Merger Impact on Sponsor Licence

When a business undergoes a merger, acquisition or internal restructuring, there are significant implications for its sponsor licence. UK immigration law requires organisations holding a sponsor licence to comply with strict duties relating to the employment of overseas workers. Where corporate changes take place, the Home Office must be notified, and in some cases, a new sponsor licence will need to be obtained. Failing to take the correct action can put the business at risk of losing its ability to sponsor migrant workers and may jeopardise the immigration status of sponsored employees.

What this article is about
This article explains how mergers, acquisitions and restructures affect a sponsor licence. It provides an overview of the Home Office rules on organisational change, the reporting duties of sponsors, and the circumstances where a new sponsor licence is required. It also considers the impact on sponsored workers, including the application of TUPE, and provides practical guidance on compliance and risk management during business transactions. The aim is to help employers plan and execute corporate changes without putting their immigration compliance at risk.

Section A: Sponsor Licence Rules and Business Changes

Business changes such as mergers, acquisitions, takeovers and restructures can have direct and sometimes immediate consequences for an organisation’s sponsor licence. The Home Office treats a sponsor licence as specific to the legal entity that holds it. If that entity changes or ceases to exist, the licence may no longer be valid, and employers must take proactive steps to protect their sponsored workforce.

1. Home Office Requirements

The Home Office requires all sponsor licence holders to report any significant organisational changes within 20 working days. These include mergers, acquisitions, takeovers, de-mergers, and substantial restructuring events. Reporting is carried out through the Sponsor Management System (SMS), which is the official online portal for managing sponsor licence duties.

The responsibility for reporting lies with the sponsor’s key personnel, particularly the Authorising Officer and Level 1 User. Failure to report accurately and on time is considered a breach of sponsor duties and can result in enforcement action, including suspension or revocation of the licence.

2. Mergers, Acquisitions, and Restructuring Events

Mergers occur when two companies combine to form a new entity, while acquisitions involve one company taking over another. In a takeover, the acquiring company may assume control without forming a new legal entity, while a de-merger involves splitting a business into separate entities. Internal restructures may include changing the business’s structure or ownership in a way that alters the licence-holding entity.

Each type of change can have different implications for the sponsor licence. For example:

• If the licence-holding entity is absorbed into another and ceases to exist, the licence automatically lapses.
• If the entity survives the transaction but undergoes changes in ownership or structure, it may retain the licence, subject to Home Office notification and checks.
• Where entirely new entities are created, fresh applications for a sponsor licence will be required.

3. Impact on the Sponsorship Licence

The impact of corporate change depends on whether the original sponsoring entity continues to exist:

• Licence lapsing automatically: If the legal entity that held the licence no longer exists after the merger or acquisition, the licence automatically lapses. In this scenario, sponsored workers are at risk unless the new entity promptly applies for and secures a new sponsor licence.
• Continuation of the licence: If the legal entity remains intact and retains its sponsor licence, the business must still report the changes and may be subject to a compliance review.
• Requirement for a new licence: Where a new entity has been created or acquired, it must apply for a new sponsor licence to continue sponsoring migrant workers.

The Home Office may also conduct compliance checks to ensure the new or continuing entity is fit to hold a licence. For sponsored workers, continuity of their immigration status depends on the new sponsor’s ability to take over sponsorship quickly and lawfully.

Section A Summary
Sponsor licences are tied to the legal entity that holds them, making corporate changes highly significant. Sponsors must notify the Home Office within 20 working days of a merger or restructuring event and understand whether their licence continues, lapses, or requires re-application. Failure to comply risks licence loss and disruption for sponsored employees.

Section B: Duties During and After a Merger

When a merger or acquisition takes place, the sponsor’s duties do not pause or diminish. In fact, the period of corporate transition is one of the most sensitive times for sponsor compliance. The Home Office expects organisations to maintain continuous oversight of their sponsorship responsibilities, ensuring that any impact on sponsored workers is managed effectively.

1. Reporting Organisational Changes

The sponsor must notify the Home Office of organisational changes within 20 working days using the Sponsor Management System (SMS). Notifications should provide clear and accurate details of the merger, takeover, or restructuring, including supporting documents such as Companies House filings, transfer agreements, or other evidence of the transaction.

The responsibility for ensuring correct and timely reporting lies with the organisation’s key personnel, particularly the Authorising Officer and Level 1 User. If reporting obligations are overlooked or mismanaged during a merger, the Home Office can suspend the licence while it investigates, creating risk for the business and its sponsored employees.

2. TUPE Transfers and Sponsored Workers

Where a merger or acquisition involves a transfer of employees, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) may apply. TUPE ensures that employees’ contracts, rights, and continuity of employment are preserved when their employer changes.

Sponsored workers are also covered by TUPE. However, TUPE does not override immigration law. Their continued employment is lawful only if the new employer holds a valid sponsor licence. If the acquiring or merged entity does not hold one, it must apply promptly. Sponsored workers cannot lawfully continue their employment under TUPE if the new employer lacks the proper licence.

3. Risk of Licence Suspension or Revocation

The Home Office has the power to suspend or revoke a sponsor licence if it believes that the sponsor is failing to comply with its duties. During mergers, risks include:

• Late or incomplete reporting of the transaction.
• Lack of clarity over which entity is responsible for sponsored workers.
• Failure to maintain HR systems and record-keeping during the transition.
• Inability of the new or surviving entity to meet the compliance requirements for sponsorship.

If a licence lapses or is revoked, all Certificates of Sponsorship become invalid, and sponsored workers are left without a sponsor. Their leave will normally be curtailed to 60 days, or shorter if their permission expires sooner. This can cause significant disruption to the workforce and expose the business to reputational and operational risks.

Section B Summary
During and after a merger, sponsors must continue to meet their reporting and compliance obligations. TUPE applies to sponsored workers, but their immigration status is tied to the sponsor licence. Any lapse in reporting, HR management, or continuity of sponsorship can result in suspension or the licence lapsing, putting both the business and its migrant workforce at risk.

Section C: Applying for a New Sponsor Licence

In some cases, a merger or acquisition results in the original sponsor licence no longer being valid. Where this happens, the business must apply for a new licence before it can lawfully sponsor migrant workers. The timing and handling of this process are critical, as delays can place sponsored workers’ immigration status in jeopardy.

1. When a New Licence is Required

A new sponsor licence will usually be required if:

• The licence-holding entity ceases to exist after a merger or acquisition.
• The ownership of the business changes in a way that alters its legal identity.
• A new company is created as part of a restructuring or de-merger.

The Home Office’s position is that sponsorship rights cannot be transferred between legal entities. This means the new entity must obtain its own sponsor licence if it wishes to continue employing sponsored workers.

2. Application Process

The process for obtaining a new sponsor licence during or after a merger follows the same procedure as a standard sponsor licence application. The business must:

• Submit an online application form to the Home Office.
• Pay the relevant fee, which varies depending on the size of the business and the type of licence.
• Provide supporting documents to prove that the organisation is genuine, trading lawfully in the UK, and capable of meeting sponsorship duties.
• Demonstrate that appropriate HR and compliance systems are in place.

The Home Office may carry out a compliance audit before granting the licence. Processing times can take up to 8 weeks, although a limited priority service may be available for an additional fee. This service is capped (10 slots per working day), so availability is not guaranteed.

3. Managing Transition for Sponsored Workers

While the new licence is being processed, sponsored workers may face uncertainty. If the previous sponsor licence has lapsed or is no longer valid, their Certificates of Sponsorship become invalid, and they risk being without lawful sponsorship.

Employers can mitigate these risks by:

• Applying for a new licence as early as possible.
• Using the priority processing service if time is critical.
• Communicating with sponsored workers to explain the process and reassure them about their immigration status.
• Ensuring HR systems track each worker’s visa expiry date so that contingency planning is in place if delays occur.

Failure to secure a new licence quickly can result in the curtailment of workers’ visas, requiring them to leave the UK or find another sponsor within a limited time. This risk highlights the importance of integrating immigration compliance planning into the early stages of any merger or acquisition.

Section C Summary
Where a merger or restructuring leads to the creation of a new legal entity, a fresh sponsor licence must be obtained. The application process requires careful preparation, including evidence of compliance systems and financial standing. Employers should act early to avoid jeopardising the immigration status of sponsored workers and maintain workforce stability.

Section D: Compliance and Risk Management

Corporate transactions are complex, but when a sponsor licence is involved, immigration compliance must be factored into the deal from the outset. Failing to plan for sponsor duties during a merger or acquisition can expose the organisation to enforcement action and risk the immigration status of sponsored workers. A proactive compliance strategy reduces these risks and supports smooth business continuity.

1. HR Systems and Record-Keeping

The Home Office places significant emphasis on the quality and reliability of an organisation’s HR systems. During a merger, businesses must ensure that:

• Right to work checks are consistently carried out and recorded.
• Contact details, job descriptions and salary information for sponsored workers remain accurate and up to date.
• Employment contracts and payroll records are maintained in accordance with sponsor guidance.

If HR processes break down during a corporate transition, the Home Office may conclude that the new or surviving entity cannot meet its sponsorship duties, increasing the likelihood of suspension or refusal of a licence.

2. Internal Governance and Communication

Immigration compliance should not be left solely to HR or legal teams. Senior management must be engaged in planning and governance to ensure sponsor duties are prioritised during the transaction. Effective internal communication is essential, particularly between legal, HR, and operational departments, so that sponsorship reporting and compliance are not overlooked amid wider commercial negotiations.

The sponsor’s key personnel — including the Authorising Officer, Key Contact, and Level 1 User — should be reviewed as part of the merger. If any of these roles are vacated or become inappropriate due to structural changes, replacements must be appointed and updated with the Home Office.

3. Strategic Planning for Immigration Compliance

Businesses that anticipate mergers or acquisitions should include immigration compliance in their strategic planning. This includes:

• Conducting due diligence on the other party’s sponsor licence history and compliance record.
• Identifying early whether a new licence will be required.
• Factoring licence application timelines into the overall transaction schedule.
• Preparing contingency plans for sponsored workers in case of delays or complications.

By addressing immigration compliance as part of corporate strategy, organisations can protect their workforce, maintain regulatory approval, and avoid last-minute disruption.

Section D Summary
Effective compliance and risk management during a merger require robust HR systems, clear internal governance, and early strategic planning. Engaging senior management and aligning immigration compliance with corporate strategy ensures that the sponsor licence is protected and sponsored workers remain secure in their roles.

FAQs

Do we need to reapply for a sponsor licence after a merger?
It depends on the structure of the transaction. If the licence-holding entity no longer exists after the merger, a new licence is required. If the entity survives but undergoes changes in ownership, the Home Office must be notified, and it may decide whether the licence can continue.

What happens to sponsored workers if our licence lapses due to a merger?
If the sponsor licence lapses, all Certificates of Sponsorship become invalid. Sponsored workers will have their leave curtailed and will usually have 60 days, or until their visa expiry date (if sooner), to find a new sponsor or leave the UK.

How long do we have to notify the Home Office about a merger?
Sponsors must report organisational changes within 20 working days using the Sponsor Management System. Failure to report within this timeframe is a breach of sponsor duties and may lead to compliance action.

Can TUPE apply to sponsored workers?
Yes. TUPE protects sponsored workers’ employment rights when their employment transfers to a new employer during a merger or acquisition. However, the new employer must hold a valid sponsor licence to lawfully continue sponsorship.

What risks does a merger pose to a sponsor licence?
The main risks include:

• The licence lapsing or being revoked if changes are not reported accurately and on time.
• Gaps in compliance where HR systems or key personnel roles are disrupted.
• Loss of lawful sponsorship for migrant workers if a new licence is not obtained quickly when required.

Conclusion

Mergers, acquisitions, and restructures can have serious consequences for a sponsor licence and the migrant workers it supports. The Home Office treats sponsorship as tied to the specific legal entity holding the licence, meaning that changes in ownership or structure can result in a licence lapsing or the need for a new application.

Employers must act quickly to notify the Home Office within 20 working days of any relevant change and ensure that sponsor duties continue to be met throughout the transaction. Where a new licence is required, applications should be submitted at the earliest opportunity to protect sponsored workers from losing their immigration status.

By maintaining strong HR systems, ensuring clear internal governance, and including immigration compliance in strategic planning, businesses can successfully navigate mergers without jeopardising their ability to sponsor overseas workers. Proper preparation and timely action safeguard both the organisation’s legal compliance and the continuity of its skilled workforce.

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