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Information Duties for M&A Deals

Germany: The rules concerning the duties to inform the staff with regard to a (planned) M&A deal have been specified.

Before closing of a M&A deal in Germany seller or buyer has the duty to inform the staff of the business/company that should be transferred about the following circumstances:
- (Planned) date of transfer;
- Reason for the transfer;
- Legal, economic and social effects of the transfer for the staff and
- (Planned) measures with effects for the staff.
The reason for these information duties is that each member of staff has a right to terminate his employment contract on the ground of a M&A deal. For a reasonable assessment of the situation in connection with the planned transfer and the effects of such a transfer for his job each member of staff has to be informed about the above mentioned circumstances.
 
The Federal Labor Court (Bundesarbeitsgericht) has now extended the duties concerning the information of the staff. The reason behind the decision was that after the transfer of the respective business/company the investor planned to give up a branch of the company and planned to terminate the employment relationship of the employees of this branch with a termination for operational reasons. The investor informed the employee about this plan in due time. But he did not indicate that the respective employees will not have a right vice versa the company to establish a social plan.
 
In Germany there is a general duty to set up such a social plan; but there is an exception for startup companies/investors.
 
This decision has a high degree of relevance for foreign investors in Germany. Typically a foreign investor starts his investment with a new founded company. If such a special purpose vehicle is a startup than the investor does not have the duty to set up a social plan if he plans to shut down a branch at the target and if he provides the staff comprehensive and correct information about his plans and about the fact that there will not be any entitlement to claim for a social plan.
 
It is not relevant whether the respective information has been delivered to the staff by the seller or the buyer.
 
Source: Court decision of the Federal Labor Court, 8 AZR 824/12
 
Author: Martin Neupert
Phone: +49 911 56961-0