Company takeover with or without staff

Company takeover staff The staff of the target company are often the focus of attention during a company takeover or merger. The selling party often wants the best for its staff. Unfortunately, a potential purchaser will have other interests and, consequently, a different point of departure. After all, the goal of a merger or company takeover is often to achieve synergy benefits. This synergy can be created through growth in turnover and/or cost reduction. It is quite often the case after a merger or takeover that there are too many staff in certain departments/positions within the business as a whole. For a purchaser, it may therefore be advantageous, during a company takeover, to leave the staff behind with the seller. The question is whether this is legally permitted? What is, and is not, allowed?

Share transaction versus assets-liabilities transaction

During a company takeover a distinction can be made between a share transaction and an assets-liabilities transaction. This distinction also has consequences for the legislation relating to staff.

Share transaction:

The legal entity (the company) is taken over in its entirety. The staff is employed by the company and therefore remain so after the company takeover. In this situation nothing changes as regards the position of the staff.

Assets-liabilities transaction:

Some of the business's activities are transferred. The seller continues to be shareholder of the legal entity that employs the staff. In this instance, are the staff an element of the takeover? Yes, in the event of a business being transferred, the rights and obligations which result at that point of time from the employment contracts with staff transfer to the party that acquires the business. A business is transferred in the event of a transfer, as a consequence of an agreement, merger or division, of an economic unit which retains its identity. This is almost always the case in a company takeover.

Legislation staff in company takeover

The staff therefore continue to be employed after the company takeover. In addition, the terms and conditions of employment which apply at the time of the company takeover will remain in force. After the company takeover the staff will retain their salaries and all other agreements such as overtime payments, travelling allowances, bonuses, profit-sharing and claims to accrued leave. The fact that these agreements may differ from the agreements made with the employees of the purchasing party, does not change anything.

Alternative possibilities

Staff are therefore well protected by the legislation in situation of a company takeover. Does this mean that a potential purchaser does not have any possibility of reducing the workforce in order to achieve the intended synergy benefits? No, there are, of course, possibilities for doing so.

The potential purchaser can make specific agreements with the seller about the takeover of staff. If some of the staff are not included in the company takeover, the current employer can try to make an arrangement with the employee(s). This will always require a tailor-made approach and this is therefore important that the parties seek assistance from a specialised employment lawyer.

Do you have any questions about a company takeover with regard to staff? Sophista would be only too pleased to help! You can contact us via +31 (0)72-540 80 10 or ask the question directly by filling in the form.

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