An asset deal directly affects employees because employment contracts do not automatically transfer to the new owner. Unlike a share deal, where the company is acquired as a whole, in an asset deal the acquirer only buys specific business units. This means that employees remain legally employed by the selling party unless explicitly agreed otherwise. The consequences range from retention of current employment conditions to possible termination of employment contracts.
What is an asset deal and how is it different from other acquisitions?
In an asset deal, the acquirer buys specific business units such as machinery, inventory, customer bases or real estate, but not the legal entity itself. The selling company continues to exist as a legal entity. This differs fundamentally from a share deal, in which shares in the company are transferred and the legal entity including all liabilities passes to the new owner.
The distinction is crucial for employees because in a share deal, all employment contracts automatically go with the new owner. In an asset deal, this does not happen automatically. The employment contracts legally remain with the original employer, even if the business activities are carried out by the acquirer.
This structure is often chosen to leave specific liabilities or risks with the seller. For M&A-transactions means that buyers can be selective in what they acquire, but this creates complexity for the employee position.
Do employment contracts automatically transfer on an asset deal?
Employment contracts go not automatically over in an asset deal. This is the fundamental difference from a share deal or transfer of undertaking. Employees remain legally employed by the selling party, even though their work may be continued by the buying party.
However, there can be a transfer of undertaking if three criteria are met: transfer of an economic entity, preservation of identity of that entity, and continuation of activities. The so-called Spijkers criteria determine whether there is retention of identity. In the case of service provision, personnel acquisition is often decisive for this assessment.
When a transfer of undertaking does occur, all rights and obligations under employment contracts pass to the acquiring employer by operation of law. This happens without the consent of the employees and is mandatory. All employment conditions, accrued years of service and seniority rights then remain unchanged.
What rights do employees retain during an asset deal?
Employees retain all their existing contractual rights towards the original employer during an asset deal. This includes salary, working hours, positions, fringe benefits and pension schemes. Accrued but unused holidays and seniority rights for periodicity remain fully respected.
Collective bargaining agreements continue to apply. About eighty per cent of the Dutch workforce is covered by a collective agreement with specific provisions in the case of mergers and acquisitions. These collective agreements can grant additional works council rights and set minimum levels for severance payments higher than the statutory transitional compensation.
Upon actual transfer of undertaking, collective agreement provisions remain in force for one year with the transferee. Individual terms and conditions of employment that are more favourable than any new CAO will continue to apply by virtue of the favourability principle. Accrued years of service are fully taken into account for calculation of notice periods and transition compensation.
What happens to employees who are not taken over?
Employees who are not acquired remain employed by the selling party, but their positions may be eliminated by the asset deal. The employer must then follow normal dismissal procedures and has a redeployment obligation within the remaining organisation. If redeployment is not possible, dismissal for economic reasons may follow.
Upon dismissal, employees are entitled to the statutory transitional compensation, which is calculated based on years of service and salary. However, many collective agreements prescribe higher minimum compensation. A compulsory social plan may be prescribed with additional provisions for affected employees.
The works council has advisory rights for decisions that have a significant impact on employees. Specific consultation processes can be prescribed for reorganisations, where timeline requirements can be stricter than minimum legal requirements. Employers should identify all applicable collective agreements and analyse the impact during the process.
How long will the process take and when will employees be informed?
On average, an asset deal takes three to six months from first contact to completion. Employees are informed as soon as concrete plans exist that may affect their position. The obligation to inform often starts during the due diligence phase, when employment law aspects are investigated.
The works council must be consulted in good time on decisions with a significant impact on employees. This advisory right must be exercised before final decisions are taken. Collective agreements may prescribe specific consultation processes with their own timelines and procedures.
Key milestones include: announcement of exploratory talks, start of due diligence, final purchase agreement, and actual transfer. There are usually several months between announcement and transfer in which clarity on the consequences for individual employees will emerge. Transparent communication during this process is essential for maintaining trust and continuity.
Can employees stop or influence an asset deal?
Employees can make an asset deal do not directly hold back, but do have influence through the works council and collective proceedings. The works council has advisory rights on major decisions and can object to plans that do not sufficiently take employee interests into account. This advisory right has suspensive effect until a final position is adopted.
Trade unions can negotiate social plans and additional protection for workers. In case of disputes, they can use mediation or arbitration. Individual workers can object to their specific treatment, but not to the transaction itself.
The Enterprise Chamber can be called in for serious conflicts of interest between management and employees. However, this happens rarely and only in cases of gross violation of procedures. In practical terms, its influence lies mainly in enforcing correct procedures, adequate information and reasonable social plans. Professional guidance during complex transactions helps safeguard employee rights and achieve optimal outcomes for all involved. For strategic advice on such processes, you can contact with us.
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