02 April 2024

Transfer of Bankrupt Undertaking Act

In the event of transfer of undertaking employees are transferred to the transferee by operation of law under the same terms of employment. An exception applies in the case of bankruptcy: in case of a continuation after bankruptcy, employees do not automatically transfer. The transferee may choose which employees it wishes to offer an employment agreement and under which conditions. This exception can also apply if a continuation after bankruptcy is prepared (far) in advance, provided there is a legal basis for such a ‘pre-pack’. Such a legal basis does not currently exist in the Netherlands. 

The Continuity of Enterprises Act, containing a legal basis for the pre-pack, already passed in the House of Representatives in 2016, but it has not entered into force yet in anticipation of the Transfer of Bankrupt Undertaking Act. This act has now been published and has entered into the public consultation phase. Dutch law may therefore soon provide a full regulation of the transfer of employees through pre-packs. 

The Transfer of Bankrupt Undertaking Act dictates that  the transferee  must, in the event of a continuation after bankrupty, offer all dismissed employees an employment contract with unchanged terms of employment. However, certain terms and conditions of employment may change if necessary to maintain employment availability. In any case, existing non-competition clauses will be null and void. If a loss of jobs is foreseen within 26 weeks after the continuation – a regular occurrence in takeovers – the transferee only has to make an offer for available positions, with selection by means of the opposite of the reflection principle (Afspiegelingsbeginsel). Finally, the works council will be given advisory rights on this course of action.  

For smaller undertakings (below 20 employees), the new rules shall – for now –  be optional . 

How can La Gro be of assistance? 

Are you thinking about selling your business? Are you facing a bankruptcy? Do you have any other questions? Expertise in 18 legal fields enables La Gro to offer broad legal assistance. Feel free to contact me or one of my specialist colleagues.

Author
G.B.M. (Gerard) Zuidgeest

Attorney at Law & Partner

Call: +31 172 530 250