Transfergesellschaft (transfer company)

When employees do not move to the acquiring business as part of a headcount reduction, they can — instead of a direct dismissal — move into a transfer company via a tripartite agreement between the employee, the previous employer or insolvency administrator, and the transfer company. The existing employment contract is terminated by mutual agreement and replaced with a fixed-term contract with the transfer company, typically for 6 to 12 months.

The transfer company is funded mainly by transfer short-time allowance from the Federal Employment Agency (§ 111 SGB III), topped up by a contribution from the insolvency estate or the previous employer. During the term, employees are qualified, coached and actively placed into new roles instead of falling straight into unemployment. Setting up a transfer company is usually negotiated together with the reconciliation of interests and the named list under § 125 InsO.

For buyers, a transfer company matters when a deal is meant to take over only part of the workforce: employees who are not taken over can be moved out in a socially responsible way with lower litigation risk, without the buyer itself having to issue dismissals or argue the scope of the business transfer (§ 613a BGB) with each individual. The cost is normally borne by the insolvency estate — it affects the estate's realisation proceeds, not the purchase price directly.