Pension plan considerations in the M&A context

In any acquisition, whether for shares or assets, employee benefits and obligations must be taken into account. One of the potentially most onerous obligations includes the provision of pension benefits to employees – this makes it all the more important for companies contemplating acquisitions to consider potential employee pension plan implications. In a share purchase context, the buyer will typically assume all liabilities of the target company, and if the target company has a pension plan in place, this will often be included. However, if there are significant pension fund deficits, this may be one reason an asset purchase agreement is more desirable. With an asset purchase agreement, the pension plan is not automatically transferred to the new company. An asset purchase allows companies to come up with creative options for addressing pension plan considerations. The options include closing plans, merging plans, moving employees to different plans, or changing the…

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