The European Commission’s Acquired Rights Directive (ARD) / Transfer of Undertakings Protection of Employment (TUPE) provides that when a business is sold, employees also transfer to the new owner with their employment rights intact. Other countries around the world, including Brazil, Colombia, India, Singapore, South Africa and South Korea also have similar laws that preserve workers’ employment terms and service histories under the new owner. Below we highlight key considerations for ARD’s/TUPE’s impact on global M&A transactions.
Considerations to Keep in Mind
There are two key points from the Acquired Rights Directive that buyers need to remember when contemplating an acquisition in the European Union, including post-Brexit Britain:
- Regardless of form, the transaction legally results in the transfer of all employees with their contracts and substantially the same benefits plans
- The buyer and seller have substantial information disclosure obligations to employees and applicable representatives of employee trade unions and works councils; the transaction may also result in additional employee consultation requirements that must also happen well before the transaction closing
In addition to acquired rights, some transferred employees may have immigration sponsorship requirements. Sponsorship transfers should be considered early on because transferring sponsorship can take up to several months.
Transferring employees is a complex process and can take more time than the buyer and seller may have contemplated, and regional differences in regulations (in addition to ARD) can further complicate matters. Your internal HR team should work closely with external advisors to due diligence the target company and develop a plan for handling acquired rights, immigration and other employee compliance requirements. Velocity Global is a valuable resource that provides consulting and alternative solutions for carve-out, divestiture, and other complex global M&A transactions, with services that include:
- Consulting on employment transfers
- Creating bespoke global benefit plans to match the needs of transferred employees
- Assisting with visa sponsorship transfers
- Providing on the ground support in 185 countries to minimize potential employee losses that can result from uncertainty around transactions
- Employer of Record for transferred employees rather than forming new legal entities to employ transferred employees
Get in touch with Velocity Global today to learn more about how we can assist your global M&A efforts.