Improved position of employees in case of company restart

Upon restart of a company following liquidation, all its employees must in principle be employed by the new owner under the same terms and conditions of employment. That principle may be deviated from only if certain jobs disappear during the transition due to commercial and operational circumstances. This legislative proposal by Minister for Legal Protection Sander Dekker and Minister of Social Affairs and Employment Wouter Koolmees was submitted for consultation today.

The objective of this legislative proposal is to prevent a situation where large numbers of employees lose their jobs in case of a restart after bankruptcy. Such situations invariably lead to a lot of commotion. In the case related to the ‘Restart pre-pack’ for Estro, a childcare organisation, the European Court of Justice ruled in 2017 that employees were entitled to retain their jobs as well as the terms and conditions of employment.

This ruling led to a discussion on the consequences for other cases. The resulting uncertainty has made a restart after bankruptcy more difficult, even though it is often the most desirable option for creditors and employees. In case of a restart, a greater number of jobs are maintained and there are more options for settling debts. Suppliers and customers also benefit from this procedure, since the company can continue operating, which also benefits the economy.

The regulation now proposed by the government is expected to provide more clarity in this respect. Employees’ positions will improve in case of a restart and potential buyers will have more certainty regarding labour costs, which means that they can make a responsible offer.

The legislative proposal also specifies that employees for whom there is no place after the restart will not be restricted by a non-competition clause if they wish to start working elsewhere. The works council and staff association of the company in question will also be entitled to give their advice on a planned restart. The Examining Magistrate who must give permission for the transition will take this advice into consideration in their decision.