The Dutch Social and Economic Council (the SER) on 10 February 2014 announced a revision of the Dutch Merger Code (SER Fusiegedragsregels) that is of importance for the timing of trade union involvement in mergers and acquisitions.
The Merger Code (the Code) protects the interests of the employees involved in a merger. The Code has a broad scope as merger is defined as ‘acquiring or transferring control over a company’.
The Code stipulates that the SER and the trade unions need to be informed of any intended merger that involves 50 or more employees in the Netherlands. The notification must be made prior to parties reaching agreement on the transaction. The Code requires the merging parties not only to inform, but to also consult the trade unions.
The subjects for consultation are the social and economic consequences of the intended merger and the measures the parties intend to take in this respect. If the merger affects employment negatively, trade unions will always pressure the parties involved to agree to a so-called social plan. A social plan includes all measures parties will take to compensate employees for the loss of employment.
The consultation process ends with the trade unions rendering their opinion on the intended merger. However, the trade unions are entitled to at least one face to face meeting with the parties before rendering their opinion. If works councils are involved in the transaction as well, they are entitled to receipt of the trade unions’ opinion prior to finalising their own consultation process.
We regularly see parties struggle with the strict timing rules of the Code. We believe the Code should leave more room for commercial interests and confidentiality restrictions. Timing is of the essence when negotiating a deal. The Code pressures parties for disclosure at a too early and inconvenient stage of the process. This leads to parties trying to work around the timing rules of the Code, although a strict interpretation of the Code prohibits parties from signing the transaction until finalisation of the Code’s consultation process.
The SER has also now concluded that since the most recent revision of the Code in 2000, problem areas have arisen. The SER has appointed a committee to revise the Code and to resolve identified problem areas. Professionals within the field of mergers and acquisitions are invited to share practical problem areas and to contribute to the development of solutions.
We will flag the timing is of the essence issue set out above. What feedback do you have from your practice? We look forward to hearing from you. The SER intends to finalise the revision in the fall of 2014.
