The overlooked deal risk: immigration compliance in corporate transactions

In today’s regulatory landscape, however, this is no longer a minor oversight; it is a material risk capable of undermining both the value and viability of a transaction.

The consequences can be significant. Businesses may face civil penalties of up to £60,000 per illegal worker, alongside the loss of key personnel, operational disruption, reputational damage, and increased scrutiny from the Home Office. In sectors heavily reliant on international talent, such as care, construction, and hospitality, these risks are particularly acute. The analysis differs depending on whether the transaction is structured as a share sale or an asset sale. In a share sale, the employing entity usually remains the same whereas in an asset sale, the employing entity often changes and employees may transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).

This is not merely theoretical; it is a recurring issue across transactions of all sizes. At its core, there is a disconnect between commercial ambition and regulatory reality. While acquisitions are driven by growth, expansion, and efficiency, immigration obligations are often misunderstood or underestimated. Where a target business employs sponsored migrant workers, it must hold a valid Sponsor Licence.  In an asset purchase, employees may transfer to the buyer under TUPE but the seller’s Sponsor Licence will not transfer with them. If the buyer intends to employ sponsored workers post-completion, it must already hold, or apply promptly for, an appropriate Sponsor Licence and comply with Home Office reporting requirements. In a share purchase, by contrast, the employing entity may remain the same but if the transaction leads to a change in majority ownership, the company must make a new Sponsor Licence application and necessary reports must be submitted within 20 working days.

The asset transaction risk can be illustrated by a common scenario: a care provider employing 200 staff, 50 of whom are sponsored workers, is acquired by a larger organisation. Although TUPE ensures continuity of employment from an employment law perspective, it does not preserve immigration compliance. Without prompt and careful action within the relevant Home Office timeframe, the acquiring business may lose the ability to continue sponsoring those workers lawfully, with potential consequences for their visa status and continued employment. The acquiring business must ensure that it holds the appropriate Sponsor Licence and complies with strict Home Office reporting requirements. Failure to do so can result in licence suspension or revocation and substantial financial penalties. In large workforces, this exposure can quickly escalate into millions.

The risk is not confined to asset transactions. Similar issues can arise in share transactions and group reorganisations, even where there is no TUPE transfer and no change to the day-to-day employing entity. For example, where a restructuring inserts a new holding company above an existing company holding a Sponsor Licence, the sponsor may be treated as having undergone a relevant change in direct ownership, even if the ultimate ownership of the wider group remains unchanged. In those circumstances, early advice is essential as the sponsor may need to notify the Home Office and, in some cases, apply for a new Sponsor Licence within a short timeframe to preserve its ability to continue sponsoring affected workers.

Immigration due diligence is essential in both share and asset transactions, but the focus will differ depending on the structure. In an asset transaction, the buyer should establish whether any sponsored workers will transfer, whether it has the appropriate Sponsor Licence in place and what Home Office reporting obligations will arise. In a share transaction, the buyer should assess the target’s existing Sponsor Licence, the robustness of historic Right to Work checks and whether the transaction triggers any reporting, renewal or fresh licence requirements. Although TUPE may preserve employment rights in an asset sale, it does not resolve immigration compliance issues. Sponsors must take proactive steps to assume and discharge their duties, including reporting relevant changes correctly and ensuring that sponsored roles continue to meet the applicable requirements. Buyers should also consider inherited Right to Work risk. While an acquiring business may benefit from the seller’s statutory excuse, it may also inherit historic non-compliance; without fresh checks carried out in accordance with current guidance, the business may remain exposed to enforcement action for breaches it did not cause. This makes early and targeted immigration due diligence critical, even where there is no overall change in ultimate ownership.

Against a backdrop of increased enforcement, the Home Office has adopted a more proactive and data-driven approach to compliance. It is no longer sufficient for compliance to be assumed; it must be demonstrable. Importantly, immigration risk does not end at completion; in many respects, it begins there. Acquiring businesses must ensure they have robust systems in place to manage sponsor duties, maintain accurate records, monitor sponsored workers, and meet ongoing reporting obligations. Without this infrastructure, even a well-structured acquisition can quickly become a compliance liability.

Immigration compliance should therefore not be treated as a peripheral, technical issue. It is a strategic priority that directly impacts deal value, workforce stability, operational continuity, and reputational integrity. The specific steps required will depend on the transaction structure but the need to identify and manage immigration risk at an early stage applies equally to share and asset deals. 

In an increasingly regulated environment, the question is no longer whether immigration risk should be considered, but whether it has been addressed early enough.