Transfer of a trading fund

What is a trade fund transfer?

Upon a transfer of a trading fund or asset deal choose to take over specific parts of a company, rather than the company's shares. It's a way to increase your transferring enterprise which differs from a share transfer, where you do not take over the entire legal entity with all its rights and obligations, but rather allows you to proceed selectively.

An asset deal can take several forms:

• The transfer of some well-chosen asset components
• The transfer of an industry (a component that functions almost autonomously)
• The transfer of the entire trading fund

A trading fund consists of all tangible and intangible elements necessary to ensure the continuity of operations and to maintain clientele and market position. This includes:

• The machinery and equipment
• The merchandise and any supplies
• The know-how and intellectual property rights
• The client portfolio
• The staff and other elements that contribute to the operational operation

Whereas a share deal basically includes the entire company in the transaction, an asset deal is limited to only those parts of the company that are expressly chosen. What is not expressly included in the sale remains the property and responsibility of the transferor.

The position of staff: collective bargaining agreement 32bis as a crucial concern

Automatic personnel transfer

One of the most crucial aspects of an asset deal is the position of personnel. Although an asset deal basically allows you to be selective in what you take over, staff is an important exception. The legislature, through the collective bargaining agreement no. 32bis put a significant brake on the acquirer's full freedom of choice.

In an asset deal, one cannot simply take over the business, machinery, know-how, clientele and possibly even the building and at the same time leave the employees in what in many cases would become an empty company structure. CLA no. 32bis stipulates that if one takes over an entire trade fund, or an autonomously functioning part of it, the employees must in principle be taken over along with it, moreover while maintaining their individual working conditions.

Legal basis and scope

CLA no. 32bis is the transposition into Belgian law of a European directive dating as far back as 1977 (77/187/EEC, later codified in 2001/23/EC). It applies to any transfer of an undertaking or part of an undertaking under contract.

The term "enterprise" is to be understood here as a permanently organized economic entity. It is a set of persons and elements through which an economic activity with its own objective can be carried out and which is sufficiently structured to effectively exist independently.

An economic entity cannot be reduced to only the activity with which it is charged. An economic entity is more broadly understood as:

• The collection of all material resources and human forces
• The substructure of the activity
• Organized according to a certain internal order and finality

Identity is determined not only by the activity but also by the composition of the workforce, management, division of labor, available means of production, operations, intellectual property rights and know-how.

Case law on mandatory employee takeover

The case law is strict on automatic transfer of employees. The Court of Justice (C-362/89 ) ruled that "all employment contracts or employment relationships existing at the time of transfer of an undertaking between the transferor and the employees of the transferred undertaking are transferred to the transferee by the mere fact of the transfer by operation of law.“

This position was later confirmed (C-305/94) with the addition that this even applies "even if the transferee or the transferor does not wish it and the transferee refuses to fulfill its obligations.”

The Supreme Court has also expressly stated that if the transfer involves an entire company or a full-fledged part thereof, the rights and obligations arising from employment contracts are "automatically transferred" to the transferee, and this by virtue of the mere transfer and notwithstanding the contrary will of the transferor or transferee (Cass. Sept. 13, 2010).

Employee choice

Importantly, however, an employee cannot waive the rights he derives from the provisions of the directive or the collective bargaining agreement, which are mandatory law. Even if the disadvantages arising from that waiver are offset by certain advantages that do not make the employee worse off overall, this rule remains standing in principle.

But one obviously cannot prohibit the transferor and the employee from agreeing that the employee does not transfer with them. An employment contract is still a consensual agreement, and, moreover, freedom of labor prevents an employer from being able to impose. An employee can always refuse to have his employment contract transferred to the transferee.

This case law was confirmed in Belgium by, among others, the Labor Court of Liege, which ruled in a May 5, 1999 judgment that parties to a transfer are not prohibited from agreeing that the employees who are normally transferred will remain in the employ of the transferor, at least "when those employees express their will to do so and express their agreement thereto."

Social and fiscal debt: an important exception to freedom of choice

Joint and several liability

Although an asset deal basically means that one can choose which parts to take over, and one theoretically does not become liable for debts of the transferring company, the legislature has also built in important protections here - this time for social and fiscal authorities.

The regulations on this subject are more or less the same in all relevant laws (art. 442bis WIB 1992, art. 93undecies WBTW, art. 41quinquies RSZ-wet, art. 16ter KB nr. 38 Sociaal Statuut Zelfstandigen and art. 3.12.1.0.14 Vlaamse Codex Fiscaliteit). If one takes over a set of elements that make it possible to maintain the clientele, one is in principle jointly and severally liable for the social and fiscal debts of the transferor, unless two cumulative conditions are met:

1. The transferor has presented the necessary certificates (which include confirmation that there are no debts as of the date of delivery)
2. The transfer was timely notified to the respective administrations

Certificates and notification

The certificate procedure is crucial and often incompletely applied in practice. As a transferee, it is not enough just to check the certificates - the administrations must also be actively informed of the transfer. This second condition is often forgotten in practice, which can have serious consequences.

The certificates also have a limited validity period: they are only valid for 30 days from the date of issuance. Older certificates lose their value and no longer guarantee the transferee that the transferor has no social or tax debts.

Procedure and protection for the transferee

If the transferor can produce the necessary certificates, the transferee may exclude the risk of joint and several liability by:

1. Notify the administrations of the transfer, attaching the certificates (which should not be older than 30 days)
2. Upon such notification, the transfer shall become immediately countermandable to the administrations

If debts should still arise in the period between the issuance of the certificates and the notification (within the 30 days), the administrations can only hold the transferor liable for them, not the transferee.

What if there are debts?

In any case, if the transferor cannot present certificates because of social and/or tax debts, the transferee is jointly and severally liable. However, the risks can be reduced by:

1. Notify administrations of the acquisition
2. Countermandability then begins at the end of the month following the month in which the notification was made
3. For example, if the acquisition is reported on March 14, the non-adversarial period runs through April 30, and the adversarial period does not begin until May 1
4. The transferee then remains jointly and severally liable for all social and tax debts of the transferor existing as of April 30

However, joint and several liability is limited:

• In the case of a contribution to company (in exchange for shares): up to the amount corresponding to the nominal value of the shares
• In other cases: up to the amount already deposited or provided by the transferee prior to the expiration of the countermand period

Professional guidance: essential for safe transfer

The transfer of a trade fund is a complex legal operation where numerous pitfalls lurk. The automatic personnel takeover via CAO 32bis, the strict procedures surrounding tax and social certificates, and the potential joint and several liability make professional guidance not only valuable but truly indispensable.

Why guidance from our law firm?

Our team of specialized lawyers has years of experience in the transfer of trading funds and will guide you through the entire process:

1. Preparatory phase: We analyze your specific situation and objectives to determine the right strategy.
2. Due diligence: Our experts conduct a thorough vetting process to identify hidden risks in a timely manner, paying particular attention to personnel issues and potential social or tax liabilities.
3. Contractual phase: We draft tailored acquisition agreements that maximize your interests, with conclusive indemnification mechanisms and warranty clauses.
4. Procedural guidance: We ensure the correct application of the certificate procedure and timely notification to all administrations involved, to avoid joint and several liability.
5. Post-transaction support: Even after the transfer, we remain available for advice and assistance in the event of any disputes or claims.

Don't underestimate the risks

Practice shows that many acquirers underestimate the risks associated with an asset deal. A forgotten notification to the tax authorities or NSSO, or a misinterpretation of the scope of CLA 32bis, can lead to unexpected liabilities that jeopardize the financial viability of the entire transaction.

Our firm has a proven track record of successfully overseeing complex trade fund transfers. By enlisting our services, you will not only avoid potential problems, but you will also ensure the optimal tax and legal structuring of your transaction.

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