Works council
M&A / Merger ModelAn elected employee body with legal rights to be informed and consulted about decisions affecting the workforce, including a sale of the business.
Also written: comite social et economique, CSE, Betriebsrat, ondernemingsraad
Works councils are a defining feature of continental European employment law and have no US equivalent. The comite social et economique in France, the Betriebsrat in Germany and the ondernemingsraad in the Netherlands are the ones most often met on a deal, and a European works council sits at group level for large multinationals.
What they hold is a right to information and consultation, not usually a veto and not an approval. In France and the Netherlands the consultation has to take place before the decision is taken, which is the point that changes deal mechanics: a seller cannot sign a binding sale agreement and consult afterwards, because that would present the council with a decision already made.
The market solution in France is the put option structure. The buyer grants the seller a put over the target on fully agreed terms, so price and commitment are locked in, the consultation then runs, and the seller exercises the put and signs the sale agreement once the council has delivered its opinion. Dutch practice runs on a similar sequence, with an advice right exercised before the decision is final.
The practical risk is time and confidentiality rather than refusal. A works council process adds weeks, widens the group of people who know, and a badly handled consultation can leak, unsettle the workforce and slow everything behind it. It also sits alongside the Acquired Rights Directive, implemented in the United Kingdom as TUPE, under which employees transfer automatically with a business or asset sale on their existing terms.
Worked example
A French mid market target is being sold. Instead of a sale and purchase agreement, the parties sign a put option agreement with the full terms attached.
Consultation with the comite social et economique runs for several weeks. The council gives its opinion, the seller exercises the put, and the sale agreement is signed on the terms fixed weeks earlier.
Economically the deal was agreed at the put. Legally the decision was not taken until the consultation had finished, which is what the sequence exists to achieve.