In a judgment issued in test cases, OTG Ltd v Barke and others, the EAT held that administration proceedings are not capable of coming within the insolvency exception to the normal business transfers rule.
The background to these cases is the changes made in 2006 to the Transfer of Undertakings Regulations (TUPE, the UK implementation of the Business Transfers Directive), designed to promote a "rescue culture". Under these changes, where the transferring business is the subject of bankruptcy or insolvency proceedings instituted "with a view to the liquidation of the assets of the transferor", the employees will not transfer and any dismissals connected with the transfer are not automatically unfair.
It had been assumed that the exception would not cover administrations. But according to Oakland v Wellswood (Yorkshire) Ltd in the EAT in 2009, whether or not the dispensation from TUPE applies depended on the intention of the administrator. The Oakland case involved a "pre-pack" arrangement, under which the company was put into administration and then sold under an arrangement set up before the administrators were appointed. Because at the time the administrators were appointed the intention was to liquidate the assets rather than to continue the business as a going concern, that was enough for TUPE to be avoided.
In OTG v Barke, the EAT said that the overriding purpose of TUPE is to protect employees and the application of the TUPE exemption should depend on the objective of the particular insolvency proceedings, not of those operating them. Strictly, we need a Court of Appeal case to resolve the conflict between the OTG case and Oakland. However, for practical purposes, those involved in administration sale scenarios should now work on the basis that TUPE will apply.