process?

 

Duty to notify of organisational change

 

As part of their licence compliance duties, sponsors must notify the Home Office of certain changes in their circumstances.

This includes reporting a merger, takeover or change of ownership via their Sponsorship Management System within 20 days of the change taking place.

The change on the SMS is to be made by the appointed sponsor licence level 1 user. The Home Office may then request supporting documents be provided to evidence the change.

Examples of documents that could be requested include:

 

• Evidence of the sale or purchase such as a letter from a practising solicitor or notary or an affidavit signed by one of the partners or senior executives at the relevant sponsor
• Employment contracts confirming that sponsored workers’ employment is maintained and working arrangements are unchanged as per each migrant worker’s Certificate of Sponsorship.
• A certified copy of the purchase agreement.
• An original or certified copy of the TUPE agreement or contract effecting the transfer of sponsored workers’ employment.
• A signed letter from the sponsor’s authorising officer confirming they are assuming full sponsorship responsibility for the transferred sponsored workers.

 

Failure to notify of a change of ownership, merger, takeover or de-merger can give grounds for the Home Office to take enforcement action against the sponsor, which may result in its sponsored workers’ leave in the UK being curtailed.

It’s an easy mistake to make to assume that a ‘simple’ change of share ownership doesn’t need reporting if it doesn’t result in any visible changes to the corporate structure or employee contracts. However, any form of change of ownership comes with reporting requirements, and may even also require a new licence application.

 

How will a corporate restructure impact my sponsor licence?

 

Fundamentally, a sponsor licence is not transferrable between organisations. How the organisational change will impact the licence will depend on whether the organisation:

 

• Sells all or part of, or the controlling number of shares in the organisation.

• Is being taken over completely or in part by any other organisation.

• Acquires a controlling interest in another organisation.

• Is splitting out to form new organisations.

 

For example, where an organisation is sold as a going concern, resulting in a change of ownership, its sponsor licence will either be revoked or rendered ‘dormant’.

 

Acquiring sponsored migrants under a TUPE transfer

 

If TUPE is triggered, or a similar arrangement exists, and sponsored workers are transferred to a new employer, the new employer will assume full responsibility for the migrant workers from the date of the transfer.

To lawfully employ the transferring sponsored workers, the new employer must either:

 

• already hold a valid sponsor licence to sponsor the transferring workers, or
• apply for a new licence within 20 days following completion.

 

Details must be submitted via the SMS of all sponsored migrants who are transferring from one sponsor to another.

Failure to meet this requirement can result in sponsored workers’ leave being curtailed to 60 days.

 

Impact of a restructure on sponsored migrants’ leave

 

Sponsored migrants involved in a merger, de-merger or takeover do not need to submit a new visa application and the new sponsor does not have to assign a new Certificate of Sponsorship to them. The only exception is where the move involves the migrant changing their job or the migrant does not have TUPE or similar protection.

If appropriate reports are not submitted, and where required a new licence application is not made, sponsored migrants may have their leave reduced to 60 days.

If a sponsored worker’s role changes as a result of the organisational change, a determination will be needed to as to whether a new application for leave to remain is required. This will involve assessing the proposed changes to visa requirements such as the role and salary. Where a new application is needed, a new Certificate of Sponsorship will also be required to be assigned.

 

Prevention of illegal working obligations

 

In addition to the compliance duties under the terms of its sponsor licence, the organisation must also consider its obligations under the prevention of illegal working regime.

Failure to conduct appropriate document and identity checks on new employees can result in a civil penalty fine of £20,000 per breach.

 

Practical steps for HR teams to ensure compliance

 

Since every transaction is different, the implications on the licence can also vary depending on the specific circumstances of the organisational change. To mitigate the complexities of the compliance and reporting requirements, as well as taking professional advice to avoid non-compliance and enforcement action, we recommend HR teams and those responsible for assessing immigration compliance issues take the following practical steps:

 

• Immigration issues should be considered at an early stage of a restructure. This creates a challenge for HR teams to ensure they are involved in, or at the very least informed of, initial discussions about any restructure affecting the organisation, but is critical to allow for effective planning and risk management.
• As soon as the nature of the restructure becomes clear, ascertain the impact of the changes on the licence. Which of the organisations involved already have a sponsor licence? If there is an existing licence, is it valid, and if so for how long? Will a new licence need to be applied for?
• If you are required to apply for a new sponsor licence, diarise the deadline for applying, with all supporting documents, within 20 days.
• Has a recent immigration audit been conducted to assess compliance with licence and prevention of illegal working duties and to avoid Home Office issues?
• Ensure all relevant notifications in relation to the transaction are made within 20 days, for example, changes to migrants’ circumstances.
• Compile a list of all sponsored workers that will be affected by the change, and identify what the impact will be on their status and leave.
• Carry out right to work checks within 60 days of acquiring new employees through acquisition or TUPE transfer of services.

 

 

Need assistance?

 

Corporate transactions are inherently complex, but overlooking the immigration compliance aspects can cause operational disruption and have a devastating effect on migrant workers and their permission to remain lawfully in the UK.

While planning is critical to mitigating risk, and although most of the compliance duties are undertaken post-transaction (within the required timeframe), it may be advisable to liaise with the Home Office in advance of the transaction completing to inform, and potentially seek approval, on the proposed course of action. We can assist in corresponding with the Home Office on your behalf to notify and liaise, and ensure continued compliance with the regulations.

If your organisation is planning or undergoing a restructure, contact us for expert advice and guidance.

 

How a merger will impact your sponsor licence FAQs

 

Will a merger or acquisition affect my company’s sponsor licence?

A merger, acquisition, or other structural change can have a significant impact on your sponsor licence. If your organisation undergoes a change in ownership, you may need to surrender your existing licence and apply for a new one, depending on the nature of the transaction. The Home Office requires sponsors to report such changes within 20 working days.

 

Do I need to apply for a new sponsor licence after a merger?

Whether you need a new sponsor licence depends on the details of the merger. If your organisation is legally absorbed by another company and ceases to exist as a legal entity, the sponsor licence will no longer be valid, and the new employer must apply for a fresh licence. If your company continues to operate under the same legal structure but with different ownership, you may only need to report the change rather than apply for a new licence.

 

What happens to sponsored workers if a company merges?

If the new entity does not hold a valid sponsor licence, sponsored workers may be at risk of losing their immigration status. The new employer must apply for a sponsor licence and issue new Certificates of Sponsorship if required. The Home Office may allow workers to continue employment if the licence transition is managed correctly and reported within the required timeframe.

 

How do I report a merger or acquisition to the Home Office?

You must report the change through the Sponsorship Management System (SMS) within 20 working days of the merger or acquisition taking effect. Failure to report significant changes to your business could result in sponsor licence suspension or revocation.

 

Will the Home Office conduct compliance checks after a merger?

The Home Office may review the new entity’s compliance with sponsor duties, particularly if a new licence application is required. The organisation may need to demonstrate it can meet sponsorship obligations, including record-keeping and right to work checks.

 

What happens if I fail to report a business merger on time?

Failure to report a merger, acquisition, or other organisational change within the required timeframe may lead to penalties, including licence suspension or revocation. This could affect the immigration status of sponsored workers and the ability of the business to continue employing skilled workers from overseas.

 

Can sponsored employees transfer to the new entity automatically?

Sponsored workers do not automatically transfer with a business. If the new employer has a valid sponsor licence and takes over sponsorship responsibilities, new Certificates of Sponsorship may be required. In some cases, workers may need to submit a new visa application.

 

What if only part of the business is transferred?

If only part of the business is transferred to another entity, the Home Office will assess whether a new sponsor licence is needed. The new employer must ensure that any sponsored workers transferred as part of the deal remain compliant with immigration rules.

 

Does a merger impact my business’s ability to recruit new sponsored workers?

If your sponsor licence remains valid, you can continue to sponsor new workers. However, if a new licence is required due to structural changes, you will need to wait until it is approved before assigning new Certificates of Sponsorship.

 

Can I continue to sponsor workers if my company changes its name?

A change of company name alone does not usually require a new sponsor licence, but it must be reported via the Sponsorship Management System. The Home Office may request supporting evidence to confirm the change.

 

Glossary

 

Term	Definition
Acquisition	The process where one company purchases another, potentially impacting the acquired company’s sponsor licence.
Certificate of Sponsorship (CoS)	A digital document assigned by a licensed sponsor to a migrant worker, allowing them to apply for a Skilled Worker or other sponsored visa.
Change of Ownership	A legal transfer of a business or part of a business to new owners, which may require reporting to the Home Office.
Compliance Checks	Inspections conducted by the Home Office to ensure a sponsor is fulfilling its duties, especially following structural changes like a merger.
Home Office	The UK government department responsible for immigration, visas, and sponsorship compliance.
Immigration Status	The legal standing of a non-UK national in the UK, which may be affected by a business merger if their sponsor licence changes.
Merger	The combination of two or more companies into one, which may result in the transfer or surrender of a sponsor licence.
New Sponsor Licence Application	A fresh application for a sponsor licence, required if a business undergoes significant structural changes and the existing licence is no longer valid.
Partial Transfer	When only a part of a business is acquired by another entity, affecting sponsorship arrangements for employees in the transferred division.
Reporting Duties	The obligation of a sponsor licence holder to inform the Home Office of significant business changes, including mergers, acquisitions, and ownership changes, within 20 working days.
Revocation of Licence	When the Home Office cancels a sponsor licence, meaning the employer can no longer sponsor migrant workers.
Skilled Worker Visa	A visa category that allows UK employers to sponsor foreign workers in eligible skilled occupations.
Sponsor Duties	The legal responsibilities of a sponsor licence holder, including maintaining compliance with immigration rules, reporting changes, and monitoring sponsored employees.
Sponsor Licence	The permission granted by the Home Office allowing a UK business to employ non-UK workers under work visa categories such as the Skilled Worker route.
Sponsor Management System (SMS)	An online system used by employers to manage their sponsor licence and report changes to the Home Office.
Sponsorship Transfer	The process by which a new employer takes over sponsorship of migrant workers following a merger or acquisition.
Suspension of Licence	A temporary restriction placed on a sponsor licence if the Home Office finds non-compliance or failure to report business changes.
Takeover	When one business takes full control of another, possibly affecting the sponsor licence status and requiring compliance updates.
TUPE (Transfer of Undertakings – Protection of Employment)	UK regulations that protect employees’ rights during a business transfer but do not automatically transfer sponsorship duties for migrant workers.
Visa Curtailment	When the Home Office shortens a migrant worker’s visa due to changes in their employment, such as their sponsor losing its licence.