OUT OF SIGHT, OUT OF MIND?
Immigration pitfalls hidden in M&A transactions
As a specialist immigration solicitor with over 23 years of experience navigating the intricacies of UK immigration law, I have seen immigration law go from a niche practice area to an area that is becoming more and more intertwined with other areas of law. It is commonplace since Brexit for immigration law to be offered as part of an employment law team in many firms that specialise in employment. Recently though I have seen an interest in immigration law perspectives in mergers and acquisitions teams where previously immigration considerations were either left too late or overlooked entirely. If you are embarking on an M&A deal in the UK, the importance of having an immigration expert as part of your legal team cannot be overstated, as will be made clear in this article.
When advising clients during a merger or acquisition, one of the first things I do is ensure we identify which employees are in the UK on sponsored visas; you would be surprised how often this step is neglected, and it can have serious consequences. If you have employees on Skilled Worker visas (formerly Tier 2) or any other visa category that ties them to their employer, their right to work in the UK depends on the continuity of their sponsorship; during an M&A transaction, particularly in a transfer of ownership or restructuring, their visa status can be jeopardised if you do not handle the process correctly. One of the key compliance duties for the sponsor licence holder is to notify the Home Office of any changes to the company’s structure, name, or ownership; failing to do this within the required time frame can lead to penalties or even the revocation of the sponsor licence, putting the entire workforce of visa holders at risk.
Another critical aspect to consider is the sponsor licence held by the company. If the business employs foreign workers, it would normally hold a valid sponsor licence, and this licence does not always automatically transfer with a change of ownership or structure; depending on whether it’s a share purchase, asset purchase, or merger, the sponsor licence may need to be amended, transferred, or, in many cases, a new one may need to be applied for by the acquiring entity. Any delay in securing or amending a sponsor licence can affect the business’s ability to employ foreign workers and can result in the loss of valuable talent.
“It’s also essential to consider the costs involved in the ongoing management of immigration during an M&A; COS fees, immigration skills charge fees, visa application fees, Immigration Health Surcharge, and legal costs associated withensuring compliance can add up quickly, and it’s important to factor these into your financial planning for the deal, especially if the company has many sponsored workers…”
Even if a business does not hold a sponsor licence or employ foreign workers, conducting thorough Right to Work (RTW) checks remains absolutely essential; every employer in the UK is legally obligated to ensure that all employees, regardless of nationality, have the legal right to work in the country; failing to do so can result in hefty fines—up to £60,000 per illegal worker—and in some cases, even criminal liability; it is no defence to say "our workers are all UK nationals" if you have no records to prove this, and this can create a huge liability for the purchasing company;
The Home Office requires that RTW checks are conducted even on UK nationals, and this must be done by obtaining and keeping evidence of their right to work; for UK nationals, this typically involves taking a copy of one of the following: a valid British passport, or alternatively, a full UK birth or adoption certificate along with proof of their National Insurance number; these checks can be done either manually, by inspecting original documents and retaining clear copies, or digitally through the Home Office’s online RTW checking service, provided the individual shares their status online. Without proper documentation or checks, a business risks being found non-compliant, and in the context of an M&A deal, this oversight can transfer significant liabilities to the acquiring company, exposing it to fines and reputational damage.
It’s also essential to consider the costs involved in the ongoing management of immigration during an M&A; COS fees, immigration skills charge fees, visa application fees, Immigration Health Surcharge, and legal costs associated withensuring compliance can add up quickly, and it’s important to factor these into your financial planning for the deal, especially if the company has many sponsored workers; I always advise my clients to be clear about who will bear these costs, as it can cause confusion or dissatisfaction if employees are left to foot the bill unexpectedly.
One area that often complicates matters, particularly for multinational companies, is global mobility; if the business operates internationally or has employees travelling frequently across borders, immigration laws in multiple jurisdictions may come into play; I have worked with businesses where the M&A deal required immigration planning not just in the UK but in several other countries as well, and neglecting this aspect can lead to business continuity issues if key personnel are suddenly restricted in their ability to work abroad or travel for business.
In every M&A deal, due diligence is key, and this absolutely applies to immigration compliance; when acquiring a business, it’s vital to review the target company’s history of immigration compliance to ensure there are no hidden risks or liabilities; I once worked on a deal where, upon closer inspection, we discovered that the target company had been operating with significant breaches of its sponsor licence obligations, which could have led to serious penalties for the acquiring company had we not uncovered it during due diligence. This kind of proactive approach is what saves businesses from inheriting costly problems.
It is clear that immigration has become an integral part of any M&A transaction whether or not foreign workers are involved; having an immigration expert on your legal team ensures that you stay compliant with UK immigration laws, protect your workforce, and avoid delays or penalties that could affect the
success of the deal.
