Transfer of business

Various business arrangements and organizational change situations often involve the question of whether it is also a transfer of business. Incorporation, outsourcing or changing the subcontractor may be evaluated.


What is meant by transfer of business?

The purpose of the transfer of a business is the transfer of a company, shop, or foundation or a functional part of one of these entities to another employer, when the business to be transferred, carried out as a main or secondary activity or its part, remains the same or similar after the transfer. In other words, transferring a business means handing over a financial and functional entity that retains its identity.

The situations are sometimes unclear and difficult, and the recognition of the transfer of the business is not always clear-cut or easy. Whether the situation constitutes a transfer of the business is decided based on an overall assessment. EU law (the so-called transfer of business directive) and the jurisprudence of the Court of European Union are emphasized in the special issues concerning the transfer of business.

How does the transfer of the business affect employment relationships?

In the transfer of the business, the rights and obligations arising from the employer’s employment relationships in force at the time of the transfer, as well as the related employment benefits, are generally transferred to the new owner or holder of the business. The transfer of rights and obligations is automatic and mandatory.

How do you evaluate the business’s transfer situations?

The evaluation focuses on the following points:

  • what kind of business it is
  • whether staff will be transferred and how much
  • whether tangible or intangible assets are handed over and how much
  • whether to retain the customer base
  • whether to continue operations in a similar manner and without a long break after the transfer of the business
  • whether the employer changes.

The procedural rules of the Act on cooperation within undertakings must be remembered

In situations of transfer of business, the provisions of Chapter 4 of the Act on cooperation within undertakings must be taken into account. The provisions require informing the personnel and the obligation to answer personnel’s questions.

We offer or expertise for our customers in challenging transfer of business situations regarding special issue. We are also well versed in international and EU legal regulation and European Union jurisprudence.

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