Philippine Company Being Sold: What Happens to the Employees and Their Work Visas

Step one: is it a share sale or an asset sale?

Everything that follows depends on this single question. In a share sale the owners transfer their shares to the buyer. The corporation itself does not change: its name, tax registration, permits and social security employer number all stay the same, so legally the employees still have the same employer. In an asset sale the company sells its premises, equipment, stock, customer contracts or brand to a different company. The employees remain employed by the old company, while the buyer is a separate legal person with no automatic connection to them.

Many small deals mix the two. The shares change hands while some assets are carved out, or the buyer sets up a new company to run the business. In a mixed deal you have to read the transaction documents role by role to see which entity each person will actually work for. The most common owner mistake is a deal document with no employee clause at all, which leaves nobody willing to pay separation or years of unpaid benefits after closing. The mechanics and tax treatment of transferring shares are covered in buying out a partner's shares.

For employees the quickest test is three questions. After closing, which company pays my salary? Will the employer registration for social security and health insurance change? Will the employer name on my contract change? If all three answers are no, it is almost certainly a share deal. If any answer is yes, prepare as if it is an asset deal, and ask HR for a written explanation you can rely on later.

Share sale: employment continues, but that is not the end of it

In a share sale the employment relationship generally carries on, years of service keep counting and the existing terms do not change just because the shareholders did. A new owner cannot unilaterally cut pay, remove benefits or force everyone onto worse contracts on the basis that he is now in charge; any change still needs agreement or the proper legal process. Equally, employees do not acquire a right to separation pay simply because the shares were sold.

Continuity does not mean nothing needs doing. The buyer takes on the whole company, including unremitted social contributions, unpaid overtime and unconverted leave, so these liabilities belong in the due diligence. Changes to the company name, address, directors or major shareholders may need to be reported to the labour, tax and immigration authorities, and foreign employees' documents in particular should be checked. If the new owner later wants to reduce headcount, that is a separate redundancy decision that still needs a lawful ground and procedure; a change of ownership is not itself a reason.

Employees should use the transition period to keep copies of their contract, payslips and contribution records. Internal systems are often replaced around closing, and once old records disappear it becomes much harder to prove length of service or claim what is owed.

A practical step for both sides is a short written notice to staff after closing, confirming that the employer entity is unchanged, that service continues and that existing terms remain in force. It costs nothing, settles rumours quickly and gives employees something concrete to keep. If the buyer intends to change any policy, it is far better to announce that separately and through the proper process than to bundle it into the ownership news.

Asset sale: the buyer generally owes nothing, so the seller must settle first

When assets or a whole business are sold, the common understanding is that the buyer has no legal duty to take on the existing staff unless the deal says so. The seller stopping that part of its business because of the sale is a form of termination, which requires advance written notice to the employees and the labour authority and payment of the applicable separation benefits and full final pay. Use the current rules from the labour authority for how these are calculated and how much notice is needed rather than relying on memory.

Three arrangements are common. The buyer takes everyone and recognises their prior service; the buyer picks some people and the seller separates the rest; or the seller terminates everyone and the buyer recruits on new terms. The second and third generate the most disputes, because employees will ask whether the sale was arranged to avoid obligations. Whether a sale was made in good faith usually turns on the documents, the timeline and whether the business genuinely changed hands.

Owners should avoid one trap in particular: letting staff simply turn up at the new company on closing day with neither a final settlement from the old employer nor a new contract from the new one. Employees can then pursue both companies, and liability becomes very hard to untangle. When final pay is still unsettled after a closure, see unsettled final pay complaints.

If the buyer does want to take people on, put it in writing before closing: which positions, from what date, whether prior service is recognised and how leave balances are treated. Employees who are offered a place should compare the new terms with their old ones line by line before accepting.

Foreign employees: permits follow the employer, so a new employer means new papers

A foreign employee's work permit and work visa are issued on the petition of a specific employer, and the holder may only work for that company. In a share sale where the employer stays the same, status can usually continue, but changes to name, address or major shareholders should be checked for any reporting duty to the labour department and immigration; see company changes and the 9G.

Where staff move to the buyer in an asset sale, they are changing employer. The old employer's permit and visa have to be dealt with according to the rules, and the buyer must apply again in its own name. Whether the person may keep working during the gap is for the labour department and immigration to say under current practice; do not assume you can start first and fix the paperwork later. When a former employer refuses to cancel a permit and the new application stalls, see former employer will not cancel the AEP.

Foreign employees should ask early and in writing: who will handle my status after closing, how will the gap be managed, and if the buyer does not take me, will the old company assist with downgrading or departure formalities? A written answer is worth far more than a verbal reassurance.

Owners should also remember that a foreign employee who is simply let go during a sale may need help to leave or change status lawfully. Building that into the transaction timetable avoids a former employee becoming an overstayer because nobody took responsibility for the paperwork.

If you are an employee: secure your records, then find out which group you are in

The first thing to do when you hear the company is being sold is not to resign but to keep the documents that prove your entitlements: your contract and salary adjustment notices, recent payslips, social security and health insurance contribution records, attendance and overtime records, and confirmation of unused leave. Old accounts are often shut down at handover, and afterwards these are much harder to obtain.

Next, find out which group you fall into: being taken on by the buyer, being terminated by the seller, or still undecided. If you are being taken on, check that the new contract recognises your prior service and that your position and pay are not reduced. If you are being terminated, check for written notice, the separation benefit and the timing of final pay. Be careful with anything you are asked to sign quickly, especially a quitclaim waiving all claims; read it fully and get advice if needed.

Finally, keep a record of what changes after closing. If you are pushed onto a clearly worse contract, transferred for no reason or stop being paid, keep the written exchanges and consider labour mediation. How an employee can respond to a demotion or pay cut is covered in demoted or pay cut as an employee.

If you are unsure what a document means, ask for time to read it and for a copy to take away. A reasonable employer will not object, and a refusal is itself useful information. Keep a short dated note of every meeting about the sale, including who said what about your future, because these details are easily forgotten by the time a dispute starts.

A checklist for owners, and how YIXING can help

Before signing, sellers and buyers should spell out which employees the buyer will take, whether prior service is recognised, who bears termination and separation costs for those not taken, who covers historic contribution and benefit liabilities, who handles foreign employees' status and when, and who pays wages around closing. Anything left vague becomes the next dispute.

Before closing, build a status table for every employee: name, role, destination, contract treatment, who pays any separation, and the timeline for foreign staff status. The table usually reveals a group of roles nobody had planned for. Closing just one branch while the company continues is a different situation, covered in closing one branch.

YIXING Travel Consultancy (SEC registration CS202009551, Bureau of Immigration accredited agent CA-202624381-1) can help both sides map the work permit and visa steps for foreign staff, handle new applications after a change of employer or downgrading and departure, and prepare the employee status table for your lawyer and accountant to review; see our visa and HR services. Deal structure, separation amounts and labour disputes are legal questions for a licensed lawyer, and we promise no outcome. For individual cases, consult a licensed lawyer; this article is not legal advice.

It also helps to agree a single message to staff. Mixed signals from the seller and the buyer during a sale cause more resignations and complaints than the sale itself. Decide who will speak to employees, what will be said and when, and make sure foreign employees receive the same information in a form they can keep.