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Russell Advocaten B.V.
Amsterdam, Netherlands

Business owners have to request the advice of the works council well in advance of a merger or takeover decision. But what exactly does well in advance mean?

Business owners have to request the advice of the works council (OR) well in advance of a merger of takeover decision. If the business owner fails to make the request for advice timely, the Enterprise Chamber may require him or her to withdraw the decision. Therefore, it is crucial to follow the advisory path correctly and consult the works council well in advance. However, the question is what does “well in advance” mean exactly.

Not Too Early, But Not Too Late Either

This question turns out to be difficult to answer. On the one hand, the advice must still be able to have ‘significant effect’ for the future decision, but on the other hand the proposed decision must be rather ‘concrete’. So when are both requirements met?

Concreteness: Not Too Early

Before requesting the works council’s advice on a decision, entrepreneurs have to investigate and prepare the decision. In addition, a decision has to be sufficiently motivated. This way, the entrepreneur ensures the concreteness of the proposed decision.

Significant Effect: Not Too LatA

An entrepreneur is likely to investigate several options with regard to a proposed merger or takeover. If the request for advice is submitted after he or she has made a choice, it may be too late. However, that does not need to be so as the advice of the works council can still have significant effect. What is important is that the actions the business owner has taken in the preparatory stage can be reversed. This shows, that the entrepreneur has allowed room for another decision than proposed by him.

Recent decisions of the Enterprise Chamber show that when an entrepreneur has made arrangements with third parties to prepare his or her proposed decision, the request for advice could soon be too late. For example, the works council has to be given the opportunity to render advice before an agreement is signed containing the intention of a proposed merger (letter of intent). A request for advice can no longer be of significant effect if an agreement is concluded containing binding provisions with a penalty clause and/or that the advice of the works council will be set aside if negative. Thus the request for advice would be reduced to a formality.

Our Advice

If you, as an entrepreneur, intend to take a decision requiring the works council’s advice, we recommend you involve the works council in the preparation in due time. You can also agree on a special confidentiality obligation for sensitive negotiations.

More information

Would you like to know whether a request for advice was submitted in due time? Or do you have questions regarding the right to be consulted and other rights of the works council? Please contact us.