Summer 2017 saw two important judgments at the intersection of employment law and insolvency law in the Netherlands. The Dutch Supreme Court has ruled that the court-appointed trustee must consult the works council if the insolvent company is to be restarted following a bankruptcy. The European Court of Justice ("ECJ") has found that the transfer of undertaking rules apply in case of pre-packaged, or "pre-pack", bankruptcy.
Dutch Supreme Court: Works Council Must be Consulted in Case of Post-Bankruptcy Restart. The Dutch Supreme Court has decided that the works council needs to be consulted in the event a business is restarted following the liquidation of a company. If assets are sold in the context of a business restart and the expectation is that the associated jobs will be preserved, the decision relating to the sale is subject to works council consultation.
In an earlier judgment, the Amsterdam Court of Appeal found that works council consultation rights were incompatible with the trustee's primary task—namely, to collect as much money for the creditors as possible, regardless of whether this is achieved through the company's liquidation or restart. The Supreme Court has ruled otherwise. Recognizing that the trustee must be able to take swift action, however, the Supreme Court allows the trustee to derogate from procedural requirements which normally apply. If time is of the essence, this implies, for example, that the trustee may impose strict deadlines on the works council and that he does not have to submit comprehensive written reasons for the business restart.
ECJ: Transfer of Undertaking Rules Apply in Case of Pre-Packaged Bankruptcy. The case deals with the pre-pack of Estro, at the time the largest childcare provider in the Netherlands.
A pre-pack entails the court-appointed trustee confidentially preparing for the restart of trading by the insolvent company with the court's consent. If successful, the company is subsequently declared bankrupt and immediately restarted. Dutch law provides that transfer of undertaking rules do not apply in the case of bankruptcy.
The question the ECJ had to answer was essentially whether this exception also applies in the case of a pre-pack. The court observed that the pre-pack is not ultimately aimed at liquidating the company, but rather at preparing a restart of its viable parts. In these circumstances, the ECJ found that it cannot be justified that the employees concerned lose their rights under transfer of undertaking rules. As a result, the ECJ decided that these rules continue to apply in the case of a pre-pack.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.