Key considerations for UK businesses with a sponsor licence after ownership change

This insight is part of our Legal Business News | Winter 2025 series. Explore the full series at the end of this piece.

Mergers, acquisitions and similar changes in corporate ownership are significant transactions, leading to substantial changes in business operations, structure and strategy. Businesses with a sponsor licence must carefully navigate the implications of these complex transactions, to maintain compliance with UK immigration rules and regulations.

Sponsor licences are essential to employ migrant workers and can be impacted in various ways, necessitating careful planning to avoid legal and operational disruptions. Here, we outline the key considerations for UK businesses undergoing such corporate changes.

Sponsor reporting duties

Sponsor licences cannot be transferred from one legal entity to another. The required sponsor reporting duties vary depending on whether:

there is a change in direct owner;
there is a sale of all or part of the controlling number of shares in a business;
a business is partly or wholly taken over by another business; or
a business is divided to form new organisations.

No later than 20 working days after one of the above changes, an appointed Level 1 User (with consent of the Authorising Officer) must report the change on the sponsor licence via the sponsorship management system (SMS). Once reported, the Home Office requests certain documents to verify the relevant change in ownership and advises on the required next steps.

Failure to report by the specified deadline can, in the worst-case scenario, result in a rating downgrade or full revocation of the sponsor licence. A rating downgrade prohibits a company from sponsoring new workers until an A-rating is reinstated, and a revocation may result in all sponsored workers’ visas being cancelled.

A report made after the 20-working day deadline is still advisable rather than making no report, as the Home Office looks more favourably on a late report than a complete failure to report.

Acquisitions, takeovers and mergers

When there is a change of direct ownership of a business, ie, it is sold as a going concern or the sale of shares results in the controlling number of shares being transferred to a new owner, the seller’s sponsor licence is either revoked or made dormant, depending on whether the seller’s sponsored workers are being transferred to the buyer’s sponsor licence.

When a business completely takes over or merges with a business sponsoring migrant workers, it must apply for a sponsor licence within 20 working days of the sponsored workers being transferred, if it does not already have one. If the business already has a sponsor licence, the complete takeover/merger must be reported within 20 working days of the change taking place (including details of the sponsored workers they are accepting responsibility for), in addition to requesting to make the previous sponsor licence dormant.

For the business subject to the complete takeover/merger, resulting in their sponsored workers moving to the new business, they must report the change within the 20-working day deadline (including the details of all sponsored workers and whether they are being transferred), in addition to confirming whether they need to surrender their sponsor licence.

Sponsor licence application

The licence application process involves meeting specific requirements and demonstrating to the Home Office that it can adequately monitor its sponsored workers and comply with the various sponsor reporting and record-keeping duties. Processing times for a sponsor licence application should be considered (including expediting the application) to ensure the buyer obtains a sponsor licence before the reporting deadline.

Following a successful licence application, the receiving business must report the change (no later than 20 working days after the takeover/merger transaction completes), including the details of the sponsored workers they are accepting responsibility for, and request to make the previous sponsor licence dormant.

Partial takeovers and de-mergers

If a sponsoring business is partially taken over or is split up to form one or more new organisations, resulting in some sponsored workers being moved to a new organisation, the required actions differ for each party to the transaction, based on the circumstances.

Buyer’s considerations

Due diligence

If the seller has a sponsor licence, before the transaction completes, the buyer must conduct thorough due diligence on the seller’s sponsor licence. This includes reviewing the licence status, compliance history, sponsored workers and any ongoing obligations. Identifying potential issues early can prevent future complications.
Compliance obligations

Post-completion, the buyer inherits the responsibility for maintaining compliance with the seller’s sponsor licence and sponsored worker reporting obligations. This includes reporting changes, maintaining accurate records and ensuring that sponsored employees satisfy ongoing immigration requirements.
Integration challenges

Integrating the workforce from an acquired company can be complex. The buyer must ensure that all sponsored workers are accounted for and that their employment terms remain compliant with UK immigration rules and regulations.

Seller’s considerations

Licence surrender

If the seller ceases to exist as a legal entity post-completion, they must surrender their sponsor licence. This involves notifying the Home Office and ensuring that all sponsored workers are transferred to the buyer’s sponsor licence or have alternative arrangements.
Employee communication

The seller must communicate effectively with their sponsored workers regarding the changes resulting from the merger, acquisition or other change in ownership. This includes providing information on how their employment and visa status will be affected.
Compliance during transition

Until the transaction is complete, the seller remains responsible for maintaining compliance with sponsor licence obligations. This includes continuing to meet their sponsor reporting and record-keeping duties.

Joint considerations

Employee transfers

Both parties must collaborate to ensure the seamless transfer of sponsored employees. This may include updating employment contracts, notifying the Home Office and ensuring that visa conditions are met. Follow-on right-to-work checks are required to establish a statutory excuse against a civil penalty or other immigration enforcement action.
Reporting requirements

As outlined above, the Home Office must be notified about the merger, acquisition or other corporate change in ownership within the 20-working day deadline. This applies to all parties involved in the transaction holding a valid sponsor licence, including full details of the transaction.

Conclusion

Mergers, acquisitions and other corporate ownership changes have notable implications for businesses with sponsor licences and the workers they sponsor. Both buyers and sellers must carefully consider and proactively manage these changes. By comprehending the commercial and legal ramifications and taking the necessary steps, companies can ensure a seamless transition, maintain compliance with UK immigration laws and safeguard their ability to employ migrant workers.

Contact our specialist immigration lawyers for further information on UK businesses with a sponsor licence after ownership change.