Current legal framework

The main rule in case of a transfer of undertaking, based on Directive 2001/23/EC (the EU Directive) and the Dutch implementation thereof, is that all employees who belong to the undertaking will be transferred to the transferee by operation of law (read: automatically), while retaining their rights and obligations under the existing employment agreement. This rule does not apply in case of a transfer of an undertaking that occurs after bankruptcy (section 7:666 Dutch Civil Code (DCC), wich effectively creates a restart of the business). This exception is based on Article 5(1) of the EU Directive, which stipulates that the protective rules of the EU Directive do not apply if the transfer takes place in bankruptcy proceedings or in similar proceedings that are aimed at liquidation. Member States are however allowed to decide otherwise in their national legislation, which is currently intended with the WOVOF.

The WOVOF

The WOVOF aims to increase the protection of employees in case of a restart (in Dutch: doorstart) in bankruptcy, by introducing a new regime regarding a transfer of an undertaking in bankruptcy. Amongst other things, the draft bill aims that, in principle, all employees of the bankrupt employer shall transfer to the acquirer in case of a transfer of the undertaking following bankruptcy.  To effectuate this, the acquirer is obliged to offer the employees a new employment agreement under the same terms and conditions of employment that applied to them before the bankruptcy. Only if there are objective business economic circumstances that necessarily lead to redundancies, the acquirer does not have to offer employment agreements to all employees.

Recent developments on employee rights in a restart during bankruptcy

The position of employees in a restart of the business via a bankruptcy process (specifically for example in so-called ‘pre-pack’ procedures) has been subject to discussions for a long time. We also refer to our earlier news blogs (Draft bill on transfer of undertaking in bankruptcy) and (ECJ Judgment in Heiploeg/FNV).

The legislative process of the WOVOF resumed in May 2024 with a second internet consultation.[1] Meanwhile, the EU Council confirmed and circulated the final text of the Harmonisation Directive on 5 December 2025, introducing minimum harmonisation rules for pre-pack procedures, including a provision that the liquidation phase of a pre-pack procedure must be regarded as a liquidation procedure aimed at liquidating the transferor’s assets.[2]

The advisory opinion of the CoS

Under Dutch law, the CoS has to provide advice to the government in respect of any legislative proposal. In respect of the WOVOF, the CoS issued critical comments and advised addressing such comments before submission of the legislative proposal to the House of Representatives (Tweede Kamer). While acknowledging the goal of protecting employees and preserving jobs, the CoS warns that the regime may be overly complex, particularly for SMEs.

Key concerns include:
  1. The draft bill proposes an exception to acquirers of small enterprises, that may optionally decide whether to apply the regulations under the WOVOF. The CoS questions the choice to base this exception on the size of the bankrupt company instead of the size of the acquirer of the business. Also, the additional obligations imposed when making use of the exception in case of a transfer of a small business also raises concerns. The burden of these additional obligations could hinder the completion of the transfer of a business.
  2. As stated above, the draft bill includes an exception where, if there are objective business economic circumstances that necessarily lead to redundancies, the acquirer is not required to offer employment contracts to all the employees of the bankrupt business. To determine which employees are offered contracts, the draft bill proposes a selection method referred to as the inspiegelingsmethode. This selection method is essentially the reverse of the selection method applied under Dutch dismissal law when positions are terminated for business economic reasons (the so-called afspiegelingsbeginsel). The CoS expresses reservations about the complexity of this selection method. The CoS notes that encouraging the transfer of employees in bankruptcy could be a reason to apply less strict rules. Also, the explanatory memorandum does not sufficiently justify why the alternative method – where selection is based on a business plan prepared by the intended acquirer and approved by the supervisory judge – is not adopted as the main rule.
  3. When the bankruptcy trustee has terminated the employment contract before the undertaking is transferred, the draft bill requires the acquirer to offer the employee a new employment contract with the same terms. The CoS points out that this adds an administrative burden on the acquirer (especially SME businesses) and places excessive demands on employee’s ability to act. As an alternative, the CoS suggests that it could be considered to eliminate the bankruptcy trustee's notice of termination, resulting in employment contracts to transfer by operation of law, unless the employee objects.
  4. Lastly, the draft bill fails to address the consequences of the Harmonisation Directive, which includes provisions that may (indirectly) impact the WOVOF. It is recommended that an explanation is included in the explanatory memorandum. Finally, it is mentioned that the evaluation clause should be set out in greater detail.

Conclusion

Amendments to the current draft bill appear necessary following the critical comments from the CoS. With the Harmonisation Directive now adopted, it remains to be seen whether the WOVOF will (still) proceed and in what form.

[1]      The legislative process was put on hold, pending the answers to preliminary questions submitted by the Dutch Supreme Court to the European Court of Justice on 29 May 2020 in the Heiploeg case.

[2]      In this news blog, we will not focus on the content of the Harmonisation Directive in detail.