Employee Transfer in Dutch Asset Deals
In Dutch M&A transactions, asset deals are often used where the buyer only wants to acquire selected assets, contracts or business activities instead of acquiring the shares in the company itself. However, buyers and sellers sometimes underestimate the employment law consequences of an asset transaction.
Under Dutch law, employees may transfer automatically to the buyer if the transaction qualifies as a transfer of undertaking. This can significantly affect transaction structure, integration planning and post-closing liabilities.
For earlier articles in this series, see M&A Insights: Dutch Deal Practice for Buyers, Sellers and Investors.
Transfer of undertaking under Dutch law
Dutch transfer of undertaking rules are based on European legislation and are implemented in the Dutch Civil Code. If an economic entity transfers while retaining its identity, employees assigned to that business activity may transfer automatically by operation of law.
This means that the buyer generally takes over the employees together with their existing employment rights and obligations. The transfer does not require employee consent.
Whether a transfer of undertaking exists depends on the factual circumstances of the transaction. Relevant factors may include the nature of the business, transfer of personnel, customers, contracts, goodwill, assets and continuation of activities after closing.
Consequences for buyers and sellers
If the transfer rules apply, the buyer generally assumes the employment relationships connected to the transferred business. Existing employment terms and conditions continue after closing.
This may affect salary arrangements, bonus rights, pension obligations, holiday entitlements, restrictive covenants and collective labour arrangements.
From an M&A perspective, this means that employment issues should be analysed carefully during due diligence and transaction structuring. The buyer cannot simply select only the employees it wants to take over if the transfer rules apply.
Information and consultation obligations
Dutch law may require employees, works councils or employee representative bodies to be informed or consulted before completion of the transaction.
The exact obligations depend on the structure of the business, the number of employees and whether a works council exists. Failure to follow the required process can create legal and operational complications.
Timing is therefore important. Employment law planning should be aligned with the transaction timetable and signing process.
Practical deal considerations
Employee transfer issues often affect the negotiation of the asset purchase agreement. The parties may need to address employee allocation, ongoing liabilities, transitional arrangements, indemnities and cooperation obligations after completion.
In cross-border transactions, additional complexity may arise where employees work across multiple jurisdictions or where group structures are integrated internationally.
For related transaction structuring issues, see Buying a Dutch Company: Share Deal or Asset Deal? and Warranty Claims in Dutch M&A.
Practical takeaway
Employee transfer rules are one of the most important legal aspects of Dutch asset deals. If a transaction qualifies as a transfer of undertaking, employees may transfer automatically together with their employment rights and protections.
The key issues are transaction structure, allocation of employees, due diligence, information obligations and post-closing integration planning.
About Dirk de Waard
Dirk de Waard is a Dutch corporate and M&A lawyer focusing on mid-market and cross-border transactions. He advises buyers, sellers, investors and management teams on Dutch acquisitions, transaction structuring and post-closing implementation.
Questions about Dutch asset deals or employee transfer issues in M&A transactions? Send an email to dirk.dewaard@viottalaw.com.
