Register now! Employment Webinar “Tricky sickness issues” (17 June 2021)

Transfer of undertaking: Also in a pre-pack regime?

Publication date: 12 April 2017
Do you intend to take over (part of) a business by means of a pre-pack? If so, do you have to take over the employees too?


Transfer of undertaking

In a transfer of undertaking all rights and duties of the employees arising from the employment contracts with the disposing company will automatically be transferred to the acquiring company. The new owner of the company will then automatically become the new employer of all employees. Consequently, it is prohibited to dismiss employees due to or for the purpose of the transfer.

Exception of prohibition to dismissal: re-launch after bankruptcy

The regulation of transfer of undertaking does not apply if the business was declared bankrupt and is re-launched by the acquirer. Therefore, the relaunching company does not have to take over all the rights of the employees.

Does the exception also apply to pre-packs?

In a pre-pack regime an administrator will be appointed before bankruptcy proceedings start to prepare a potential relaunch of the company as soon as it is officially declared bankrupt. This will improve the chances of a successful relaunch. When it is clear that a relaunch of a company is possible, the company will formally go bankrupt and the relaunch will then be performed. Due to the bankruptcy there will be no transfer of undertaking. Therefore, the “new” company is often a leaner version of the original company.

According to employee organisations, pre-packs can be misused as a cheaper and quicker way to reorganise a company without having to take into account employees’ rights and without having to rely on the permission from the UWV (Employee Insurance Agency). Therefore, they are of the opinion that the regulation for transfer of undertaking should also apply to a pre-packaged relaunch.

Dutch courts brought the question as to whether the regulation on transfer of undertaking does also apply in the event of pre-packs before the Court of Justice of the European Union. The regulation for transfer of undertaking is based on a European directive. The Advocate General of the Court of Justice of the European Union has recently rendered a decision. The Advocate General comes to the conclusion that the regulations regarding the transfer of undertaking also apply to pre-packs because:

  • Pre-packs intend a relaunch of the company, not its liquidation. The bankruptcy is in fact a means to realize this.
  • The pre-pack regime does not have the same safeguards as the “classic” bankruptcy proceedings. The trustee and bankruptcy judge concerned have far less influence.

If this conclusion will be adopted by the European Court of Justice – which is common – there would be significant consequences for the practice. In that case, a company could not use the pre-pack scheme for reorganisation, without having to take into account the employees’ rights. This would make pre-packs less attractive for entrepreneurs.

In response to the conclusion of the Advocate General, the Dutch Senate has removed the Bill dealing with pre-packs from the agenda.

More information

Naturally, we will keep you informed about the latest developments. Would you like to learn more about the regulations applying to transfer of undertaking? Or do you have any other questions about employment law. Please contact us:

    Share on social media

    • Employment law and dismissal

    Transfer of undertaking: Also in pre-packs!

    26 June 2017

    Employees’ protection against dismissal also in pre-packs! What does this mean in practice?

    read on
    • Works Council
    • Corporate law

    No pre-pack if relaunch is postponed

    21 November 2017

    A surprising judgment – on how a company does not fall under the pre-pack regime and the new organisation does not have to take over the staff.

    read on
    • Employment law and dismissal

    Transfer of undertaking: Do the rules also apply in case of bankruptcy?

    21 June 2016

    Planning a merger, acquisition or division of (part of) a business in the Netherlands or any other EU country? Be aware of the EU law which sets out the strong position of employees in case of a transfer of undertaking (Directive 2001/23/EC). This time: Do the rules regarding transfer of undertaking also apply in case of bankruptcy?

    read on
    • Works Council
    • Corporate law

    Management and Supervision of Legal Entities Act: What are the changes?

    23 June 2021

    On 10 November 2020, the Dutch Senate adopted the bill on the management and supervision of legal entities. This affects all associations and foundations, but, above all, nonprofit organizations. As an officer of a sports club, are you now more likely to be liable? Do you have to meet additional requirements when you are a member of the supervisory board of a school?

    read on
    • Employment law and dismissal

    Dismissal of sick statutory director

    18 June 2021

    A sick employee may not be dismissed. However, an employee who knows of imminent dismissal, cannot avoid this by reporting sick. But when does the employee know that this is the case? This question was central to the court case concerning the dismissal of a CFO of Volksbank.

    read on
    • Expats
    • Employment law and dismissal

    17 June 2021: Employment Webinar “Tricky sickness issues”

    17 June 2021

    If your employee reports sick, this may raise many difficult questions. What are your reintegration obligations during the sick leave period? What are you allowed to record about your sick employee with regard to the privacy legislation? We answered these and other questions during a webinar. Watch the video!

    read on
    • Employment law and dismissal

    Be careful with the employer’s statement!

    14 June 2021

    Before obtaining a mortgage or rental contract, banks or landlords often ask for an employer’s statement. Such a statement can sometimes have unintended consequences for the employer. What do you need to be aware of?

    read on
    • Employment law and dismissal

    Statutory minimum wage as of 1 July 2021

    2 June 2021

    As of 1 July 2021, the statutory minimum wage and minimum youth wage will be increased. What are the new amounts of the minimum wage?

    read on