| (1) | This section applies to a transfer of a business— |
| (a) | if the old employer is insolvent; or |
| (b) | if a scheme of arrangement or compromise is being entered into to avoid winding—up or sequestration for reasons of insolvency. |
| (2) | Despite the Insolvency Act, 1936 (Act No. 24 of 1936), if a transfer of a business takes place in the circumstances contemplated in subsection (1), unless otherwise agreed in terms of section 197(6)— |
| (a) | the new employer is automatically substituted in the place of the old employer in all contracts of employment in existence immediately before the old employer"s provisional winding—up or sequestration; |
| (b) | all the rights and obligations between the old employer and each employee at the time of the transfer remain rights and obligations between the old employer and each employee; |
| (c) | anything done before the transfer by the old employer in respect of each employee is considered to have been done by the old employer; |
| (d) | the transfer does not interrupt the employee"s continuity of employment and the employee"s contract of employment continues with the new employer as if with the old employer. |
| (3) | Section 197(3), (4), (5) and (10) applies to a transfer in terms of this section and any reference to an agreement in that section must be read as a reference to an agreement contemplated in section 197(6). |
| (4) | Section 197(5) applies to a collective agreement or arbitration binding on the employer immediately before the employer"s provisional winding—up or sequestration. |
| (5) | Section 197(7), (8) and (9) does not apply to a transfer in accordance with this section. |
[Section 197A inserted by section 50 of Act No. 12 of 2002]
