Question around sale of client - and their obligation to us

[Wing Commander]

Hi all

I run a cleaning business and we have a commercial client who is under contract with us. We have a 2 month rolling notice period for either side to be able to terminate the contract.

Their company (company A) has been sold to another company (company B). The finance lady (who has been with Company A for as long as we have worked with them) gave me written 2 months notice, on 8th August. Their email was worded as such:

---

Good afternoon Wing Commander

Further to the completion of the sale of <Company A>, I wish to formally give you the required two months notice that we wish to cancel your Contract for cleaning services.

With the month of August having been paid, I would expect the service to continue until at least the end of August.

Please let me know if you have any queries.

Many thanks

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I have just spoken with the lady who sent this via phone, and she is now expecting us to work only to the end of August (as that is what they have paid), and that they do not plan to honour the remaining notice period. In her words, the sale of the business was just the land and assets, and that does not include their contractual obligation to us.

I'm new to this side of things, but this does not seem right to me. Normally, I would just say "screw it" but we have dedicated staff for their site, who are on one month notice, so we would be financially out of pocket for 2 weeks of pay AND the profit from September as well.

Keen to know if this is something that I should fight, and who basically has the obligation to honour the other side of our contract - Company A, Company B or if I am up sh*t creek for the money.

In addition, the staff want to stay on under TUPE (which I am fine with), but I imagine that is also going to be an uphill battle - so the question with that is, can they get out of their obligations on that too??

Thanks

Edited by Wing Commander on Thursday 15th August 16:03

[Panamax]

You need to be sure what 2 months notice means - 2 months notice given at any time or 2 months to the end of a calendar month?

From what you wrote it sounds like there's two months notice running from 8 August so, on the face of things, expiring 8 October.

Company A is obliged to pay for the service until 8 October irrespective of whether they want the service and irrespective of whether,
a) Company A is now owned by company B, or
a) Company A has sold its business to company B.

Your so-called "privity of contract" is with company A. In reality you don't care who pays you so long as somebody does, but the person with the obligation to pay is company A.

[Wing Commander]

Thank you for the quick reply. Yes you're right - it's a rolling 2 month from whatever date, so the 8th October is the last day, in my opinion.

I presume that they cannot just say that Company A does not exist anymore, and Company B isn't who signed our contract. Therefore, we have no one to hold responsible?

It seems crazy/unreasonable to assume that both parties could walk away from the obligation??

[2 sMoKiN bArReLs]

With regard to the TUPE thing it can be tricky.

We had a very similar experience, so I discovered who was taking over a contract from us. I phoned the new contractor up and asked from what date did they want to take on our staff? They said they didn't as they were already staffed up.

I asked if they'd heard of TUPE, and they hadn't! I asked they look it up & call me back.

They did, and took over our staff (after some argy-bargy)

[Mr Overheads]

If Company A is now just a shell company with no money or assets then there is no one or nothing to chase for payment of the 2 months notice. Is it being wound up? Have you checked the status on Companies House website?

[Rough101]

You buy the business, you buy the contracts, that’s what due diligence is all about.

If the service is to continue as well, without you,TUPE definitely applies, if they are closing or changing the facility and don’t need these services from any provider then it doesn’t.

[Wing Commander]

Mr Overheads said:

If Company A is now just a shell company with no money or assets then there is no one or nothing to chase for payment of the 2 months notice. Is it being wound up? Have you checked the status on Companies House website?

Ive been to their website and put in their company number (from the website) into Companies House, and that shows up all of Company B details, including the names of the new owners

For all intents and purposes (from my layman's view), it looks like they have bought the whole company, including their obligations (I hope)

[Wing Commander]

Rough101 said:

You buy the business, you buy the contracts, that’s what due diligence is all about.

If the service is to continue as well, without you,TUPE definitely applies, if they are closing or changing the facility and don’t need these services from any provider then it doesn’t.

Yes, that is how I would see it too. They don't just get to buy the bits they like. It comes with contracts too.

If you mean the service we provide, yes, the nature of their business will require someone to carry on the cleaning. Its a public facing business (pub and restaurant), so will absolutely need a cleaning service. They are not closing or changing anything

[Rough101]

Wing Commander said:

Yes, that is how I would see it too. They don't just get to buy the bits they like. It comes with contracts too.

If you mean the service we provide, yes, the nature of their business will require someone to carry on the cleaning. Its a public facing business (pub and restaurant), so will absolutely need a cleaning service. They are not closing or changing anything

You seem to be in the right, but if they’re playing hardball, it might cost more pursuing it than it’s worth.

[Panamax]

Mr Overheads said:

If Company A is now just a shell company with no money or assets then there is no one or nothing to chase for payment of the 2 months notice. Is it being wound up? Have you checked the status on Companies House website?

Well yes, but it seems unlikely. A company can't just transfer out its good stuff, hang onto the bad stuff and then evaporate into thin air. The directors will have deliberately rendered their company insolvent in the process and exposed themselves to all manner of penalties. The new shareholder, company B, may well have made itself personally liable for the debts of company A for good measure if that's the case.

I suspect the new owner has simply told company A to get out of its contracts as cheaply as possible, so fight your corner.

The TUPE question needs detailed professional advice as it depends on all the circumstances and can be quite complicated.

[Wing Commander]

Rough101 said:

Wing Commander said:

Yes, that is how I would see it too. They don't just get to buy the bits they like. It comes with contracts too.

If you mean the service we provide, yes, the nature of their business will require someone to carry on the cleaning. Its a public facing business (pub and restaurant), so will absolutely need a cleaning service. They are not closing or changing anything

You seem to be in the right, but if they’re playing hardball, it might cost more pursuing it than it’s worth.

The only thing I have going for me at the moment, is that they pay upfront for the service. So they have already paid for August.

Is there any way I can leverage this to ensure payment for the rest of the notice period?

My hot headed side wants to invoice them now for the remainder of contract, and if they don't settle, we walk away now. The argument being that apparently we don't have anyone on the other side of our contract at the moment, as Company A does not exist and Company B apparently have not taken the contract on

[Wing Commander]

Panamax said:

Mr Overheads said:

If Company A is now just a shell company with no money or assets then there is no one or nothing to chase for payment of the 2 months notice. Is it being wound up? Have you checked the status on Companies House website?

Well yes, but it seems unlikely. A company can't just transfer out its good stuff, hang onto the bad stuff and then evaporate into thin air. The directors will have deliberately rendered their company insolvent in the process and exposed themselves to all manner of penalties. The new shareholder, company B, may well have made itself personally liable for the debts of company A for good measure if that's the case.

I suspect the new owner has simply told company A to get out of its contracts as cheaply as possible, so fight your corner.

The TUPE question needs detailed professional advice as it depends on all the circumstances and can be quite complicated.

Thanks, that aligns with my thinking and hope. I plan to fight this to a certain degree, but there is of course a limit to how much time and effort I want to sink into this, for the sake of a few £k. But I am stubborn, so there's that.

Thanks for your input - much appreciated

[Ean218]

Wing Commander said:

The only thing I have going for me at the moment, is that they pay upfront for the service. So they have already paid for August.

Is there any way I can leverage this to ensure payment for the rest of the notice period?

My hot headed side wants to invoice them now for the remainder of contract, and if they don't settle, we walk away now. The argument being that apparently we don't have anyone on the other side of our contract at the moment, as Company A does not exist and Company B apparently have not taken the contract on

You said you checked the company number, was it company A or company B. If it was company A's original number but the details came up with company B, then company A is still very much in existence. It has just changed its name, that does not give it carte blanche to repudiate its obligations.

[Wing Commander]

Ean218 said:

Wing Commander said:

The only thing I have going for me at the moment, is that they pay upfront for the service. So they have already paid for August.

Is there any way I can leverage this to ensure payment for the rest of the notice period?

My hot headed side wants to invoice them now for the remainder of contract, and if they don't settle, we walk away now. The argument being that apparently we don't have anyone on the other side of our contract at the moment, as Company A does not exist and Company B apparently have not taken the contract on

You said you checked the company number, was it company A or company B. If it was company A's original number but the details came up with company B, then company A is still very much in existence. It has just changed its name, that does not give it carte blanche to repudiate its obligations.

Yes, I have gone to Company A's website and made a note of their company number. When I input that number on Companies House, it gives the details of Company B

[Simir]

Contracts can often contain a Change of Ownership clause. This would describe what would happen in the event of a change of ownership and the conditions for the contract to be terminated (i.e. if company was acquired by a competitor subject to x notice period). If this clause does not exist in your contract then the customer can only rely on the termination rights that have been specified.

[Wing Commander]

Simir said:

Contracts can often contain a Change of Ownership clause. This would describe what would happen in the event of a change of ownership and the conditions for the contract to be terminated (i.e. if company was acquired by a competitor subject to x notice period). If this clause does not exist in your contract then the customer can only rely on the termination rights that have been specified.

Thanks Simir,

Irritatingly, our contract does not have any information about change of ownership in there.

I'm working up a plan today to try and resolve this issue. First stop will be the polite request for them to see reason, do the right thing etc. From there, I will have to look at other options on this - it's bugging me more than I thought it would.

[Vixpy1]

She's already acknowlaged the contract in her email, but saying they are givijng the required notice under it.

If they did not feel the contract was still in force, they would have just terminated you,

They need to honour the terms of it

[jonsp]

Presumably B already have their own cleaning crew so don't want to pay twice for the same thing. But that's not your problem.

Given it seems you're in the right legally - and no doubt B realise you are - would you settle for some % of September's fee then pull your boys out end of August and pay them up? Obviously you'd have to work out what % is suitable - maybe 75%?

[Wing Commander]

jonsp said:

Presumably B already have their own cleaning crew so don't want to pay twice for the same thing. But that's not your problem.

Given it seems you're in the right legally - and no doubt B realise you are - would you settle for some % of September's fee then pull your boys out end of August and pay them up? Obviously you'd have to work out what % is suitable - maybe 75%?

Thanks Jon, yes this is my fall back. Essentially, I am happy to finish early, so long as I have the required financial insentive to cover our staffing bill, plus a bit

Thanks for your help

[Wing Commander]

Vixpy1 said:

She's already acknowlaged the contract in her email, but saying they are givijng the required notice under it.

If they did not feel the contract was still in force, they would have just terminated you,

They need to honour the terms of it

Indeed, that is exactly how I see it - I just didn't know if I was missing some finer detail that was just going to trip me up. Thankfully, it seems like its just a case of "it is what it looks like" and common sense should apply. Time to see if they have any...

Thanks for your input - appreciated!