Government submits proposal to safeguard position of employees in cross-border restructuring of companies

The proposal is based on an EU directive that safeguards the position of employees when an employer plans or implements a cross-border restructuring of business. A cross-border restructuring can involve a merger of companies, division of a company or transfer of a registered office.

On 13 October 2022, the Government submitted to Parliament its proposal to implement the provisions on safeguarding the position of employees under the EU Directive relating to certain aspects of company law concerning limited liability companies. 

The aim of the proposal is to safeguard the position of employees when the employer company plans or implements a cross-border merger, division or transfer of registered office. The provisions would ensure the:

• continuity of employees’ rights based on employment relationship
• existing right of employees to administrative representation 
• consultation of and provision of information to employees when the employer prepares a corporate restructuring

Employees’ participation rights

The EU Directive aims to ensure the participation and representation of employees in company administration. The provisions on employee representation in company administration differ in the EU countries, and not all countries provide for employee representation. 

According to the Finnish Act on Co-operation within Undertakings, employees have the right to appoint a representative to the administration of the employer company if the company has more than 150 employees. With regard to cross-border restructurings, the Finnish regulation also safeguards the continuity of employee representation in administration during mergers and divisions of companies. The Government now proposes that the regulation also cover the transfer of a company’s registered office, as required by the Directive.

In principle, Finnish legislation would apply to companies that result from a cross-border restructuring with the registered office in Finland. In certain situations, however, the procedures applicable to European companies would apply.

Employees to be consulted and informed about the plans

The Directive requires that employees are informed in a timely manner and that they are consulted on the planned corporate restructuring. The Government proposes that companies inform employees and consult them before the general meeting discusses a report or plan concerning the position of employees in a corporate restructuring. 

The employees should also be given a reasoned reply to any comments they have made to the report or plan before a decision is made on the restructuring.

Continuity of employer obligations

Employer’s obligations include the payment of wages determined in the collective agreement and obligations related to labour law, occupational safety and health, and the funding of social security. The government proposal will ensure that these obligations continue in cross-border restructurings, as required by the Directive. 

In a transfer of business, the provisions concerning a transfer of business under the Employment Contracts Act and the Seafarers’ Employment Contracts Act will apply. According to the government proposal, a company that will be formed in a merger and a company transferring its registered office will be responsible for employer obligations in other cases too. 

In a division of a company, the draft terms of division should specify which of the companies resulting from the division will act as the employer for which employees and be responsible for the continuity of the terms of the employment relationship and other employer obligations. 

The Government’s proposed amendments would enter into force on 31 January 2023. The Directive also requires provisions of company law that will be implemented with a government proposal submitted by the Ministry of Justice on 19 September 2022. 

Inquiries: 
Liisa Heinonen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. + 358 29 506 4131