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Don't forget the due
diligence Informed and well resourced companies are using the present economic environment to invest in new opportunities, some of which include acquiring existing businesses. Sensible business people will ensure that in these cases some form of due diligence process is conducted prior to purchase so that liabilities and risks are identified and considered as part of negotiations. Compliance with immigration requirements is sometimes overlooked in these situations, with potentially serious implications for the new business owner. When a business is purchased decisions are taken about whether the legal entity will continue to trade in its own right or its operations will be merged within a separate legal entity. If the former, it may be that the brand name will change at some point while other features of the business will remain largely unchanged. The question of visa holders arises because when people are sponsored to Australia holding subclass 457 visas, they are permitted only to work for the entity that sponsored their visa. If the visa holder is employed by a new entity without appropriate steps being taken through the Department of Immigration & Citizenship, potentially significant breaches of immigration law could take place, which could involve criminal offences. A change in ownership of a business does not affect the existing sponsorship approval and sponsored 457 employees are able to continue to be employed by that sponsor, provided that they remain in the same roles. It is prudent (and after September 2009, following significant changes to the legislative regime that will affect all existing sponsors, compulsory) to notify the Department of Immigration and Citizenship (DIAC) of a change in ownership of a sponsoring entity. A significant change to the job role or a reduction in salary as a consequence of the transition may be events that would trigger the making of a fresh visa application and should be discussed with an immigration advisor. A change in ownership will not necessarily mean that any fresh paperwork needs to be lodged with immigration authorities. But it can mean that the new owners are exposed to liabilities that arose under the previous owners' sponsorship undertakings. For example, Company A which includes a substantial population of 457 visa holders, is purchased by Company B and A continues to trade as a wholly owned subsidiary of Company B. Following the purchase, Company A is monitored by DIAC (as it has power to do) and it is discovered that whilst trading under the previous owners, its 457 visa population was paid substantially under the minimum salary level prescribed by legislation. The new owners would be required to make restitution to the underpaid employees (which could amount to a significant sum) and could face administrative sanctions that could remove its right to sponsor future 457 visa holders or employees under the employer nomination scheme. It is also important to check whether the visa holders are actually working in the positions for which they were nominated. If they are working in lesser skilled roles this could result in an administrative sanction and/or an inability to re-sponsor that person. These sorts of problems can be avoided if a professional visa audit is conducted as part of the pre-purchase due diligence process, thus alerting both the seller and the purchaser of any immigration compliance issues that need to be addressed in the terms of sale. In principle, this is no different to checking for any tax or employment law problems that could arise. In the event that the business is purchased but the legal entity is not, then immigration legislation requires fresh paperwork. Although workplace law may regard such an arrangement as a continuation of employment with the associated preservation of rights and entitlements accumulated under the old employer, DIAC regards such a transaction as a change in employer. As this is not permitted under the work limitation imposed on the 457 visa the new employer must seek sponsorship status, approval for each position and the each 457 visa holder must apply for a fresh 457 visa. Significant problems can arise if the fresh visa application is not initiated in a timely way. The visa holder will be inadvertently in breach of the work limitation imposed on their visa and the sponsor may be committing a criminal office by recklessly employing a person without the correct permission. Whilst it is difficult to time exactly the grant of the new 457 visa with the purchase of the business (particularly so if negotiations have been conducted under a veil of secrecy) DIAC is generally accommodating of the needs of business in these circumstances. As the liability under the sponsorship obligations remains with the old sponsoring entity, then the purchaser does not need to be concerned with whether or not these obligations were met. However, if the old sponsoring entity is wound up then this means that the visa holders would not have the ability to recover any underpayments of other financial obligations that arose with respect to their previous employment. A change in the employing entity can also cause problems for a 457 visa holder that wishes to obtain permanent residence on the basis of the employer nomination scheme. Although there are three possible pathways to this visa, the most common is for the employee to have worked for at least two years in Australia as the holder of a 457 visa with the last of these with the nominating employer. As there is a new employer, the visa holder must then be employed for at least 12 months before qualifying on this ground. Although the majority of problems arise with respect to 457 visa holders, it is worth noting that DIAC adopts a different approach to the case of working holiday-makers who are restricted to working with any one employer for six months. According to the policy on this particular visa condition, if the technical employer changes, but the work place or tasks do not then this is regarded as the same employer and a breach will occur if the work continues beyond six months. The working holiday-makers constitute a growing source of labour in our economy and they are being supplemented by other visa holders with the right to work. Over the last four years the number of student visa holders, working holiday makers and other temporary residents has swelled to well over 500,000. Unlike 457 visa holders there are no sponsorship obligations for employers but there may be conditions attached to their visas that would limit the length of time they can remain with one employer or the number of hours they may be able to work each week. Employment of a temporary resident in breach of a work limitation imposed on their visa can expose the business to criminal penalties. It is essential to keep adequate records of a businesses total foreign workforce, not just the 457 population. If a business is purchased it is highly likely that many new employers do not consider the visa status of their employees and examine their right to work. Any breaches of immigration law (particularly in employing people in breach of visa conditions) are potentially important in themselves but any breach along these lines can compromise a business's ability to qualify to sponsor employees on 457 visas - the skilled people their business may really need. Immigration compliance is another regulatory challenge facing business- people looking to make the most of a new opportunity. Failure to identify and deal with that challenge is becoming riskier business. About the
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