Transfer of Undertakings

The transfer of undertakings takes place when a business or undertaking is taken over by another Company (new employer) from the current Company (old employer). Any employee in employment, with the same Company, shall be deemed to be in employment by the new employer who shall also take on all the rights and obligations which the employee had prior to the transfer of the undertaking.

Obligations to inform the employees’ representatives (and not the employees involved) would only apply to those undertakings being transferred and which employ more than 20 employees, including all full-time and part-time employees.

If the undertaking employs more than 20 employees, both the transferor (the old employer) and the transferee (the new employer) must inform the employees’ representatives and provide the following information:

(a) the date or proposed date of the transfer;

(b) the reasons for the transfer;

(c) the legal, economic and social implications of the transfer for the employees; and

(d) the measures envisaged in relation to the employees.

The said information has to be given by means of a written statement. The written statement is to be delivered to the employees’ representatives at least 15 working days before the transfer is carried out or before the employees are directly affected by the transfer as regards their conditions of work and employment, whichever is the earlier. In this respect, it is important to keep in mind that the transferor and the transferee must also forward to the Director responsible for Employment and Industrial Relations in Malta, a copy of the said written statement on the same day that it is notified to the employees’ representatives.

A question which is often posed is that does a transfer of shares constitute a transfer of undertaking. We summarise this as follows:

There is a case of “transfer of undertaking” only if the transfer of shares implies:

• A change of the Director;
• A change of the registration number of the Company;
• The continuation of the business or activity as an economic entity.

Therefore, if (for instance) there is a change of the Director, but there is not a change of the Registration Number of the Company, there is not a case of transfer of undertaking (as the employer is still the same).

Although the below example is slightly different due to the fact that the subject is a stock exchange and not a business, the similarities are there.

The European Commission is planning to open an in-depth investigation into the planned £21bn merger of London's Stock Exchange and Germany's Deutsche Boerse. The merger is seeking to combine the stock exchanges of the UK, Germany and Italy and some big clearing houses to create Europe's largest exchange operator.

Each of the companies has more than 5,000 staff and the merger could lead to as many as 1,250 job losses.

The deal is expected to produce £215m in annual cost savings over five years, with £138m of those achieved by the third year, while the headquarters in London and Frankfurt would both be kept.

Commissioner Margrethe Vestager has been reported to state that the EU has to make sure that financial markets remained "competitive" as the merger could eliminate competition in areas such as bonds, derivatives and repurchasing agreements.

For more information on transfer of ownership, mergers and employment, contact us by email at [email protected]