Parent company in difficulties

[bed32]

I am currently waiting for a tribunal date for a very large claim against the UK subsidiary of a US company.

The same US parent company has hit the headlines recently as the Fed has just lent it a lot of money to stop it going bust. As far as I know the UK entity itself is still solvent. The most likely scenario is that they will hold a "fire sale" and dispose of all the assets of the parent company. Can anyone guess where that leaves me as an employee of the UK company?

I believe that current employees have pretty high up the list of creditors but what is the status of a former employee using a tribunal to get money that is owed?

[bed32]

Somewhat more quickly than anticipated it seems that the company is going to be taken over by another US firm at a bargain basement price.

My solicitor is now suggesting that I will not be able to pursue the new owners? Is that really correct - it certainly doesn't seem fair and it is going to cost me £££

[Sidewinder]

You would require specialist employment advice, but assuming that the transfer of the business falls within the scope of TUPE (which as long as the business is to continue trading then it should do), then you may well still have a case.

TUPE regulations would normally require an incoming owner of a business to accept all rights and responsibilities, including any ongoing or future Tribunal matters. The outgoing owner may in turn provide an indemnity as a part of the due diligence process to the new owner against any financial affect of claims made after the transfer. This was a change brought in for the TUPE regulations which came into effect in April 2006.

If a solicitor has told you differently though, I would assume that he has a far greater knowledge than I, and should be able to explain why this is not the case, but as far as I am aware TUPE is usually relevant in any transfer of a business where the business is to continue to trade in its existing manner. I do not believe that the fact that it is a US parent company would have any bearing on the case, nor the fact that the business is being transferred for finacial reasons - that happens all of the time and employees rights (including those bringing Tribunal claims) are supposed to be protected.

[cal37]

You are 100% right Sidewinder. If they wish to continue trading within the UK then TUPE would be in force.

I also can not understand why your solicitor has advised you differently.

[bed32]

Thanks for the responses.

The truth is that I have been very unhappy with this solicitor as I think she has made a couple of fundamental mistakes already (in other words mistakes so basic that I have been able to correct her on points of law). Your responses only confirm what I suspected, that she is probably wrong in this case too.

I have now arranged to talk to another solicitor and will probably instruct him in place of the original (but there are of course a couple of complications).

Ordinarily I would have hoped to use the possibility of a take-over to persuade them to come to an agreement rather than go to court but in this case the arguments for the take over are so persuasive that the threat of a few tribunal cases from UK employees is unlikely to have any impact at all.

[JonCris]

Originally Posted by bed32

Somewhat more quickly than anticipated it seems that the company is going to be taken over by another US firm at a bargain basement price.

My solicitor is now suggesting that I will not be able to pursue the new owners? Is that really correct - it certainly doesn't seem fair and it is going to cost me £££

Then whilst not wishing to be unkind I suggest you may be using the wrong solicitor.

If the new owners where buying at a liquidation sale then he would be correct but as this is not the case, only that they are buying a going concern very cheaply ($2 a share I think) they must accept all it's liabilities & that includes your outstanding claim & that has always been the case including pre TUPE

Remember it's because they are accepting it's liabilities that they are only paying $2 a share

[bed32]

Indeed it is only $2 per share - a bargain basement price, a "fire sale" but not a liquidation. I can't help wondering if there has been a deal in US to protect the purchaser from some of the liabilities (e.g. the regulatory ones).

In fact I think that change of ownership of the group should not have any impact at all on the UK entity as I imagine that that will continue to trade unchanged for some time. I think there is a risk that they might "torch" the UK entity rather than merge it with there existing business but I think that there is sufficient business that they have to transfer that I can make a good case that TUPE applies even in those circumstances.

[bed32]

The solicitor finally came back to me saying that she had meant I might have trouble getting my money if the company was insolvent. However since it had already been taken over in as a going concern that seems a very remote possibility.

[JonCris]

Now that does! make sense

[bed32]

Originally Posted by JonCris

Now that does! make sense

Yes it does make sense - apart from the fact that it was not the question I asked

By this stage it was clear that the company was going to be taken over as a whole and the chance any part of it becoming insolvent was vanishingly small. In those circumstances to state categorically that I would not be able to pursue the new owners without any qualification of that statement seems very strange advice.

[JonCris]

Sorry I don't understand.

1st you say your lawyer said one thing then you say they claim they didn't & that the thing they actually meant was that there could be a risk of your claim being made worthless if the company here in the UK went bust which is the correct answer & make sense as apposed to the one you state was given to you by your lawyer which doesn't

For the UK company to avoid your claim it would have to enter liquidation & be sold off by a receiver & I doubt the UK creditors (which includes you) would allow a solvent American UK subsidiary to be sold off allowing it to avoid it's liabilities.

[bed32]

I asked the lawyer whether the take over of the firm would impact my claim. She responded:

In the event that xxx are taken over by another xxx, .... you would not be able to recover your losses against any potential owners.

No hint their that her advice only applied if the company went into liquidation. When I asked her "are sure" she then replied that it would only be an issue if they were insolvent. However there was never a real chance that they would be allowed to become insolvent, and that certainly wasn't the question I asked.

Hence she either gave the right answer to a question a didn't ask or the wrong answer to the question I did.

[JonCris]

I understand that but her final & latest answer was the correct one so if she is now saying that she didn't say what you state she did & know to be true then I should either make sure that you check any further advice given or change solicitors

[Ell-enn]

Cal & Sidewinder absolutely correct - when we took over a company last year we inherited a tribunal case.

Regards

Ell-enn

[JonCris]

What about me Ell :o wasn't I right also

[bed32]

Thanks again for the advice.

It confirms my suspicions about the quality of the advice I have been getting from by solicitor - it is time to change I feel. There is too much at stake to risk going to the tribunal with less than the best advice.