The Dutch shrimp factory Heiploeg was declared bankrupt in November 2014. The undertaking was relaunched immediately, as the relaunch was prepared in a ‘pre-pack’ construction. All 180 employees of the bankrupt company were dismissed by the administrator. 120 employees were immediately employed again by the relaunched company, but on different employment conditions.

The involved trade unions took the position that, as the administrator and the corporate entity that relaunched the company reached broad agreement on the transfer of the undertaking before Heiploeg was declared bankrupt, the relaunch should be qualified as a transfer of undertaking in which case all employees maintain their rights and obligation.

This position of the trade unions was based on the European Council Directive 2001/23/EC on the protection of employees in the event of a change of employer following a transfer of undertaking. The directive is implemented in the Dutch Civil Code. In accordance with the European Directive, the provisions on the protection of employees are excluded from application in case of a transfer of an undertaking that is part of a bankruptcy estate (art. 7:666DCC).

The unions stated that, as there was already agreed on the transfer of the undertaking before the company was formally declared bankrupt, and the goal of the prepackaged administration was used to maintain the undertaking, the exclusion stipulated in art. 7:666 DCC could not be applicable. This argument is based on the fact that the European Court of Justice, ruled that an exclusion of the provisions to protect the employees is only allowed if the transaction is a result of an insolvency proceeding, whose purpose is the collective and compulsory liquidation of the debtors assets.

The Dutch district court ruled that, the fact that the transfer of the undertaking during bankruptcy was fully prepared before the company was formally declared bankrupt, did not prejudice that (i) the transfer took place after the company was declared bankrupt, and (ii) the purpose of this prepackaged bankruptcy still is the collective and compulsory liquidation of the assets.  Thus, the employees cannot rely on retaining their rights under the employment agreement with the bankrupt employer, in relation to the entity that takes over the undertaking.