Once again, the cleaning sector gives rise to new and interesting judicial developments. The Supreme Court has clarified, through ruling 873/2018 of 27 September 2018, that where labour is an essential factor in the entity being transferred, the business succession rules under Article 44 of the Workers' Statute apply — not Article 148 of the Insolvency Act governing liquidation plan rules.
Consult our specialist insolvency lawyer.
Written by Josep Conesa
Employment and insolvency lawyer
In summary:
First. — There is a transfer of a company falling within Article 44 of the Workers' Statute where a change of contractor is accompanied by the transfer of an economic entity between the outgoing and incoming companies.
Second. — In activities where labour constitutes an essential factor, the assumption of a significant proportion of the staff assigned to the contract (whether in quantitative or qualitative terms) triggers the application of Article 44 of the Workers' Statute.
Third. — Where (as in this case) labour — rather than infrastructure — is the determining factor, subrogation only applies if there is such an assumption of a significant proportion (quantitatively or qualitatively) of the workforce.
Fourth. — The fact that the assumption of a significant proportion of the workforce arises from the requirements of the collective bargaining agreement does not preclude the application of the above doctrine.
Accordingly, in accordance with the Supreme Court, what matters are the facts and circumstances of each case, meaning it will be necessary to establish whether the set of organised resources constituting a company has labour as its essential factor.
Article 146 bis of the Insolvency Act: Specific rules on the transfer of productive units.
1. In the event of a transfer of productive units, the rights and obligations arising from contracts linked to the continuation of the professional or business activity that have not been subject to a termination request shall pass to the acquirer. The acquirer shall be subrogated to the contractual position of the insolvent company without requiring the consent of the other party. The assignment of public administrative contracts shall take place in accordance with the provisions of Article 226 of the consolidated text of the Public Sector Contracts Act, approved by Royal Legislative Decree 3/2011 of 14 November.
2. Any licences or administrative authorisations linked to the continuity of the business or professional activity and included as part of the productive unit shall also be transferred, provided the acquirer continues the activity on the same premises.
3. The provisions of the two preceding paragraphs shall not apply to those licences, authorisations or contracts in respect of which the acquirer has expressly stated its intention not to assume the corresponding obligations. This is without prejudice, for employment law purposes, to the application of Article 44 of the Workers' Statute in cases of business succession.
4. The transfer shall not entail any obligation to pay debts left unsatisfied by the insolvent party prior to the transfer, whether these are insolvency-related debts or claims against the insolvency estate, unless the acquirer has expressly assumed such obligation or a legal provision provides otherwise, and without prejudice to the provisions of Article 149.4.
The exclusion described in the preceding paragraph shall not apply where the acquirers of the productive units are persons with a special relationship to the insolvent party.
Article 149. Statutory liquidation rules.
4. Where, as a result of the disposal referred to in Rule 1 of paragraph 1, an economic entity retains its identity — understood as a set of organised resources intended to carry out an essential or ancillary economic activity — this shall be deemed, for employment and Social Security purposes, to constitute a business succession. In such cases, the court may order that the acquirer shall not be subrogated in respect of that portion of outstanding wages or compensation due prior to the disposal that is assumed by the Wage Guarantee Fund (Fondo de Garantía Salarial) in accordance with Article 33 of the Workers' Statute. Likewise, in order to ensure the future viability of the activity and the preservation of employment, the transferee and employee representatives may conclude agreements modifying collective working conditions.
We include a link to the full ruling for your reference:
Link to full insolvency proceedings information
If you would like to learn more about company succession, click here.
We are lawyers specialising in insolvency proceedings, pre-insolvency procedures, and express insolvency proceedings ....
Contact us via this link
