Employment issues in M&A transactions in Spain

1. Check whether:

• employees‘ representatives exist;
• stock plan awards may be affected by the share deal;
• collective bargaining agreements and/or other collective agreements or internal regulations apply, and the specific conditions laid down in these agreements or regulations;
• the company is compliant with all applicable employment, social security or health and safety regulations or a risk or contingency is detected during the due diligence process;
• any individual employees or groups of employees enjoy special rights as a result of the share deal;
• the share deal is to be combined with a merger or asset deal;
• the share deal may involve a restructuring or other employment measures.

2. Prepare the following in draft form:

• If the share deal involves a restructuring of the company’s staff or the implementation of other employment measures (e.g. a substantial modification of working conditions), the general information and consultation procedures to implement these measures will apply to the target.
• A mere share deal itself is not subject to specific information requirements. However, it is common practice to inform the employees‘ representatives about the change of ownership of the company (normally this information is delivered by the target). There are no specific formalities in this respect.
• Additional documents may be required if, as described in the sixth paragraph of section 1, the share deal is to be combined with a merger or asset deal. For details, please see Section B. Asset Deal and Section C. Merger.

3. Inform / Notify

• Forward the information drafted to the respective addressees if section 1 ( sixth or seventh paragraph) apply.
• Likewise, inform the employees‘ representatives, if any, about the share deal although no express requirement exists (normally this information is delivered by the target).

4. Consult

• No consultation requirements to be followed by the purchaser.

5. Implement

• Implementation following information if so required.

1. Check whether:

• employees‘ representatives exist;
• stock plan awards may be affected by the share deal;
• collective bargaining agreements and/or other collective agreements or internal regulations apply, and the specific conditions laid down in these agreements or regulations;
• any individual employees or groups of employees enjoy special rights as a result of the share deal;
• the share deal is to be combined with a merger or asset deal;
• the share deal may involve a restructuring or other employment measures.

2. Prepare the following in draft form:

• If the share deal involves a restructuring of the company’s staff or the implementation of other employment measures (e.g. a substantial modification of working conditions), the general information and consultation procedures to implement these measures will apply. In such case, the relevant documentation to fulfil these information and consultation procedures will need to be prepared.
• A mere share deal itself is not subject to specific information requirements. However, it is common practice to inform the employees‘ representatives about the change of ownership of the company. There are no specific formalities in this respect.
• Additional documents may be required if, as described in the sixth paragraph of section 1, the share deal is to be combined with a merger or asset deal. For details, please see Section B. Asset Deal and Section C. Merger.

3. Inform / Notify

• Forward the information drafted to the respective addressees if the sixth paragraph of section 1 or the seventh paragraph of section 1 apply.
• Likewise, inform the employees‘ representatives about the share deal although no express requirement exists.

4. Consult

• No consultation requirements unless the sixth paragraph of section 1 or the seventh paragraph of section 1 apply.

5. Implement

• Implementation following information if so required.

1. Check whether:

• the asset deal leads to a transfer of undertakings as defined in Article 44 of the Spanish Workers’ Statute and Council Directive 2001/23/EC (i.e. transfer of an autonomous economic unit, meaning an organised grouping of resources with the objective of pursuing an essential or ancillary economic activity, which retains its identity after the transfer);
• collective bargaining agreements and/or other collective agreements, internal regulations or employment contracts include specific conditions applicable to the asset deal;
• any individual employees or groups of employees enjoy special rights as a result of the asset deal;
• any measures affecting the employees – such as dismissals, salary reductions or any other substantial modification which may have a negative impact on the employees‘ employment conditions – are intended.

2. Prepare the following in draft form:

• the following in draft form:
• if the first paragraph of section 1 above applies, the seller shall inform the employees‘ representatives of the affected employees (or the employees that may be affected if there are no employees‘ representatives) in good time and in detail about the following aspects:

1. the date of the transfer;
2. the reasons for the transfer;
3. the legal, economic and social implications/consequences of the transfer for the employees;
4. any measures being planned in relation to the employees.

• If the fourth paragraph of section 1 applies, an information and consultation period will have to be initiated before the measures are undertaken. Therefore, additional documentation may have to be prepared for these purposes.

3. Inform / Notify

• the employees‘ representatives of the affected employees (or the employees that may be affected if there are no employees‘ representatives).
• This information shall be provided “in good time”, being common practice in general terms 15 days prior to the date of the transfer.

4. Consult

• the employees‘ representatives only if the fourth paragraph of section 1 applies.

5. Implement

• Implementation following proper information.

1. Check whether:

• the asset deal leads to a transfer of undertakings as defined in Article 44 of the Spanish Workers’ Statute and Council Directive 2001/23/EC (i.e. transfer of an autonomous economic unit, meaning an organised grouping of resources with the objective of pursuing an essential or ancillary economic activity, which retains its identity after the transfer);
• collective bargaining agreements and/or other collective agreements, internal regulations or employment contracts include specific conditions applicable to the asset deal;
• the company is compliant with all applicable employment, social security or health and safety regulations or a risk or contingency is detected during the due diligence process;
• any individual employees or groups of employees enjoy special rights as a result of the asset deal;
• any measures affecting the employees – such as dismissals, salary reductions or any other substantial modification which may have a negative impact on the employees‘ employment conditions – are intended.

2. Prepare the following in draft form:

• If the first paragraph of section 1 applies, the seller shall inform the employees‘ representatives of the affected employees (or the employees that may be affected if there are no employees‘ representatives) in “good time”, being common practice in general terms 15 days prior to the date of the transfer and in detail about the following aspects:

1. the date of the transfer;
2. the reasons for the transfer;
3. the legal, economic and social implications/consequences of the transfer for the employees;
4. any measures being planned in relation to the employees.

• If the fifth paragraph of section 1 applies, an information and consultation period will have to be initiated before the measures are undertaken. Therefore, additional documentation may have to be prepared for these purposes.

3. Inform / Notify

• the employees‘ representatives of the affected employees (or the employees that may be affected if there are no employees‘ representatives).
• This information shall be provided “in good time”, meaning in general terms 15 days prior to the date of the transfer.

4. Consult

• the employees‘ representatives only if the fifth paragraph of section 1 applies.

5. Implement

• Implementation following proper information.

1. Check whether:

• the merger leads to a transfer of undertakings as defined in Article 44 of the Spanish Workers’ Statute and Council Directive 2001/23/EC (i.e. transfer of an autonomous economic unit, meaning an organised grouping of resources with the objective of pursuing an essential or ancillary economic activity, which retains its identity after the transfer);
• collective bargaining agreements and/or other collective agreements, internal regulations or employment contracts include specific conditions applicable to the merger;
• the companies are compliant with all applicable employment, social security or health and safety regulations or a risk or contingency is detected during the due diligence process;
• any individual employees or groups of employees enjoy special rights as a result of the asset deal;
• any measures affecting the employees – such as dismissals, salary reductions or the harmonisation of working conditions which may have a negative impact on the employees‘ employment conditions – are intended.

2. Prepare the following in draft form:

• The companies must inform the employees‘ representatives of the affected employees (or the employees that may be affected if there are no employees‘ representatives) regarding the following aspects:

1. the date of the merger;
2. the reasons for the merger;
3. the legal, economic and social implications/consequences of the transfer for the employees;
4. any measures being planned in relation to the employees.

• the following documents to be uploaded to the company’s website or made available to the employees’ representatives:

1. common draft terms of the merger;
2. the directors‘ reports, if applicable;
3. reports by independent experts, if applicable;
4. the company’s annual accounts and management reports for the past three years, including audit reports, if applicable;
5. the balance sheet of the merger where different to the last balance sheet, including, if applicable, the audit report or, in the case of listed companies, the half-year report;
6. the company’s bylaws and any other relevant document to will be included in the public deed;
7. the draft version of the new company’s by-laws;
8. the identification of the directors of the companies participating in the merger, the date of their appointment and the same information for the directors of the new company;

• If the merger potentially affects the volume of employment, the employees’ representatives are entitled to issue a non-binding report giving their opinion on the merger within 15 days. However, the deal is not subject to the consent or advice of the employees‘ representatives. For these purposes, the company shall provide the relevant information to the employees‘ representatives and request this non-binding report.
• If section 1.5. applies, an information and consultation period will have to be initiated before the measures are undertaken. Therefore, additional documentation may have to be prepared for these purposes.

3. Inform / Notify

• The employees‘ representatives of the affected employees (or the employees that may be affected if there are no employees‘ representatives) shall receive the information included in the first paragraph of section 2 when publishing the call to the general shareholders meetings that shall adopt the resolutions on the merger.
• The company shall make available the documents included in the first paragraph of section 2 before the invitation to the shareholders‘ meeting is published.

4. Consult

• the employees‘ representatives only if the fifth paragraph of section 1 applies.

5. Implement

• Implementation following proper information.