On 15 May 2024, Law of Ukraine No. 3677-IX "On Amendments to the Labour Code of Ukraine on Labour Relations in the Course of Transfer of a Business Entity" dated 25 April 2024 ("Law") came into force, regulating succession in labour relations in the event of, inter alia, a change of company ownership.
Key changes
- The Law introduces the term "transfer of a business entity", which means, in particular, a company's change of ownership or its reorganisation (merger, acquisition, division, transformation).
- The Law introduces a new rule stating that in a business entity transfer, the employment relationships "continue with the transferee", which also receives the rights and obligations under the employment agreements between the employees and the seller.
- The Law establishes the obligation of the employer and the transferee to notify employees or their elected representatives (in paper or electronic form) of the forthcoming transfer of a business entity at least 10 business days prior to such transfer and to provide the following information:
- The (estimated) date and reasons for the transfer of a business entity
- The legal, economic and social consequences to employees of such transfer
- The planned actions affecting the employees
- Employees' representatives are given the opportunity to initiate consultations with the employer and/or the transferee on the reasons for the decision to transfer the business entity and its consequences for the employees, as well as on measures to avoid or mitigate the consequences, within five business days of receiving such information.
- The Law requires that employees be notified at least two months in advance of changes in essential employment terms caused by the transfer of the business entity.
Recommendations
We recommend that employers in Ukraine consider the above legislative changes in their business activities, particularly in connection with acquisitions or reorganisations of their companies.
