Transfer of an undertaking shortly before bankruptcy? Not without sufficient evidence

When a business ceases its activities and another business continues part of those activities, this may constitute a transfer of an undertaking. But when is this actually the case? In a recent judgment of the Gelderland District Court (ECLI:NL:RBGEL:2026:7995), the central question was whether it was sufficiently plausible that a transfer of an undertaking had taken place. Even where the UWV and the liquidator consider that a transfer of an undertaking has occurred, the court may conclude that further evidence is required. But what does this mean for the employees concerned?

What were the facts of the case?

An employee worked for a company engaged in the production of confectionery. The company ceased its activities on 1 April 2026 and was declared bankrupt on 21 April 2026. According to the employee, another company, which was already a customer, had taken over the activities before the bankruptcy. He pointed to the takeover of business assets, staff and customers, and the continuation of production.

Through his lawyer, the employee argued that his employment contract had transferred to the new company by operation of law as a result of that transfer. He therefore claimed payment of outstanding wages and holiday allowance. His argument was, in essence, that the transfer had already taken place before the declaration of bankruptcy, so the bankruptcy exception did not prevent his employment contract from transferring.

Why does the timing of the transfer matter?

Normally, a transfer of an undertaking automatically transfers the rights and obligations arising from employment contracts to the transferee. Article 7:666(a) of the Dutch Civil Code provides an exception where the employer has been declared bankrupt and the undertaking forms part of the bankruptcy estate. These employee protections therefore do not, in principle, apply to an acquisition out of bankruptcy. The position is different if the transfer has already taken place before the declaration of bankruptcy.

Ruling of the subdistrict court

The subdistrict court refers to Article 7:662 of the Dutch Civil Code. A transfer of an undertaking requires the transfer of an economic entity that retains its identity. Various circumstances are relevant to this assessment, including the nature of the undertaking, the takeover of business assets and staff, the continuation of activities and the takeover of the customer base.

However, the new company disputed that it had actually taken over the business activities. It maintained that it had merely brought its own production, which had previously been outsourced, back in-house. This accounted for approximately 15% of total production. It also disputed that it had taken over the former company’s customer base.

According to the subdistrict court, these disputes would very probably require further evidence in proceedings on the merits concerning, among other things, the assets acquired, production activities, customer base and staff. There was no scope for such evidence-taking in these summary proceedings. On the basis of the parties’ submissions and the documents provided, it was therefore not sufficiently plausible that the employee was entitled to payment of wages by either of the defendant companies as a result of a transfer of an undertaking. The claims were dismissed. This does not definitively establish that no transfer occurred: further examination in proceedings on the merits may be needed.