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    No Works Council consultation rights in case of a restart following a 'technical' bankruptcy

    On 23 December 2015 DA Retailgroep B.V. ('DA') was granted a moratorium of payments (surséance van betaling). Immediately after, its court-appointed administrator (bewindvoerder) engaged in third party negotiations to explore a possible sale and restart of its business.

    Following summary due diligence by five parties, indicative offers were made. On 29 December 2015 DA was declared bankrupt, its over 200 employees were dismissed and its business sold to a third party, who offered employment to part of the workforce subject to less favorable conditions, leaving dozens unemployed.

    The Works Councils Act provides that, in the event of a proposed change of control (whether by means of a share or asset transaction), the works council should be consulted in advance, such that its advice may be of material influence on the change of control decision. This consultation right also applies in a moratorium, but - although not set aside by law - is rarely applied in bankruptcy situations, where protection of employment no longer applies. DA's Works Council challenged the trustee's decision to sell (an important part of) its business immediately following the 'technical' bankruptcy as it had not been consulted in respect of such sale.

    On 27 May last, the Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer) decided that such consultation right is, in principle, incompatible with the responsibilities of a trustee in bankruptcy (curator). Though the trustee will generally take employee interests into account as well, as in this case where a somewhat higher offer was turned-down, his primary responsibility is to wrap-up the estate in the interest of the joint creditors. Whether and, if so, in which situations exceptions to said principle are conceivable is explicitly left open by the Court as, in this case, the business was not continued by the trustee following the bankruptcy.

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