Introduction: Legal challenges when acquiring insolvent businesses and occupational pension schemes
The acquisition of a company from insolvency presents buyers not only with economic, but also with complex legal challenges. In particular, liability for occupational pension obligations (bAV) is regularly the subject of judicial disputes and is the focus of current decisions of the Federal Labor Court (BAG). The takeover of a business also means, under certain conditions, the assumption of obligations towards employees – this regularly includes claims arising from occupational pension schemes. But what happens if the seller becomes insolvent and the Pensions-Sicherungs-Verein (PSV) assumes benefits? The BAG most recently addressed this issue in its judgment of 26 January 2021 (3 AZR 139/17).
Transfer of business and liability for company pensions: fundamentals and recent case law
Scope of § 613a BGB in business transfers
If a business or part of a business within the meaning of § 613a para. 1 sentence 1 of the German Civil Code (BGB) is transferred to a new owner, the latter, by operation of law, enters into the rights and obligations arising from the employment relationships existing at the time of the transfer. This generally also applies to pension commitments made to employees. Their claims become part of the transferred employment relationship, which often leads to difficulties in the context of insolvency situations when deferred or ongoing pension payments are involved.
Insolvency of the seller: entry of the PSV and consequences
If the former employer becomes insolvent, the security system under the Company Pension Schemes Improvement Act (BetrAVG) comes into effect, which covers obligations arising from direct commitments and support funds through the Pensions-Sicherungs-Verein (PSV). In such cases, the PSV replaces the claims of the pension beneficiary, insofar as these have not been transferred to the new business owner. Especially at this interface, recent court decisions allow for a more precise balancing of liability risks.
Key statements of the BAG: No direct claim against the business acquirer after entry of the PSV
According to the BAG decision of January 26, 2021, the purchaser of a business is generally not liable for company pension claims arising from a period before the insolvency-related business transfer if the PSV has already assumed its liability. The purpose of this regulation is to limit the acquirer’s liability to the point in time of acquisition and, at the same time, to ensure the functionality of insolvency protection under the BetrAVG. Accordingly, the acquirer is only liable for pension claims earned after the business transfer and not secured by the PSV.
Detailed analysis of liability and the differentiation of individual legal grounds for claims
Extent of liability and claims under occupational pension schemes
According to § 613a BGB, the liability of the business acquirer extends to all contractual employment obligations, but, according to prevailing opinion, does not include those claims that have already been triggered and transferred to the PSV under the insolvency protection system. Thus, the period prior to the business transfer is covered by the PSV’s obligation to secure. For the period after the transfer, the new owner generally bears the pension risk and is responsible for further entitlements and obligations arising from the employment relationship.
Limitation periods, objections, and statute of limitations
It is noteworthy that the BAG has determined that the assertion of occupational pension claims against the acquirer is subject to limitations, such as contractual exclusion periods or statutory limitation. Insofar as the PSV is already providing benefits, the beneficiary’s claim against the acquirer is, in the view of the court, generally excluded.
Practical relevance: Structuring and risk analysis in corporate acquisitions
For companies, investors, and acquirers, knowledge of the liability-limiting effect of current BAG case law is essential. The distinction between pension claims that already existed in insolvency and are covered by the PSV, on the one hand, and newly earned (future) entitlements, on the other, enables a more precise risk analysis in company acquisitions. These decisions also provide important guidance for drafting transaction documentation, particularly with regard to guarantees and indemnity clauses.
Summary and outlook
Through its established case law, the BAG has clarified that business acquirers are not liable for legacy liabilities from occupational pension schemes if and to the extent that the Pensions-Sicherungs-Verein has already assumed liability due to the insolvency of the former employer. This offers companies and acquirers of insolvent businesses a certain protection against unforeseeable subsequent claims, but also sets higher requirements for careful review and documentation in the context of M&A transactions.
The substantive legal situation remains shaped by the circumstances of individual cases, so the assessment of the scope of liability must always be made at the interface between labor and insolvency law. In particular, additional challenges may arise in cross-border scenarios or group structures.
If you have specific questions about taking over businesses from insolvency or liability for occupational pension schemes, the Rechtsanwalt at MTR Legal with their extensive experience in commercial law are at your disposal.
