How to Draft an Immediate Resignation Form for Employees Amidst a Company Split?

Can anyone suggest how to create an immediate resignation form for employees due to the company splitting into two parts, with another company taking over one part? In this case, it involves an immediate resignation from the current company and an immediate joining in the new company.

Regards,
Neha Sharma

In case of splitting and selling the company, there will be a clause for selling the company with its staff. You cannot demand any resignations. The final benefits accumulated by the employees with the present employer will be transferred to the new company, and the employees' service will continue. The new company will also have to bear the costs of their final benefits. The old company will be responsible for settling the benefits for employees who choose to leave the company. Instead of resignation, it will be considered as retrenchment due to the change in ownership of the company.

We also faced the same problem when our company split into three different companies in 2008. Every company head had a different plan of action for splitting employees, as many employees were common for the first company, such as Finance, HR, Accounts, Admin, Office peons, etc. Therefore, we discussed and deliberated with all the new heads to take it further. In two companies, we first issued appointment letters to employees and immediately on the next page had them sign a resignation letter—just to ensure that their services remained intact. In the third company, we transferred their services to the new division with a transfer letter. So, you should discuss this issue first with the new heads of the companies and decide on the best course of action without creating unrest among the employees. Hope this is useful.

Regards,
Shailendra Deshpande

If there are no conflicting terms of employment as far as employees are concerned, this is just a matter of a couple of letters/orders. However, there could definitely be queries on the statutory part. If the companies are two legal entities and one ceases to exist, the transfer may not be so simple. I would suggest consulting the company secretary immediately and please don't wait for expert opinions from this forum.

1. EPF/ESI
2. What about gratuity payment - are you going to pay for existing company service?
3. What happens to Annual Leave Balance?

Thanks, everyone, but can anyone suggest the common format for a resignation letter? We need to distribute it and collect signatures from all the employees.

Yes, I agree with Mr. Consultme. The point which I forgot to mention is about statutory compliances. In any case, the EPF code will be changed. I don't know about ESI since our company salaries were over and above ESI limits. Since the gratuity trust was with LIC only, we have shown the closure of the first company and transfer of funds to the existing gratuity account with past benefits. The same applied for annual leave balance. (But do refer to CS as recommended by Mr. Consultme).

Following is the common format we have used for resignation:

Date: April 01, 2013 To: Name of HOD His/Her Designation SUB.: RESIGNATION Dear Sir,

I, the undersigned, would like to resign from (name of existing company), w.e.f. March 31, 2013, for better prospects. Kindly accept my resignation and relieve me with immediate effect.

Yours truly, EMP_NAME EMP_DSGN

Hope it serves the purpose.

Regards, Shailendra Deshpande

Please note that in your organization's case, it's not necessary to request all the employees to resign and take fresh appointments.

Employee Retention During Acquisition

As per the general terms of acquisition or takeover of any organization, it should be noted that while the management may change, the activities and employees remain the same. The existing infrastructure and shares are transferred, and employees who are interested in staying with the new management should be allowed to do so without the need for resignation. They only need to provide fresh acceptance of continuing to work under the new management.

This approach is followed to retain employee benefits such as their experience, provident fund, gratuity, bonus, and others. Employees willing to continue in their roles will be retained as before, and they will all be taken over by the current management in the same way that property and shares were transferred.

I recommend you confirm with your superior why resignations are being requested.

Regards,
Aktapisum

Your description of the episode of the split of the existing company into two and the takeover of one part by another company is hazy. What is the basic criterion for the split? By operations or unit-wise?

Clause on Terminal Benefits

What is the substance of the clause relating to the terminal benefits for the period of service rendered by the workmen under the vendor mentioned in the sale deed? If the takeover is comprehensive, including all assets both material and human, and all liabilities monetary and legal by the buyer, there is no necessity for resignation by the workmen. Otherwise, the vendor has to pay retrenchment compensation and gratuity for the service rendered until the date of takeover. Then, the service under the Buyer will be a fresh one. If not, transfer the total amount equivalent to gratuity from the sale proceeds to the Buyer's account, in which case no resignation is necessary.

Clause in the Sale Deed

A specific clause will have to be in the sale deed stating that the existing rights and benefits enjoyed by the workmen under the Vendor will not be altered to their disadvantage by the Buyer. I am in complete agreement with the views of Mr. Bhaskar. Chances for lots of legal problems, both for the vendor company and the buyer company, are there. Please tread carefully!

Handling Employee Options During Amalgamation

In the case of amalgamation (takeover), existing employees should be given the option to either continue with the new company or to quit. If they choose to quit, they should be provided with retrenchment benefits. The camouflaging action of resignation is uncalled for.

The question is how to handle the distribution of employees because, in your case, there are two parts, and one part is being amalgamated. This will depend on the deal, which may be product-wise, plant-wise, unit-wise, or geography-wise.

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

Dear Neha and other contributors,

The story behind this split-up should be different from what many might think, especially the 'Resignation' route. Given that the actual facts behind the scheme are still unknown, this resignation route seems to be a tactic to deny all the employees the continuity of service and other related benefits such as F & F settlement (interim). There seems to be no assurance either on the continuity of service or the final settlement part. What if there is no continuity of service, and the losses to employees aren't compensated in one form or another? There is no clarification on this issue raised by many of our friends.

The format is of no consequence; it's not a significant matter. It could be as simple as "Please accept my resignation with immediate effect" because the reason is well-known to everyone. The suggested formats also place the responsibility entirely on everyone concerned. The essence and repercussions of such formats should be carefully considered.

On the positive side, having a back-to-back appointment letter and resignation letter means starting fresh employment in a new firm with new conditions. Going back in time, start counting from day one onwards. One should be aware of the consequences beforehand.

Regards,
Kumar S.