Posted on: 06-12-2019

Transfer of Undertaking in the Netherlands

Written by:

Marcel van den Ende

Transfer of undertaking in the Netherlands

Article 7: 663 of the Dutch Civil Code stipulates that as a result of a transfer of an undertaking, the rights and obligations that arise at that time for the employer in that undertaking from a contract of employment between him and an employee working there legally transfer to the transferee (as prescribed by EU Directie 98/50).

According to article 7:662 (1) a, a “transfer” means a “transfer arising from a contract, merger or division of an economic entity, which maintains its identity”. An “economic unit” means a “complex of organized means established for the pursuit of an activity whether or not this constitutes its principal economic activity”.

In case of transfer of undertaking, all the rights and obligations arising from the employment agreement move to the (new) employer.

transfer of undertaking in the Netherlands

The protection of the employee applies if an economic unit is transferred. So if a garage owner stops, sells everything and transfers it to the buyer as an economic unit, then the employment contracts go along. It often becomes more complicated when only a part of a company is transferred or when a discussion arises as to whether or not the law applies. Because the law is based on the European Directive, the case law of the European Court of Justice must be considered for how the provision should be interpreted.

Is it a transfer of undertaking or not?

The Supreme Court of the Netherlands sees it as follows. For the answer to the question whether there is a tranfer within the meaning of the Directive, the decisive criterion is whether the identity of the company is preserved. To that end, it is necessary to examine whether it is a question of the disposal of a current business, which may in particular be evidenced by the fact that its operation is in fact continued or resumed by the new entrepreneur with the same or similar business assets. The transfer of stock alone will not count as a transfer of undertakings.

All factual circumstances count

In order to determine whether these conditions are met, account must be taken of all the factual circumstances that characterize the transaction in question, such as the nature of the undertaking or establishment concerned, whether or not the tangible assets such as buildings and movable property are transferred, the value of the intangible assets at the time of the transfer, whether or not almost all of the staff are taken over by the new entrepreneur, whether or not the clientele is transferred, the extent to which the activities carried out before and after the transfer with each other and the duration of any interruption of those activities.

Integral test. No separate assessment of partial aspects

However, all these factors are only partial aspects of the overall research to be carried out and should therefore not be assessed individually. The importance that must be attached to the various factors differs depending on the activity performed and also on the production method or business operations in the company.

More information

Whoever reads this understands that it can sometimes be very difficult to determine whether there is a transfer of business or not. Sometimes it is clear that there is a transfer of business, sometimes discussion is possible. It is wise to seek legal advice in such cases. For example at Minerva Advocaten. It is not without reason that our motto is: "Your problem, our concern."

More information?

Marcel van den Ende will gladly help you further.

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