Acquiring a business on insolvency can have pitfalls, especially if it involves an employee occupational pension scheme. Will the German Federal Labour Court’s case law, which is favourable to acquirers, continue to apply following a recent European Court of Justice decision?

The promise of a company pension makes companies an attractive employer for (potential) employees. However, if a company is to be sold at some point, the pension obligations can become a dealbreaker from the buyer’s point of view. Particularly when it comes to the takeover of a business (or part of a business) from insolvency, the prospect of taking on extensive, long-term burdens from pension obligations as an acquirer does not seem very enticing. The case law of the German Federal Labour Court, according to which the liability of the acquirer of an insolvent business (or part of an insolvent business) for occupational pension benefits is clearly limited, has so far eased this to a great extent. But can the German Federal Labour Court stick to this approach in view of new impulses from the European Court of Justice?

The acquirer’s liability for occupational pension benefits
The rights and obligations arising from employment relationships which pass to the acquirer of the business pursuant to s613a (1) of the German Civil Code also include the pension commitments made by the transferor. If an employee who has been taken over retires after the transfer of the business, s/he can therefore in principle claim the full amount of the promised occupational pension from the acquirer, even if s/he earned the majority of his pension entitlements during his employment with the transferor. That is the basic principle.

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