Certain labor law provisions are particularly relevant when acquiring or selling an ongoing business in Spain. For example, if a business is transferred, both the seller and the buyer are jointly and severally liable for labor claims which arose prior to the sale for a period of three years thereafter. When a business is transferred, the employees are also transferred, and the new employer is subrogated in the former employer’s labor and social security rights and obligations, including pension commitments, as provided in the legislation specific thereto and, in general, in many employee welfare and supplementary obligations as the former employer may have entered into.

The seller and buyer must previously inform their respective employees of the transfer.

The information must at least comprise the following:

– Proposed date of transfer.

– Reasons for the transfer.

– Legal, economic and social consequences of the transfer for the employees.

– Measures envisaged for the employees.

If there are no elected representatives at the affected companies, the information must be supplied directly to the employees affected by the transfer.

There is also an obligation (applicable to both the seller and the buyer) to arrange for a period of consultations with elected employee representatives where, as a result of the transfer, labor measures are adopted for the personnel affected.

The consultation period will address the measures envisaged and their consequences for the employees and must be arranged sufficiently in advance of the date on which such measures are to be taken.

If the change in ownership results in significant changes in business activities, philosophy or management, senior management personnel may be entitled to terminate their employment within three months following the occurrence of these changes and to receive an indemnity equal to seven days’ pay per year worked, up to a maximum of six months’ pay, or such indemnity as may have been agreed on with each senior executive.