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The transfer
of undertakings

When the owner of a business changes, it is called a transfer of undertakings. This means that the acquirer of the business also becomes the new employer to current staff. In order to prevent any formal errors from occurring during the transfer, our firm will advise you using our expert knowledge and expertise. We have compiled the most important information on this topic for you.

Things to consider when dealing with employees

According to the law, employees should be protected from termination during a transfer of undertakings. As an employer it is your responsibility to inform your staff, because the one month objection period will only commence upon notification of your workforce. Furthermore it is imperative, that you strictly follow the procedure for creating a balance of interests as well as a social plan. Also, employers can only terminate as part of a compulsory redundancy.

Why the operational concept is so important to you

When a business is sold, the concerned parties may choose between various contractual items and contract structures. Legal consequences only occur, when the acquirer continues business operations in adherence to the former business identity. You need to be vigilant: When it comes to the question of whether or not a transfer of undertakings has taken place, it depends largely on the business concept. For example if non-monetary resources or workforce are mistakenly perceived as insignificant, a statutory transfer of undertakings will occur as an unwanted side effect.

What happens to operating agreements and collective agreements?

As acquirer you will enter the legal status of the former employer. Operating and collective agreements transform into individual employment contracts. These contracts are then subject to a one year development freeze. Caution: There are many interdependencies between regulations of employment contracts and collective agreements, as well as statutory regulations. The exact clause of contractual content should be written by a professional, ideally by a specialist in labor law. We are happy to help you in this regard.

How to handle a several debtor compensation

During the first year as acquirer you are held liable, together with the transferor, as joint debtor for pre-existing commitments; Meaning liabilities, which arose prior to the business transfer, but will be due afterwards (for example annual special payments). During this time you have to expect a several debtor compensation. The share of compensation is determined by the type and timing of the respective liability. Our advice: You can make deviating agreements in the takeover agreement. We are happy to advise you extensively in this regard.

The legal consequences of a transfer of undertakings are complex. Have someone thoroughly check the prerequisites in every case. The choice of appropriate contract structures can already significantly affect the future operating situation. Place your trust in prudent contract design – your specialist lawyer in the field of labor law will best be able to advise you, using the specific knowledge of all the peculiarities and pitfalls that arise in a transfer of undertakings. We are here for you if you have additional questions and will moreover help you to ensure a legally sound and successful transfer of operations.

You have further questions regarding business transfers? You require expert advice on contract drafting?

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