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Restructuring: look before you leap

Categories: Restructuring
01/10/2020
 
 

Restructuring step 1: Choose the right reason

Following The Boontje restructering roadmap we announced a series of blog posts earlier this month. Below you will find our infographic, in which the steps to be taken and the timeline are shown schematically.

This blog focuses on step 1: the reasoning. If an employer would like to restructure its business, UWV is the competent authority. UWV only grants permission if the employer can demonstrate that there are business economic reasons. The UWV policy for dismissal due to business economic reasons (only available in Dutch) stipulates that there are six different business economic reasons on the basis of which an employer can substantiate the need for the loss of jobs. A combination of reasons is of course also possible. The reason the employer chooses determines which (degree of) information is required. As such, the reason for the restructuring defines, in a way, the course of the restructuring. It is therefore important to carefully determine in advance which reason or combination of reasons is the most suitable in your situation. Please be referred to the below, in which we will discuss the four most important business economic reasons and the assessment framework of UWV in that regard.

Poor financial situation

If you opt for ‘poor financial situation’, you must demonstrate on the basis of key financial data over the past three financial years that the company is already for a longer period suffering from financial problems. In addition, you must demonstrate that the restructuring is the appropriate solution based on forecasts of changed and unchanged course of action. Therefore, before you choose the reason to substantiate the restructuring, it is important (i) to determine whether you are willing or able to share the requested key financial data; (ii) whether your key financial data actually indicate a poor or deteriorating financial situation; and (iii) whether the forecasts can substantiate the restoration of the financial situations in relation to the proportionality of the labor cost savings. Please appreciate that if your company belongs to a group of companies and the cause of the poor financial situation also or only lies with the group, the key financial data of the group must also be provided.

Structural decrease in work

If you would like to restructure the business because of a structural overstaffing, the reason ‘decrease in work’ is the obvious choice. In that case, you need to demonstrate that there are structural fluctuations in the supply of work and that it is not sound to retain the workforce in light of an efficient business operation. Against this backdrop, you will have to show that one the one hand  you have made efforts to get the work supply (back) at the right level and that there are on the other hand no other possibilities, such as a different setup of the organization, to absorb the fluctuations.

Organizational and/or technological changes

With the third reason, the organizational and/or technological changes, ‘efficient business operations’ is the keyword. You need to demonstrate that in light of efficient business operations you consider it necessary to take measures that result in the loss of jobs. This may be caused by a poor financial situation, but not necessarily. If you intend to outsource work, this can also be considered as organizational changes. You can also choose this reason if you believe that a strategic reorientation of the market is required in order to be able to respond more quickly and easily to new developments. This reason is a good fit to respond to the “new corona reality” and as such currently often chosen. The advantage of this reason is that not all financial or turnover data need to be provided. 

Company closure

In case you are going to end the business activities permanently, you can choose the reason ‘company closure’. The reason may be business related (poor financial situation or decrease in work) or more personal (age, health, lack of succession). Based on information regarding the company’s premises, assets and customer base, you must demonstrate that the business activities will be effectively and permanently terminated. In addition, you must explain whether continuation of the business, e.g. through a transfer of undertaking, is possible. Please appreciate that if you continue the activities elsewhere, in the Netherlands or abroad, this does not constitute as ‘company closure’, but a special form of ‘organizational changes’ (see above).

If you consider to restructure the business, please think carefully on the reason or combination of reasons you will choose. It is not only important that the reason is in line with your considerations to restructure, but also available and/or necessary data to demonstrate the reasoning play an important role. Therefore, look before you leap.

Would you like to know more?

Would you like to know more about the different steps to be taken in case of a restructuring? Contact Yvette Dissel (dissel@boontjeadvocaten.nl)or Stéphanie Spoelder (spoelder@boontjeadvocaten.nl). You can also contact them by telephone on 020 – 572 7190. Our Corona Restructuring Team remains at your disposal.

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