Transfer of business Prerequisites

The most important facts in brief:

• The prerequisite for a transfer of operations is that a Business transferred to a purchaser through a legal transaction passes over.
• A transfer of operations occurs in the context of Asset dealsif significant assets are transferred.
• The transfer of operations also means that the Employment contracts are transferred to the purchaser.

What is a transfer of business?

A transfer of operations occurs when a Business or part of a business taken over and the acquirer continues the business. A transfer of business occurs when business assets are taken over by an acquirer as part of an asset deal. In principle, only the individual assets are acquired in an asset deal. However, the transfer of business means that the employment relationships of all employees are also transferred to the acquirer. The transfer of business results from Section 613a BGB. The consequence of the transfer of business is that the acquirer assumes all rights and obligations arising from the employment relationship with the employees who belong to the business that the acquirer has taken over.

What are the requirements for a transfer of business?

A transfer of business occurs when a business or part of a business is transferred to another owner through a legal transaction and is continued by this owner, Section 613a (1) sentence 1 BGB. The transfer of business therefore has three prerequisites:

1. Transfer of a business
2. Transfer to one farmer
3. Transfer by legal transaction

The key question as to whether a transfer of business has taken place is often whether a business has been transferred. It is crucial that the economic unit of the business is transferred and that the business is continued unchanged by the acquirer. The following criteria are important for this assessment:

• Kind: The type of company must be taken into account as part of the assessment. The type of company influences, for example, which operating resources must be transferred.
• Operating resourcesA transfer of business requires that the operating resources required for the business are transferred to the acquirer. In the case of a production company, for example, the assessment depends on whether the machines, raw materials and buildings are transferred. In the case of a service company, it is primarily a question of whether the "know-how" is transferred.
• ValueThe extent to which intangible assets (e.g. licenses under public law, brand names, etc.) are transferred to the acquirer must be taken into account.
• WorkforceThe extent to which employees are (not) taken over. If, for example, certain people who are central to a company are taken over, for example due to their high level of expertise, this indicates that a transfer of business has taken place. In the service business, for example, the takeover of a large part of the workforce is an indication of a transfer of business.
• CustomersA key factor for a transfer of business is the takeover of customers. Customers cannot be "transferred", which is why the takeover of a customer file or the takeover of a distribution authorization is considered to be a takeover of customers.
• SimilarityThe assessment takes into account whether the activities before and after the transfer are similar. For the assessment of similarity, it is not only important which products are manufactured or services are provided. It is also important to consider whether the working methods, the organization of the work, etc. are similar.
• DurationIf the business has been closed for a longer period of time, this is an argument against a transfer of business. Very short-term closures (e.g. a plant closure for two weeks) are not an argument against a transfer of business. If, on the other hand, the business was not shut down but continued to operate immediately, this is an argument in favor of a transfer of business.

What are the consequences of a transfer of business?

The consequence of a transfer of operations is that the The purchaser assumes the rights and obligations of the previous employer. The employment relationship is therefore transferred in full to the purchaser. You must bear in mind that the legal consequences of the transfer of business can neither be excluded nor structured. The purchaser and seller only have the option of agreeing who should bear the costs and risks (e.g. guarantees, indemnification clauses, etc.). Overall, the transfer of business has the following consequences:

• Employment contractThe transfer of business leads to a complete transfer of the employment relationship, so the salary remains roughly the same, the previous activity is taken into account in the notice periods, etc. However, only the employment contracts of salaried employees are transferred. There is no automatic transfer of freelancers or temporary workers.
• Company agreementsThe company agreements also apply to the purchaser.
• Collective agreementsCollective agreements also generally continue to apply after the transfer of the business. However, a special rule applies to references to collective agreements in employment contracts. In this respect, the prohibition of change in Section 613a (1) sentence 2 BGB does not apply, meaning that a change is possible.
• Prohibition of terminationEmployees may not be dismissed due to the transfer of business, Section 613a (4) sentence 1 BGB. However, this does not mean that dismissals are completely excluded. If, for example, operational reasons justify a dismissal. Section 613 para. 4 sentence 1 BGB also does not exclude the possibility of concluding termination agreements.
• LiabilityAfter the transfer of the business, both the acquirer and the transferor are liable for the liabilities. After the transfer of the business, the acquirer is liable for all liabilities. After the transfer of the business, the transferor is liable for one year alongside the transferee for all liabilities that already existed at the time of the transfer of the business.

Employees must be informed about the transfer of business and the consequences of the transfer of business. Employees also have the opportunity to object to the transfer of the employment relationship. contradictSection 613a (6) BGB.