“Lights. Camera. Action!” – Re Motion Picture Capital and standing for minority shareholders to bring unfair prejudice petitions
Jackson Lloyd Ltd and Mears Group Plc v Smith and others
This case involved a factual scenario that will be a familiar one to many who have been involved in share purchases, particularly where a group is purchasing a failing company.
Jackson Lloyd Ltd (JL) and Mears Group Plc (MG) appealed against the Employment Tribunal’s decision that there was a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) from JL to MG. They also appealed the Employment Tribunal’s decision that all the Claimants save one were entitled to pursue their claims for protective awards.
On 1 October 2010, the subsidiary company of MG, Mears Ltd (ML), purchased 100% of the shares of JL. Upon the acquisition, the original JL board resigned with immediate effect and they were replaced by MG nominees. Although not the purchaser of JL’s shares, MG announced that it had acquired JL and would be embarking on a programme of integration. This process of integration began immediately and the CEO of MG appointed an “integration consultant”.
It was held that the share transfer did not amount to a TUPE transfer, and this was a genuine transaction. However, the share purchase by ML provided the context within which MG began to operate JL’s business, so as to trigger TUPE. On the facts, control was found to be exercised by MG, not by JL or ML. Essentially, the Employment Tribunal found that from the date of JL’s acquisition by ML, MG imposed major changes on JL through their integration team and this was in the absence of any meetings of JL’s board.
This may seem somewhat surprising since, for commercial reasons, the outward appearance was that JL was a separate, autonomous company: it was a separate legal entity, there was no transfer of assets other than ML’s share purchase, and JL retained its customer contracts. However, the Tribunal found that in reality JL was not an “autonomous, independent company”. The Tribunal found that there had been a “classic or old style TUPE transfer”, in other words a transfer of a business from JL to MG.
On appeal, the EAT held that the Employment Tribunal directed themselves clearly and adopted the “broad, flexible, multifactorial and fact sensitive approach” as required by case law and its conclusions were “unimpeachable”.
It is a reminder that although a share transfer itself may not be a TUPE transfer, TUPE may nevertheless be found to apply post-acquisition, even as a result of steps that are taken in many acquisitions, particularly where a group is purchasing a failing company, that they are looking to turn around by imposing their own systems into the company.
The second main issue, was whether the Claimants were entitled to present their TUPE claims to the Employment Tribunal in their own names, or as representatives of those named as Claimants. JL had representative committees, however the Employment Tribunal had found that at the relevant time, the JL representative committees had no mandate to act for those they represented as their terms of office had expired. This meant that each of the Claimants could bring their own claim for a protected award, rather than the representatives having to be the person to bring a claim on behalf of the members they represented.
This serves as a salutary reminder to employers to ensure that representatives have the required mandates, and that these are kept up to date.
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