Employment issues in M&A transactions in Peru

• In general, no consequences for working conditions and no notifications are necessary as there is no change of employer. But check whether:  
  • any individual employee or groups of employees enjoy special rights as a result of the share deal (e.g. golden parachute rights, compensation rights in the event of a share deal, stock option rights, among others), which may be set out in an individual employment contract, collective agreement, internal regulation of the target, etc.  
  • a mere share deal is intended, or whether the deal is to be combined with an operational change to a business unit of the purchaser. The latter may trigger additional information/consultation requirements.  
  • any risks are identified during the due diligence process carried out on the target company (e.g. any pending employment-related litigation, inspections by labour control authorities, etc.).  

• Not applicable, unless stated otherwise in the individual employment agreement, collective bargaining agreement or internal regulations in force at the target company.

• Not applicable, unless stated otherwise in an individual employment agreement, collective bargaining agreement or internal regulations in force at the target company.  

•  The purchaser is not obliged to consult with the employees of the target company.  

• Closing formalities regarding the execution of a share deal, such as filing the registration of the operation carried out between the parties in the shareholder register book, issuance of the share certificates, approvals of the competition authority (if applicable), etc. However, these would not normally trigger direct obligations related to employees.

• In general, no consequences for working conditions and no notifications are necessary as there is no change of employer. But check whether:  
•  any individual employee or groups of employees enjoy special rights as a result of the share deal (e.g. golden parachute rights, compensation rights in the event of a share deal, stock option rights, among others), which may be set out in an individual employment contract, internal regulation of the target, etc.  
• a mere share deal is intended, or whether the deal is to be combined with an operational change to a business unit of the purchaser. The latter may trigger additional information/consultation requirements.  

• No documents need to be prepared unless stated otherwise in the individual employment agreement, collective bargaining agreement or internal regulations in force at the target company. 

• Not applicable, unless stated otherwise in the individual employment agreement, collective bargaining agreement or internal regulations in force at the target company.  

• Not applicable, unless stated otherwise in the individual employment agreement, collective bargaining agreement or internal regulations in force at the target company.  

• Closing formalities regarding the execution of a share deal, such as filing the registration of the operation carried out between the parties in the shareholder register book, issuance of the share certificates, approvals of the competition authority (if applicable), etc. However, these would not normally trigger direct obligations related to employees. 

• sufficient reserves have been accrued to cover all theoretical fringe benefits and any company pension or similar entitlements at the time of the deal.  
• one or more employees will be transferred to the purchaser of the assets as a result of the contemplated transfer.  
• the working conditions derived from individual and/or collective bargaining agreements (including pension schemes) are applicable to employees affected by the transfer.  
• the relevant employment files and information in connection with the transferred employees are complete and up to date. 
• there are any obligations still outstanding from the employment of staff to be taken over, such as pending court disputes with former and existing employees, etc.  
• any measures affecting the employees – such as dismissals, salary reductions or any other substantial modification that may have a negative impact regarding the working conditions of the employees – is intended once the transaction is implemented. If this is the case, the employees must be informed and consulted in good time prior to a decision over such measures being taken.  
• It is important for the seller to identify the employees to be transferred jointly with the asset(s) in order to allow the seller and the purchaser to take appropriate measures allocating the workforce in a mutually acceptable way. 

• Although no contractual agreement is legally required, if, as a direct consequence of the sale of the assets, all affected employment relationships are transferred from the seller to the buyer, it is advisable to prepare the following documents: 
  • a Transfer Agreement between the seller and purchaser. Further representations and indemnities are usually included in the pointed agreement on behalf of the purchaser. 
  • notification letters to the employees providing for:
    1. the change related to the new employer (i.e. the purchaser) and the respective date on which this change is to be implemented;
    2. the possible legal implications derived from the transfer.  
  • a Tripartite Agreement between the seller, the purchaser and the employees to be transferred in which the employees agree to terminate their employment relationship with the seller and enter into a new employment relationship with the buyer.
• the relevant information pursuant to any individual or collective bargaining agreement, or internal regulations of the seller (if applicable) subject to be transferred. 
• the liquidation of social benefits of the workers who will cease to work for the seller. 
• the employee's certificate of employment, the certificate of income and income tax withholdings, and the certificate of termination for the employee to withdraw his compensation for time of services from the depositary bank. 

• Prior to transfer, all affected employees must be provided with certain written information in advance. Such information must include the name of the new employer (i.e. the purchaser), the date of the transfer and the legal consequences thereof.  
• Once the transfer of personnel has taken place, the seller must register in the electronic payroll the termination of all transferred employees, whereby the termination of their employment relationship is automatically notified to the social health insurance and, if applicable, to the state pension entity. In addition, the seller shall deliver to them the certificates mentioned in the forth paragraph of section 2 and inform the respective private pension fund of its termination. 
• Inform the trade union representatives and employees’ representatives if stated in the collective bargaining agreement.  

• The seller is not subject to any consultation or approval in advance from the transferred employees or trade union representatives. 

• In principle, all working and salary conditions are maintained after the transfer, although it is possible to modify these conditions by means of individual or collective agreements, depending on the case. The transfer cannot in itself result in a termination of the employment relationship or a (unilateral) modification of working conditions, but the parties may enter into related agreements.  After the transaction, the seller and the buyer remain jointly and severally liable for their obligations prior to the transaction. 
•  The file and information on each transferred employee must be provided to the purchaser (e.g., payroll records, information regarding the private or state pension fund in which the transferred employees are enrolled, annual leave records, fringe benefits and allowances, outstanding loans and promissory notes, among others).

•  employees are to be transferred to the purchaser of the assets as a result of the transfer. It is also important to identify the payment scheme applicable to these employees, including basic remuneration, any additional bonuses, payments and other incentives, labour regulations, vacation entitlements, etc. 
• any employees enjoy special termination protection. This applies to disabled persons, persons on parental leave, persons on medical leave and trade union representatives.  
• any trade union exists at the seller, and whether any provision of the collective bargaining agreement at the seller mandates the information and/or consultation of the trade union in connection with the transaction.  
• a collective bargaining agreement has been concluded (if so, the collective bargaining agreement that applied to the employees prior to the change of employer will continue to apply until a new collective bargaining agreement is concluded). 
• any risks are identified during the due diligence process of the target (e.g. any pending employment-related litigation, inspections by labour control authorities, etc.).  
• the seller has fulfilled all of its obligations towards former employees, such as outstanding salaries, fringe benefits, social security contributions, reinstatement guarantees, etc. This is because both the former and the new employer will be jointly and severally liable for any such outstanding liabilities as a result of the asset deal.  
• the asset deal would impact:
  • the recent and future economic status of the company;  
  • the status, structure and future evolution of the workforce; and  
  • the organisation of the workforce and employment contractual and collective relationships. 
• any measures affecting the employees – such as layoffs, salary reductions or any other substantial modification that may have a negative impact on the employees' employment conditions – are foreseen after the transaction has taken place. If this is the case, the employees themselves must not only be informed and consulted before a decision on such measures is taken, but must also enter into the corresponding agreements.

• Although no contractual agreement is legally required, if, as a direct consequence of the sale of the assets, all affected employment relationships are transferred from the seller to the buyer, it is advisable to prepare the following documents:
  • a Transfer Agreement between the seller and purchaser. Further representations and indemnities are usually included in the pointed agreement on behalf of the purchaser.  

Also, the purchaser shall prepare the following in draft form:  

• a Tripartite Agreement between the seller, the purchaser and the employees to be transferred in which the employees agree to terminate their employment relationship with the seller and enter into a new employment relationship with the buyer
• Calculate the amount of monthly withholdings to be made to the transferred personnel for the payment of income tax, taking into account the income and withholdings certificate delivered by the seller to each employee. 

• Once the transfer of personnel has been carried out, the purchaser must register in the electronic payroll the registration of all transferred employees, which will automatically notify the social health insurance and, if applicable, the state pension entity of the beginning of their employment relationship with the new employer.  
  In addition, the purchaser must notify the respective private pension fund of such registration. 
• Inform the trade union representatives and employees’ representatives if stated in the collective bargaining agreement.  

• Consultation regarding measures affecting employees on the back of the transaction must be carried out in good time prior to when a decision on such measures has been taken.

• The purchaser must provide the transferred employees of the target company with the same working conditions they enjoyed previously.  
• If the transferred employees of the target company were subject to a collective agreement, the latter remains valid until its expiry.  
•  Provide each of the transferred employees with a copy of all HR policies, rules and regulations used by the purchaser, if applicable.  
•  Adjust any internal rules and regulations applicable to employees as a result of the transaction where necessary and ensure that all employees (both new and old) read and understand them. 

The steps, rules, and regulations applicable to a merger transaction are similar to Section B. Asset deal above.