29 January 2025
For the second time in five years, a proposed bill was open for public consultation, introducing new rules that automatically transfer employees to the acquiring company during a restart after bankruptcy.
This proposal, known as the WOVOF bill, impacts labor and insolvency law as well as employee representation through the works council (WC), which will gain additional rights. In this blog post we highlight some of the proposals contained in this upcoming legislative initiative.
Following the Dutch Supreme Court ruling of June 6, 2017, the WC’s statutory right to provide advice in bankruptcy situations will now be codified. If the bankruptcy trustee intends to restart a bankrupt company, they must seek the WC’s advice beforehand. Under the upcoming legislation the WC will have a minimum period of three days to issue its advice, as speed is critical in such cases.
If the trustee deviates from the WC’s advice regarding the restart, the WC cannot appeal to the Enterprise Chamber but can seek a quick decision from the supervisory judge handling the bankruptcy (in Dutch: rechter-commissaris). Additionally, the WC can approach the supervisory judge if the trustee fails to request the WC’s advice regarding a restart.
In response to an advice request, the WC could, for instance, recommend that the trustee engage with another potential buyer. This allows the WC to exert greater influence on any potential acquisition or restart.
If the trustee seeks approval from the supervisory judge for a private sale of the bankrupt company that constitutes a transfer of undertaking under the law, the WC or the staffe representation (in Dutch: PvT) has the right to be heard by the supervisory judge. This process is subject to a very short timeline. Additionally, the WC/PvT will gain an enhanced right to information: the employer must notify the WC if suspension of payments or bankruptcy appears imminent.
Currently, the WC can already use Article 10 of the Bankruptcy Act to object as an interested party to a bankruptcy or discuss a looming bankruptcy in consultation meetings with the management.
A question separate from the upcoming WOVOF-legislation is what happens to the WC when the company it represents is transferred via a transfer of undertaking (TUPE). Under the European directive on which Dutch TUPE legislation is based, the WC of the transferring company remains in place if the transferred entity continues to exist as a unit after the acquisition.
For example, if only one department is transferred, it would be unworkable for the WC of the transferring company to move with that department, as this would leave the remaining departments without representation.
According to the EU directive, elections for the WC can also be organized immediately after the transfer of undertaking. This is often the most practical approach, ensuring that the WC of the acquiring company is promptly adjusted to reflect the new structure post-transfer. Employees transferring to the new company who do not join the (new) WC retain their legal protection against dismissal and discrimination based on their former WC membership.
Codifying the WC’s expanded responsibilities in bankruptcy and restart scenarios ensures employee representation and may prevent disputes. The upcoming WOVOF-legislation largely formalizes an advisory right that the WC already possesses based on the aforementioned Supreme Court ruling.
Works councils should make use of their current and forthcoming rights concerning bankruptcy and transfer of undertaking to safeguard employee interests effectively. It is expected that the final proposal for the WOVOF-legislation will be made public and send to the parliament by the Minister of Social Affairs, in Q3 of 2025.
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