Employment issues in M&A transactions in Singapore

1. Check whether:

• Whether any special arrangements or employment terms exist between the company involved and its employees relating to a ‘change of ownership’. Provisions may be contained in individual employment agreements (e.g. golden parachutes), collective bargaining agreements or in the company’s internal regulations/rules.  
• If labour/trade unions are recognised by the company, details of the employees who are members of each union, any collective labour agreement(s) and details of information or consultation which has occurred or is proposed with any recognised union representatives. 
• Review the rules or documentation relating to any share options, share incentives or phantom share option schemes and non share‑based incentives, schemes or arrangements in place for the benefit of the involved company‘s employees. 
• Otherwise, there are generally no conditions to be satisfied, and no notifications necessary as there is technically no change of employer

2. Prepare the following in draft form:

• Not applicable, unless any special arrangements or specific employment terms exist.

3. Inform / Notify

• Not applicable, unless any special arrangements or specific employment terms exist.

4. Consult

• Not applicable, unless any special arrangements or specific employment terms exist.

5. Implement

• Not applicable, unless any special arrangements or specific employment terms exist.

1. Check whether:

• Whether any special arrangements or employment terms exist between the involved companies and their employees relating to a ‘change of ownership’. Provisions may be contained in individual employment agreements (e.g. golden parachutes), collective bargaining agreements or in the companies‘ internal regulations/rules;  
• If labour/trade unions are recognised by the company, details of the employees who are members of each union, any collective labour agreement(s) and details of information or consultation which has occurred or is proposed with any recognised union representatives. 
• Review the rules or documentation relating to any share options, share incentives or phantom share option schemes and non share‑based incentives, commission or bonus schemes or arrangements in place for the benefit of the involved companies‘ employees, and details of any employee benefit trust in which any employee is a beneficiary or potential beneficiary. 
• Otherwise, there are generally no consequences for employment conditions, and no notifications necessary as there is no change of employer. 

2. Prepare the following in draft form:

• Not applicable, unless any special arrangements or specific employment terms exist.

3. Inform / Notify

• Not applicable, unless any special arrangements or specific employment terms exist.

4. Consult

• Not applicable, unless any special arrangements or specific employment terms exist.

5. Implement

• Not applicable, unless any special arrangements or specific employment terms exist.

Employees who benefit from general protection under the Employment Act, or “EA Employees“ generally comprise employees earning not more than S$4,500 per month (and expressly excludes seamen, domestic workers and statutory/government board workers).   

Editor’s Note: The Employment Act will undergo several major changes in April 2019 including, among others, the removal of the salary cap of S$4,500 for all employees (except for seamen, domestic workers, public servants and those covered under other legislation due to the nature of their work), meaning the definition of EA Employees will change and the scope of protection widened accordingly.

1. Check whether:

• whether the sale is a mere transfer of assets or if there is a transfer of business or trade on a “going concern” basis.
  • If the transaction is a mere transfer of assets, the employees of the seller will not be transferred across to the purchaser. There are generally no restrictions against the dismissal of such employees, save that the applicable contractual notice (or payment in-lieu of notice) provisions should be complied with. The Employment Act specifies minimum notice periods for EA Employees.
  • If there is a transfer of a business or trade on a "going concern“ basis, the contracts of the EA Employees will be automatically amended from the seller to the purchaser. There is no requirement for the EA Employees to consent to the transfer. Employees who are not EA Employees will have their employment terminated unless their employment contracts are amended to the purchaser or unless new employment contracts are entered into with the purchaser. If the intention is not to retain employees, the applicable contractual notice (or payment in-lieu of notice) provisions should be complied with. The Employment Act specifies minimum notice periods for EA Employees.
• Also check if labour/trade unions are recognised by the company, details of employees who are members of each union, any collective labour agreements and details of information or consultation which has occurred or is proposed with any recognised union representatives. 
• Review the rules or documentation relating to any share options, share incentives or phantom share option schemes and non share‑based incentives, schemes or arrangements in place for the benefit of the involved company‘s employees. 

2. Prepare the following in draft form:

• If there is an automatic novation of EA Employees, to prepare information set out at the first paragraph of section 3 below.  

3. Inform / Notify

•  If there is an automatic novation of EA Employees, as soon as it is reasonable and before the automatic transfer takes place, the seller must inform the affected EA Employees or the trade union representing the employees of the fact that the transfer is to take place, the reasons for it, the implications of the transfer and the measures that will be taken by the seller or purchaser in connection with the transfer.
• Employers who employ at least 10 employees are required to notify the Ministry of Manpower if 5 or more employees are retrenched within any 6-month period beginning 1 January 2017. This applies to permanent employees, as well as contract workers who are contracted on at least 6-month terms. 

4. Consult

• Consultations may take place between the seller and affected employees, or trade unions representing the affected employees.

5. Implement

• Although there is no set time limit specified under Singapore law, the seller is required to notify affected employees or their union within a reasonable time of the impending transfer so as to enable them or their unions to enter into consultations and to ensure that there is continuity of employment when they are transferred to the purchaser, and that their terms of employment are no less favourable than those they had been enjoying before the transfer.
• Retrenchment notifications to the Ministry of Manpower (as described above) must be made within five (5) working days from the date on which the affected employees are notified.

1. Check whether:

• whether the sale is a mere transfer of assets or if there is a transfer of business or trade on a “going concern” basis:
  • if the transaction is a mere transfer of assets, the employees of the seller will not be transferred across to the purchaser. There are generally no restrictions against the dismissal of such employees, save that the applicable contractual notice (or payment in-lieu of notice) provisions should be complied with. The Employment Act specifies minimum notice periods for EA Employees.
  • If there is a transfer of a business or trade on a “going concern“ basis, the contracts of the EA Employees will be automatically amended from the seller to the purchaser. There is no requirement for the EA Employees to consent to the transfer. Employees who are not EA Employees will have their employment terminated unless their original employment contracts are amended to the purchaser or unless new employment contracts are entered into with the purchaser. If the intention is not to retain employees, the applicable contractual notice (or payment in-lieu of notice) provisions should be complied with. The Employment Act specifies minimum notice periods for EA Employees.
• if labour/trade unions are recognised by the company, details of employees who are members of each union, any collective labour agreement and details of information or consultation which has occurred or is proposed with any recognised union representatives.
• Review the rules or documentation relating to any share options, share incentives or phantom share option schemes and non-share‑based incentive schemes or arrangements in place for the benefit of the involved company‘s employees.

2. Prepare the following in draft form:

• If there is an automatic amendment of EA Employees, the purchaser is to prepare appropriate information for the seller to enable the latter to comply with the Employment Act information  obligations, as described in section 3.1. below.

3. Inform / Notify

• If there is an automatic amendment of EA Employees, as soon as it is reasonable and before the automatic transfer takes place, the purchaser must inform the seller of the measures the purchaser intends to take in relation to the affected EA Employees, if any (which the seller will then convey to the affected EA Employees or the trade union representing the employees).

4. Consult

• There are no mandatory consultation requirements for the purchaser to consult with the affected employees.

5. Implement

• Pursuant to the transfer, the purchaser takes over from the seller all rights, powers, duties and liabilities under the employment contract with the employee or with the trade union representing the employees before the transfer; and the purchaser may not change any terms and conditions of employment unless the affected employee resigns.

In Singapore, apart from a share sale or an asset sale, a merger can also take place by way of an amalgamation. In an amalgamation, two or more Singapore-incorporated companies amalgamate and continue as one company. An amalgamation in Singapore may take the form of a short-form (usually an intra-group merger between a parent and subsidiary or between two wholly-owned subsidiaries of the same corporation) or a standard amalgamation (typically between unrelated corporations). Following an amalgamation, the amalgamated surviving company will succeed to all the properties, rights and privileges as well as assume the liabilities and obligations of each of the amalgamating companies, including employment contracts. 

The rules set out in Section B “Asset Deal” would therefore apply in the case of an amalgamation.