Employees are the one thing on an asset sale that transfers whether or not anyone plans for it — and the one thing a share sale leaves entirely untouched, because the employer never changes. Getting that distinction wrong is a common and expensive error.
Automatic Transfer, and What Comes With It
On an asset sale amounting to a transfer of an undertaking, the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 operate: employees assigned to the business transfer to the buyer by operation of law, with existing terms, accrued rights and continuity of service intact. No new contracts are needed and none can defeat it — and, importantly, what the buyer and seller agree between themselves does not change the employees’ position. The Regulations apply regardless of what the sale agreement says. What comes across is broadly the employment relationship as it stands: terms and conditions, continuity, and rights and obligations arising from the contract, including accrued holiday and notice periods based on full service, together with any historic issues attaching to those employments. Occupational pension rights are treated differently under the Regulations and need specific advice rather than assumption. On a share sale, by contrast, the employer company is unchanged and the shares simply change hands — nothing transfers, and the Regulations are not engaged.
Consultation, Redundancies, and the Timetable
Both transferor and transferee have obligations to inform, and in certain circumstances consult, employee representatives about the transfer — the fact of it, its timing, the reasons and the implications for employees — in advance of it taking effect. The timing and detail matter, and this is the point most frequently underestimated in deal planning: a transaction kept confidential for months can meet an obligation that requires disclosure to representatives before completion. Build it into the timetable at the outset rather than treating it as a completion formality. On redundancies: a dismissal by reason of the transfer itself is prohibited; dismissals for an economic, technical or organisational reason entailing changes in the workforce may be capable of justification, but that is a specific test rather than a general permission, and it is exactly where disputes arise. Where redundancies are contemplated around a transfer, take dedicated employment advice — redundancysolicitors.ie covers redundancy properly, and the sale agreement is not the place to resolve it. Finally, the seller-side point: employment liabilities inherited on an asset sale are a due diligence and warranty issue. A seller who never issued written terms, or whose contractor arrangements look a good deal like employment, will meet that in diligence. Fixing employment documentation before going to market is one of the cheapest items on the readiness list.
Selling or Buying a Business With Staff?
On an asset sale the employees transfer whether or not anyone planned for it, and the consultation obligations can move your completion date. Both are better addressed at the outset.
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