Works Council Consultation and the Dutch Merger Code in Dutch Acquisitions

How employee consultation can affect signing, closing and deal certainty in the Netherlands

International buyers often understand the financial and legal sequence of a Dutch acquisition: NDA, LOI, due diligence, SPA, signing, conditions precedent, notarial preparation and closing.

But employee consultation can materially affect that timeline.

In Dutch transactions, works council consultation may be required for certain important proposed decisions. In addition, the Dutch Merger Code may require timely information to trade unions in qualifying merger situations. These processes can affect when a deal can be signed, when it can close and how the SPA should allocate process risk.

For international buyers, this is often unfamiliar. In some jurisdictions, employee consultation is mainly a post-signing integration issue. In the Netherlands, works council advice and trade union notification may need to be considered before final implementation of the transaction.

This article is part of M&A Insights: Dutch Deal Practice for Buyers, Sellers and Investors and Buying a Dutch Company: Practical Insights for International Buyers.

Works council consultation is broader than employee transfer

International buyers often associate employee issues with asset deals and automatic transfer of employees. That is only part of the picture.

Works council consultation may also be relevant in share deals, group restructurings, carve-outs, business unit sales, changes of control, major investments, acquisition financing, changes to the organization or post-closing integration plans.

The key question is not only whether employees transfer by operation of law. The question is whether the proposed decision is significant for the Dutch business, its employees, its organization or its future.

That is why works council analysis should be part of deal planning, not a late employment-law check.

When can works council advice be required?

A Dutch works council may have advisory rights in relation to important proposed decisions, including transfers of control, acquisitions or disposals of control, durable cooperation with another enterprise, important changes in the organization, major investments, significant financing decisions and certain restructurings.

In an M&A context, this can include a sale of the company, acquisition of another company, carve-out, integration, closure, relocation or transaction financing structure.

The factual analysis matters. Not every transaction triggers the same process. But where a Dutch target has a works council, international buyers and sellers should identify early whether advice is required and what information must be provided.

The timing is critical. Advice should be requested at a stage where it can still have meaningful influence. If the commercial deal is already irreversible, the process may be vulnerable.

Signing versus closing

One of the most important drafting questions is whether works council consultation must be completed before signing or can take place between signing and closing.

There is no single transaction answer. It depends on the transaction structure, confidentiality concerns, market sensitivity, employee impact, buyer plans and how much flexibility remains.

In some Dutch deals, consultation is completed before signing. In others, the SPA is signed subject to a condition precedent requiring completion of the works council process before closing.

If consultation occurs between signing and closing, the SPA must be drafted carefully. It should include cooperation covenants, information obligations, restrictions on implementation, long-stop date mechanics, closing conditions and rules for what happens if the process takes longer than expected or leads to changes.

For related transaction mechanics, see Conditions Precedent in Dutch M&A Deals and Signing and Closing in Dutch M&A Transactions.

What information must be shared?

The works council must receive sufficient information to give meaningful advice.

In an acquisition, this may include the nature of the transaction, reasons for the deal, information about the buyer, financing structure, expected consequences for employees, organizational changes, future strategy, locations, management, integration and any proposed measures.

For buyers, this can be sensitive. They may not want to share detailed financing materials, integration plans, post-closing strategy or commercially sensitive information too early.

For sellers, confidentiality may also be important. Premature disclosure may create market, customer, employee or competitor risk.

The solution is not to ignore consultation. The solution is to plan information sharing carefully, use confidentiality arrangements where appropriate and coordinate messaging between buyer, seller, target management and advisers.

Confidentiality before signing

M&A transactions are often confidential before signing. Works council and Dutch Merger Code processes can create tension with that confidentiality.

Confidentiality does not automatically remove employee consultation obligations. But it can affect how the process is structured.

Parties may need to limit the circle of informed persons, agree confidentiality obligations, stage the information process and prepare a carefully drafted request for advice.

In auction processes, the issue is especially sensitive. A seller may not want to involve the works council for every early-stage bidder. But once a concrete proposed decision develops, the consultation analysis becomes more important.

International buyers should therefore ask early whether the Dutch target has a works council, how it is usually engaged and whether the expected transaction timeline includes a consultation step.

The Dutch Merger Code

The Dutch Merger Code, issued by the Social and Economic Council of the Netherlands, is aimed at protecting employee interests in proposed mergers. In qualifying situations, it may require timely information to trade unions and notification to the SER secretariat.

The Merger Code is separate from the works council advice process. It focuses on trade union involvement and employee interests at the level of the merger or acquisition.

For deal teams, the practical question is whether the transaction falls within the scope of the Code, which trade unions must be informed, when information must be provided and how the notification fits with signing, closing, confidentiality and public announcements.

If the Dutch Merger Code is relevant, it should be integrated into the transaction timetable and not discovered shortly before closing.

Buyer, seller and target board responsibilities

Works council and merger code processes are often led by the Dutch target or seller. But the buyer usually cannot remain passive.

The buyer may need to provide information about its plans, financing, strategy, organization, governance and expected employee consequences. If that information is vague or late, the consultation process may slow down or become less robust.

The target board has its own role. It should not simply treat the process as a formality required by the shareholder or buyer. It must manage the process in a way that is appropriate for the Dutch company and its employees.

The SPA should therefore allocate responsibilities clearly. Who prepares the request for advice? Who provides buyer information? Who communicates with the works council or trade unions? Who bears delay risk? What happens if the works council issues a negative advice or asks for additional information?

SPA drafting points

Works council and Dutch Merger Code issues should be translated into the SPA.

Common drafting points include:

• a condition precedent for completion of consultation or notification;
• a cooperation covenant between buyer and seller;
• information obligations for the buyer;
• restrictions on implementation before consultation is complete;
• long-stop date mechanics;
• termination rights if the process materially changes the transaction;
• allocation of responsibility for employee communications;
• and rules on amendments requested as part of the consultation process.

A generic CP for “works council approval” may be inaccurate. The works council typically gives advice; it does not simply approve the deal like a regulator. The drafting should reflect the correct legal process and the actual transaction risk.

Consequences of a deficient process

A deficient process can create real deal risk.

It may delay closing, trigger disputes, affect internal governance, create reputational issues or weaken post-closing integration. In some cases, it may lead to proceedings or require the decision-making process to be revisited.

For buyers, the risk is not only legal. A poorly handled consultation process can damage trust with employees and management before the buyer even owns the business.

For sellers, the risk is deal certainty. If consultation is delayed or mishandled, closing may slip, conditions may remain unsatisfied and the buyer may seek to renegotiate timing or terms.

Employee consultation is therefore part of transaction execution.

Practical conclusion

Works council consultation and the Dutch Merger Code can materially affect Dutch M&A timing.

For international buyers and counsel, the most important point is to identify employee consultation issues early. They may affect the LOI, due diligence process, SPA, conditions precedent, signing-to-closing period and communication strategy.

A well-managed Dutch transaction does not treat employee consultation as a late compliance formality. It integrates works council and merger code analysis into the deal timeline from the start.

That is often the difference between a predictable closing and an avoidable delay.

FAQ

Is works council consultation always required in a Dutch acquisition?
No. It depends on the Dutch business, the nature of the proposed decision and the transaction’s expected impact. But where a Dutch target has a works council, the issue should be reviewed early.

Is this only relevant in asset deals?
No. Works council consultation can also be relevant in share deals, carve-outs, restructurings, changes of control and major post-closing integration decisions.

Can consultation take place after signing?
Sometimes, if the SPA is signed subject to an appropriate condition precedent and consultation can still have meaningful influence before implementation. The correct timing depends on the transaction.

What is the Dutch Merger Code?
The Dutch Merger Code is a code issued by the SER aimed at protecting employee interests in qualifying merger situations, including through timely information to trade unions.

Should the SPA refer to works council consultation?
Yes, where relevant. The SPA should address conditions precedent, cooperation, information sharing, timing, long-stop dates and consequences if the process affects the transaction.

About Dirk de Waard

Dirk de Waard is a Dutch corporate and M&A lawyer and partner at Venture Lawyers in Amsterdam. He advises international buyers, sellers, private equity sponsors, founders, management teams and deal counsel on Dutch acquisitions, SPA drafting, conditions precedent, works council timing, governance and transaction implementation.

ViottaLaw is Dirk’s personal insights platform. Legal services are provided through Venture Lawyers.

Planning a Dutch acquisition?

Employee consultation can affect signing, closing and integration. Works council advice, Dutch Merger Code notification, confidentiality, information sharing and SPA conditions should be mapped early in the transaction.

Dirk de Waard advises international buyers, sellers and counsel on Dutch M&A process planning. Contact Dirk at dirk.dewaard@viottalaw.com to assess the Dutch employee consultation workstream in a proposed acquisition.