What insolvency practitioners need to know about sponsor licences

Insolvency practitioners dealing with sponsor licence-holders need to be aware of their responsibilities to the Home Office when being appointed administrators.

What is a sponsor licence?

A sponsor licence is a licence issued by the Home Office, which authorises a company to offer visa sponsorship to its foreign-national workforce.

A sponsor licence should be considered an item of value to the business and something that the administrator or receiver should take steps to protect. In terms of protecting the licence, the onus is on the administrator to make sure that it is complying with sponsor licence duties.

What are the duties placed on sponsor licence holders?

Sponsor duties are set out in a sponsor guidance document published by the Home Office here. Broadly speaking, sponsor licence holders’ duties fall into four categories. They must:

comply with the law (this includes, for example, complying with minimum wage regulations);
cooperate with the Home Office;
keep records in respect of their sponsored workers (these include a duty to keep a complete address history, record every change in contact details, and keep evidence of their recruitment process); and
report changes to the Home Office in respect of both the migrant worker and the organisation.

Failure to comply with any one duty can result in revocation of the sponsor licence, which will result in any sponsored workers (and their dependent family members) losing their right to live and work in the UK. It is therefore imperative that employers comply with all their duties.

While the HR team within a sponsoring company might be aware of the licence and their duties, there are specific duties that only apply when a company enters into administration or receivership that are much less well known.

What happens to a licence when a company enters administration or receivership?

Ordinarily when “control” of a sponsor licence changes, a new licence is required. There is, however, an exception for administrators.

This exception allows administrators to take control of a company and retain the sponsor licence, however, the appointment of the administrator or receiver must be reported to the Home Office within 20 working days.

If the company enters into a Company Voluntary Arrangement (CVA) or Debt Arrangement Scheme (DAS) which results in a change in ownership, that change must also be reported.

Failure to report these changes would breach the sponsor’s duties and could result in the Home Office revoking the licence.

Identify key personnel

It is good practice to identify which individuals in the business are responsible for managing the sponsor licence.

Specifically, the administrator or receiver should find out who the ‘authorising officer’ is on the licence. The authorising officer has overall control of the licence. Failure to have an authorising officer in place is a breach of sponsor duties and can be the grounds for the Home Office revoking a licence. Once a company enters administration, the Home Office requires the insolvency professional appointed as administrator or receiver to act as the company’s authorising officer, replacing the existing authorising officer.

Another key role in the sponsorship scheme is the ‘level 1 user’ (this person might also be the authorising officer, or another member of staff). The level 1 user is essential to the day-to-day use and running of the sponsor licence. If no level 1 user is in place, then this is also a breach of a sponsor’s duties.

The administrator or receiver can choose whether they are content for existing level 1 users to remain in that role, or whether they would prefer to replace them by appointing themselves as the level 1 user. If the latter, they will need to contact the Home Office to explain the circumstances and request appointment.

Identify sponsored workers

When a company enters administration, it can be a turbulent time for employees, especially any sponsored workers. Their anxiety at losing their job will be amplified with an anxiety about losing permission to reside in the UK. It’s important to quickly take stock of all currently sponsored workers, communicate with them as clearly as possible, and check for any impending visa expiry dates.

What happens at the end of the administration?

If a company goes into voluntary or compulsory liquidation, or ceases trading, the Home Office wants to be notified within 20 working days. They will then revoke the licence.

If matters progress well and the company leaves administration with a joint agreement, and the owner regains control, the only action that needs to be taken is that the company needs to report back to the Home Office that it is no longer in administration.

In the more likely event that the company is sold and there is a change in control, the sponsor licence will be revoked and a new sponsor licence must be acquired. A new licence application must be submitted within 20 days of the transaction completing to protect the right to work of any sponsored international staff. This tight timeline can be a challenge, but where the purchaser and the HR team are aware of the timescales, steps can be taken in advance to ensure that the required evidence is prepared in good time before the application deadline.

Getting things right ahead of time can be important in not only avoiding unnecessary administrative procedure, but also in maintaining the value of any business.

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