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Summary and Opinion

Selling a business? Remember to manage employee issues

Vince Rogers and James Johnston

Governance Directions, August 2015


This article gives an overview of the risks that the management possesses during the time

of its acquisition. There are also numerous steps and strategies suggested by the authors to

minimize the risks. It is shown that the different types of acquisition poses various types of

problems. For example, in an acquisition by share sale, the business employees are employed by

another entity, there is a need for transfer of the affected employees. On the other hand, the

acquisition by asset sale causes the problem because the new owner may need to terminate the

employees of the former business. Currently, there is no law ascertaining that there would be an

automatic transfer of the employees from the vendor to the purchaser in Australia. The position

of the contractors most especially in labor-only contracts was also discussed and it was suggested

that it must be dealt in the same way that businesses are dealt. Various disadvantages and risks

of transferring the assets or the ownership of an independent contractor for the employees, the

vendor, and the purchasers. In addition to this, it is cited that a vendor have an obligation to

consult with its workforce about the proposed business sale. This obligation may arise from the

employment contract or on the enterprise agreement and may cover the topics of termination of

the employees. It was further cited that the failure of the company to consult, or to consult

meaningfully and effectively may result in a lawsuit against the vendor. The article also

discussed the problems which may arise such as genuine redundancies and redeployment which

leads to unfair dismissal. All of the discussions are based on statutes or laws particularly the Fair

Work Act and the long list of precedent setting court decisions. Overall, the article provides legal

advice to the businesses employing multiple employees about the existence of a potential

problem that could hurt them legally. This is due to the fact that the sale or acquisition of the

business is not a process limited only to the transfer of ownership but of the employees as well.

There is nothing to argue about the article because all of its contents are based on law.

The interpretations and the inferences made by the author are purely legally based and were

derived from past experiences and case studies which showed the problems that may arise from

the transfer of ownership and management of business. Following the legal provisions of the

statutes and the court decisions will help the businesses minimize conflict that may arise. More

importantly, the companies have duties and responsibilities that must be complied with based on

justice and equity although it is not necessarily imposed by the laws. This article contains

minimal inferences and personal opinions of the author. This is due to the fact that it is highly

based on the legal provisions and therefore, the role of the author is limited to interpreting and

discussing it.

I think that the article is very helpful for businessmen because of the fact that most of

them disregard this issue. Business owners who are trying to sell their businesses only think of

getting rid of the company and accepting the purchase price from the buyers. However, business

nowadays are considered to be simulating a living organization composed of numerous

interdependent parts. A business organization is considered to be a living organism because of

their employees. As a result, majority of the problems may arise and be resolved through the

effective management of the human resources.

The ineffective handling of the transfer of the business ownerships to another

entrepreneur may lead to the frustrations by the employees. I agree with the suggestion of the

author of the article that the vendors must inform the employees of the conditions between him

and the buyer so that they will have knowledge of what to expect. This would minimize the

probability of the problems arising from miscommunication of future business conditions.