Why Art. 333 CO matters in SME acquisitions
In business transfer transactions — sale of a business unit, business lease, merger, or demerger — a change of ownership does not automatically terminate employment relationships. Art. 333 of the Swiss Code of Obligations (CO) provides that, upon the transfer of a business or part of a business by legal act, existing employment contracts pass to the acquirer with all rights and obligations accrued up to that point.
For entrepreneurs, HR managers, and trustees, the distinction is decisive: in an asset deal (acquisition of operating assets and liabilities), Art. 333 CO applies directly; in a share deal (acquisition of shares or stock), the employer remains the same legal entity and the provision does not apply, except for subsequent internal reorganisations. Confusing the two models exposes you to unforeseen social liabilities, union disputes, and errors in accounting for personnel costs.
This guide explains the conditions for application, joint liabilities between transferor and acquirer, employees' information and objection rights, and typical accounting consequences for a Swiss SME facing a business transfer in 2026.
When Art. 333 CO applies
The provision protects employment continuity only if the transfer of an economic unit and the passage by legal act between distinct parties occur cumulatively:
| Situation | Art. 333 CO | Effect on employees |
|---|---|---|
| Sale of a business unit (asset deal) | Applies | Contracts transferred to the acquirer; new registration with social insurance funds |
| Acquisition of GmbH/AG shares (share deal) | Does not apply | Employer unchanged; no legal transfer of the employment relationship |
| Merger or demerger | Applies | Transfer to the absorbing or beneficiary company |
| Business lease or operating lease | Applies | Continuity with the lessee if the conditions for transfer are met |
| Transfer of individual contracts without an economic unit | Generally no | Employee consent or a new contract required |
| Outsourcing of a function (e.g. cleaning, IT) | Case-by-case assessment | Transfer only if the function constitutes an autonomous part of a business |
For "part of a business", case law requires an organised set of people and resources pursuing an autonomous economic purpose — it is not enough to transfer individual assets or isolated contracts. In SMEs, transfer of a production department, a retail outlet, or a service line is common: HR due diligence must verify that the transferred unit has its own structure, customers, and organisation.
Contractual continuity: what passes to the acquirer
When Art. 333 CO applies, the employment relationship continues with the new employer without the need for a new contract, unless the employee objects:
Elements that transfer
- Employment contract and accrued length of service
- Salary, ancillary clauses, and working hours
- Right to accrued holiday and pro rata entitlements
- Any valid non-compete clauses
- Social insurance obligations (AHV/IV/EO, ALV, BVG, accident insurance)
- Collective bargaining agreements (CBAs) — the acquirer must observe them for one year (Art. 333 para. 1bis CO)
What the acquirer cannot unilaterally impose
- Immediate deterioration of essential working conditions
- Reduction of length of service or acquired rights
- Unilateral change of place of work without a contractual clause
- Exclusion of social liabilities already accrued before the transfer
- Transfer where no autonomous economic unit exists
Length of service continues without interruption: relevant for notice periods, severance pay, BVG rights, and holiday calculations. The acquirer also inherits any pending disputes (harassment, wage claims), which must emerge in due diligence and be reflected in the price or contractual warranties.
Joint liability and responsibilities of the transferor
Art. 333 para. 3 CO provides for joint liability between transferor and acquirer for employee claims that became due before the transfer and for those that accrue thereafter until the employment relationship can be terminated in the ordinary way, i.e. until termination following the employee's objection. This mechanism protects creditors — including employees — but creates risks for both parties:
Joint liability (Art. 333 para. 3 CO)
Wages, unpaid AHV/BVG contributions, and indemnities already due, as well as claims accruing during the period of joint liability, may be claimed indifferently from the transferor or the acquirer. In practice, the transfer agreement provides for indemnities, escrow, or guarantees in favour of the acquirer and reciprocal indemnification clauses.
Social insurance liabilities and BVG
The pension fund (2nd pillar) requires regulation of the transfer: transfer of accrued benefits to the acquirer's fund, settlement with payment of the buy-out value, or maintenance with the original fund with joint contributions. BVG realignment costs — often underestimated — can exceed 10–20% of annual payroll if the two funds have divergent regulations.
Transfer in insolvency proceedings (Art. 333b CO)
In the event of a business transfer during a composition moratorium, bankruptcy, or composition with abandonment of assets, Art. 333b CO excludes the application of the joint liability under Art. 333 para. 3 CO. The acquirer is not jointly liable for wage claims that became due before the transfer; the transferor remains liable within the limits of the insolvency proceedings. Anyone acquiring from insolvency proceedings must separately verify employee claims and unpaid social contributions.
Information, consultation, and right of objection
A business transfer triggers procedural obligations that, if neglected, can invalidate dismissals or expose the parties to compensation claims:
| Obligation | Legal basis | Practical content |
|---|---|---|
| Advance information | Art. 333a CO | Transferor and acquirer must promptly inform the employee representation or, in its absence, the affected employees before the transfer, regarding the reasons and legal, economic, and social consequences |
| Consultation | Art. 333a para. 2 CO | If measures affecting employees are planned (e.g. dismissals), the employee representation or the employees themselves must be consulted promptly before the decision; the opinion is not binding, but omission facilitates challenges |
| Objection to the transfer | Art. 333 paras. 1 and 2 CO | The employee may object within a reasonable period from notification (as a rule, one month); the relationship terminates at the expiry of the statutory notice period and, until then, the acquirer and the employee must perform the contract |
| Protection in case of dismissal | Art. 333 CO (case law) | Dismissals ordered solely to circumvent the transfer are void; those for objective economic reasons remain possible but require justification distinct from a mere change of ownership |
For SMEs without union representation, the information obligation falls directly on the affected employees, preferably in writing with indication of the effective date of the transfer. Accountex recommends documenting every communication: in a labour inspectorate audit or dispute, proof of information provided is decisive.
Accounting impact for the acquiring SME
The transfer of personnel affects several items in the balance sheet and income statement. Unlike the capitalisation of specific intangible assets, the workforce is not recorded as a separate balance sheet item, but generates immediate economic effects and potential liabilities:
Income statement
- Personnel costs — acquirer's wages and social contributions from the transfer date
- Restructuring costs — post-acquisition severance pay, outplacement, duplicate salaries during integration
- Transaction expenses — HR and legal consulting generally expensed in the period (not in goodwill)
- BVG costs — realignment contributions or buy-outs accounted for according to the fund's regulations
Balance sheet and liabilities
- Holiday and overtime liabilities — accrued pro rata must be recognised as a liability to personnel
- Provisions — possible provisions for exit costs if an integration plan provides for headcount reduction
- Goodwill — the value of the acquired organisation may contribute to goodwill, but not as separately recorded "human capital"
- Inherited social liabilities — verify liabilities to the transferor's AHV/BVG funds covered by joint liability under Art. 333 para. 3 CO
Under Swiss accounting standards (Swiss GAAP FER / OR), restructuring provisions are admissible only if a formalised and detailed plan exists and the obligation is legally or factually unavoidable at the closing date. Generically estimating "possible dismissals" without a concrete decision does not permit recording a provision. Goodwill arising from an asset deal must be allocated according to applicable accounting principles; the "workforce" component remains implicit in the premium paid, not capitalised separately.
Tax aspects linked to transferred personnel
For the acquiring company's income and profit tax, personnel costs transferred — wages, employer AHV/IV/EO, ALV, BVG, and accident insurance contributions — are generally deductible in the relevant period. Exit costs (severance pay compliant with the CO or CBAs) follow ordinary deductibility rules; pay attention to indemnities exceeding the legal minimum, whose potentially non-deductible portions must be analysed separately.
For the transferor, the sale of the business unit terminates the employment relationship by transfer (unless objected to): any remaining social liabilities remain within the scope of joint liability. Social contributions must be settled up to the transfer date; delays generate interest and, in serious cases, administrative criminal liability.
For withholding tax, the acquirer must register as the new employer with the competent cantonal authority and correctly record the wages of transferred employees. For cross-border workers or permits linked to the employer, a change of legal entity may require new authorisations.
Operational checklist for transferor and acquirer
A business transfer with significant personnel requires coordination between legal, HR, trustee, and social insurance funds. Here are the essential steps:
- HR due diligence — mapping of all contracts, applicable CBAs, length of service, remaining holiday, pending bonuses, disputes, and estimated BVG costs
- Verification of the transferred unit — confirmation that the perimeter constitutes a business or part of a business within the meaning of Art. 333 CO
- Art. 333a CO communication — written notice to employees or representatives before the effective date
- BVG regulation — agreement between funds and definition of benefit transfer or buy-out flows
- Update of social insurance funds — deregistration with the transferor and new AHV/IV/EO, ALV, UVG registration of the acquirer
- Transfer agreement clauses — allocation of social liabilities, indemnification, escrow for past contributions, definition of the personnel "closing date"
- Accounting recognition at closing — holiday liabilities, overtime, admissible provisions, and start of personnel cost recording on the acquirer
- Post-closing integration plan — harmonisation of internal regulations, payroll systems, and HR policies, respecting the prohibition on immediate unilateral deterioration