Transfer of Undertakings (Sec. 613a BGB)

Section 613a of the German Civil Code provides that, on a transfer of a business, existing employment relationships generally pass automatically to the new owner with their rights and obligations. Dismissal solely because of the transfer is invalid. The provision is particularly relevant to asset deals and transfers of individual business units. In a pure share deal, the employer remains the same, so the acquisition of shares alone does not trigger a transfer of undertakings.

The central question is whether an economic entity transfers to a new owner while retaining its identity. The assessment reflects the actual circumstances, including the assets, activities and employees taken over. The parties cannot exclude the rules merely by giving their agreement a different label. A buyer therefore needs to establish early which employees belong to the transferred business or unit.

Affected employees must receive information before the transfer about its timing, reason, consequences and planned measures. Following proper notification, they may object in writing within one month. Defective information can prevent that period from starting. If an employee validly objects, the employment relationship generally remains with the former employer. This can have significant consequences for both parties, especially where key specialists or managers are involved.

Headcount, remuneration, pension commitments and existing collective arrangements therefore belong in the transaction plan. Certain collectively agreed employment terms receive special protection against changes, with the effects depending on the circumstances. Potential joint liability for existing obligations also needs to be considered.

The purchase agreement can allocate responsibilities, information duties and the economic cost of these risks between seller and buyer. Those arrangements do not replace employees' rights. Coordinated communication and a realistic transition plan help preserve operational continuity and avoid unexpected staffing problems between signing and closing.

Note: This explanation is for general information only and does not constitute legal advice. The legal position depends on the individual case and may change with new legislation or case law. For a binding assessment, please consult a qualified lawyer.