Sell a company with employees in Denmark, and there's one law that almost always comes into play, even though many sellers don't know it by name: the Danish Business Transfer Act (virksomhedsoverdragelsesloven), formally the "Act on Employees' Legal Status in the Event of Business Transfers". It protects employees from losing rights simply because the business changes owner — and it also places requirements on you as a seller that you should know well before listing the business for sale.

Short answer: If you sell a business with employees as an asset sale, the buyer generally takes over the employees on their current terms — seniority, pay, pension and holiday pay all come along. You can't dismiss employees just because the business changes owner, and both you and the buyer have a duty to inform and, in certain cases, negotiate with employees before the transfer takes place. The act generally doesn't apply to a pure share sale.

Who is covered by the act?

The act protects employees — ordinary staff at the business. It doesn't cover genuine directors or others who effectively function as the business's top management, since they're not legally considered employees under the act. If you're unsure whether a specific employee or manager is covered, get it clarified specifically, since the line isn't always obvious. See also our walkthrough of what a director's contract typically includes, and how it differs from an ordinary employment contract.

What does the act specifically require?

  • Automatic transfer of employment: Employees generally transfer automatically to the new owner, with all the rights and obligations they had at the time of transfer — seniority, pay, pension, holiday pay, benefits and any severance terms.
  • Protection against dismissal solely due to the transfer: The transfer itself isn't valid grounds for dismissal. Dismissals can still happen for economic, technical or organizational reasons that lead to changes in employment — but not simply because ownership changes.
  • Right to refuse significant deterioration: If the transfer results in a significant change to employment terms to the employee's detriment, the employee can choose to resign — and this is then treated as a dismissal by the employer, not a voluntary job change.
  • Duty to inform and negotiate: Both you as seller and the buyer must inform your respective employees (or their representatives) about the date of the transfer, the reason for it, and the legal, economic and social consequences for employees — with reasonable notice before the transfer takes place. If measures affecting employees are planned, you must also negotiate about them.

Where in the process does the act become relevant?

The act becomes relevant as soon as a specific agreement on the transfer has been reached — not already when you're merely exploring the possibility of a sale. The practical handling of the duty to inform is closely tied to when and how you should inform your employees about the sale — that article goes deep into the communication and timing itself, while this article focuses on the legal framework the act sets.

An important exception: the act doesn't apply to a pure share sale

The most overlooked — and most decisive — point in the act is its scope: it applies to the transfer of a business, or a part of one, that results in an actual change of employer. If you instead sell the shares in the company that's the employer, the employer (the company) doesn't change — only the ownership behind the company does. That means a pure share sale generally falls outside the scope of the act. See the full walkthrough in our article on whether the Business Transfer Act applies to a share purchase.

What happens to a collective agreement?

If the business is covered by a collective bargaining agreement, a special rule applies for how quickly a new owner must react if they don't want to continue it. See the full walkthrough in our article on collective agreements in a business transfer.

What about union shop stewards?

If a shop steward has been elected among the affected employees, they generally retain their existing legal status and function after the transfer — the role doesn't automatically lapse just because the business changes owner.

Who's liable for claims arising before the transfer?

Generally, you as the seller (transferor) are liable for employee claims that arose before the transfer took place, while the buyer (transferee) is liable for claims arising afterward. The practical split is typically regulated directly in the purchase agreement. Be aware, though, that case law has shown a buyer can in some cases become jointly liable for claims from employees dismissed in violation of the act ahead of the transfer — so it's important that any dismissals before a sale are properly notified and justified, not just conveniently timed ahead of the deal.

Other contractual matters that often come with a transfer

Beyond the employment relationships themselves, you should have a handle on a number of other agreements when the business changes owner:

Go deeper into the individual topics

This article gives you the overview. For a deeper look at each topic, see: dismissing employees, the duty to inform and negotiate in practice, no-poach clauses, HR due diligence, and — if you're facing a larger deal — our extended checklist for larger business transfers.

Frequently asked questions

What's the law called that protects employees in a business sale?

It's called the Business Transfer Act (virksomhedsoverdragelsesloven), formally the "Act on Employees' Legal Status in the Event of Business Transfers".

Can I dismiss employees because I'm selling the business?

No, not for that reason alone. The transfer itself isn't valid grounds for dismissal — but dismissals can still happen for economic, technical or organizational reasons, independent of the change of ownership itself.

Does the act apply regardless of whether I sell assets or shares?

No. The act applies to a transfer that results in an actual change of employer — typically an asset purchase. A pure share sale generally doesn't result in a change of employer and therefore falls outside the act's scope.

Do I need to negotiate with employees, or is informing them enough?

Both. Beyond informing them of the date, reason and consequences, you must also negotiate with employees or their representatives if specific measures affecting them are planned as a result of the transfer.

Does the new owner have to take over the business's non-compete clauses and other agreements?

It depends on the type of agreement and how the transfer is structured. Some agreements transfer automatically in an asset sale, while others require the other party's consent — which is why it's important to review the business's key agreements as part of due diligence, before the purchase agreement is signed.

What happens if I don't comply with the Business Transfer Act?

Non-compliance — e.g. dismissals genuinely motivated by the transfer, or failing to inform/negotiate with employees — can trigger compensation claims from affected employees. It's therefore important to seek legal advice if you're unsure how the act should be handled in your specific situation.

Selling a business with employees? Read about how to inform employees without causing panic, or book a no-obligation call about the Advisory & Mediation package if you'd like help making sure the process follows the law correctly.

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