C-362/89

D'URSO A N D OTHERS

O P I N I O N OF MR A D V O C A T E GENERAL VAN GERVEN delivered o n 30 M a y 1991 *

Mr President, E M G to continue trading whilst remaining Members of the Court, subject to that procedure.

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They rely on the first paragraph of Article 2112 According to Article 3(3), that provision is of the Italian Civil Code, which reads as applicable to special administration follows: procedures which, as in the case of E M G , had been set in motion at the time of the entry into force of the Law amending the 'Where an undertaking is transferred, decree-law, and with effect from the date contracts of employment will continue to be on which those procedures commenced. valid as against the transferee unless the transferor has given the required notice and employees shall retain the rights flowing from the seniority acquired before the 3. The Pretore considers that the main transfer.' 3 , 4 proceedings raise two questions concerning the interpretation of Directive 77/187.

I shall not therefore proceedings rely on Article 3 of Decree-Law focus my analysis on the effect of the N o 835 of 9 December 1986, 5 which, with directive but shall confine myself to some amendments, was converted into Law answering the two following preliminary questions. Those questions read as follows: 3 — The Court has already considered this provision in its judgment in Case 23/84 Commission v Italy [1986] ECR 2291.

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the employment relationships relating emphasis on the criteria which, in view of to the transferred undertaking and in the case-law of the Court, I shall existence at the time of its transfer? subsequently consider to be decisive in ascertaining whether the directive is applicable.

(2) Is the directive applicable to transfers of businesses made by undertakings under special administration?' The Italian special administration procedure

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95 of 3 April 1979 10 (hereinafter referred to lose their power to manage the undertaking as 'Law No 95/79'), which was and dispose of its assets. subsequently amended.

6. Article 2 of Law N o 95/79 provides that According to Article 1 of Law No 95/79, the ministerial decree commencing the the special administration procedure is procedure after the court has found that the applicable to large undertakings, that is to undertaking is in a state of insolvency or has say those having had more than 300 failed to make payments may authorize the employees (including workers entitled to undertaking to continue in trading under claim benefits under the CIGS rules) for the supervision of the auditor for a period more than one year and whose debts to not exceeding two years; that authorization credit institutions and social security may be extended two times for a total institutions exceed both set a minimum and period not exceeding two years. five times the paid-up capital. The special administration procedure is applicable to those undertakings, to the exclusion of the bankruptcy procedure. The auditor draws up a programme which must be approved by the supervisory authority. That programme contains, as far as possible and taking into account the interests of creditors, a restructuring plan The decision to apply the procedure is taken compatible with the main thrust of industrial by ministerial decree. However, it is first policy. The plan identifies the plants to be necessary for the court to have found that brought back into operation and those the undertaking is insolvent or that at least which must be transferred. Article 2 of Law three months' salaries have not been paid. No 95/79 expressly provides that the The court can arrive at that finding on its integrity of the operating plant must be own initiative or on the application of the preserved as far as possible, even in the case undertaking itself, one of its creditors or the of plant which is to be transferred. Public Prosecutor's Department.

5. The preference shown for continuing the 7. Opinions differ on the purpose of the operation of the undertaking is so great special administration procedure. In the that the law does not deal with the order for reference the referring court states converse, but theoretically possible, case, that the procedure is mainly intended to nor does it deal with the situation in restructure the undertaking, having regard which the restructuring plan proves to be above all to the safeguarding of jobs. impracticable after the continued According to the referring court, the operation of the business has been 'conservatory' purpose of the procedure is decided upon.' clear from the following circumstances:

The defendants in the main proceedings had enabled 29 000 workers to be trans- state categorically that the interpretation of ferred. 24 400 workers had opted for the referring court is wrong. According to voluntary redundancy or been made them, it is unanimously accepted in Italian redundant. As at 30 April 1990, 7 600 academic writing that special administration workers were still employed in the under- is a creditors' arrangement procedure takings under special administration and having liquidation as its purpose. The fact 6 600 of them were receiving benefits from that the undertaking concerned may CIGS. continue its operations for two or three years does not alter anything. That period allows the liquidation to go ahead under conditions which allow the production units Case-law of the Court of Justice to be maintained but not the undertaking itself.

9. Article 1(1) of Directive 77/187 defines the scope of the directive as follows:

The plaintiffs in the main proceedings state that the principle aim of the procedure is to enable undertakings or parts of under- ' 1 . This directive shall apply to the transfer takings under special administration to be of an undertaking, business or part of a transferred to third parties. business to another employer as a result of a legal transfer or merger.'

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The specificity of insolvency law was also 11. The Court noted first of all that there confirmed in Community law. Thus, were discrepancies between the various Council Directive 75/129 of 17 February language versions of Article 1(1) of the 1975, on the approximation of the laws of directive. Some versions indicated that the Member States relating to collective transfers arising as a result of an adminis- redundancies, M excluded from its scope trative or judicial decision were excluded * Translator's note: the term used in the Dutch version of the 13 — Judgment in Case 135/83 H. B. M. Abels v Bedrijfsvere- directive is 'overdracht krachtens overeenkomst' and in the niging voor de Metaalindustrie en de Electrotechnische French text 'cession conventionnelle' Industrie [1985) ECR 469. 14 — OJ L 48, p. 29.

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Certain parties in the Abels case considered that the directive ought to be applicable in The fact that insolvency law is the subject of the event of insolvency on the ground that it specific rules both in the legal systems of the is precisely the employees of the employer Member States and in the Community legal declared insolvent which most need order and the fact that the rules on protection. However, other parties in that insolvency and analogous proceedings are case, including the Commission pointed to a very different in the various Member States number of unfavourable economic conse- led the Court to state (in paragraph 17) quences which, in their view, would arise if that: the directive were to apply to transfers of undertakings in the event of insolvency or a 'surséance van betaling'. In their view, such an extension of the scope of the directive might dissuade a potential acquirer from acquiring an undertaking on conditions 'if the directive had been intended to apply acceptable to the body of creditors, which also to transfers of undertakings in the might lead them to sell the assets of the context of such proceedings, an express undertaking separately. That would entail provision would have been included for that the loss of all the jobs in the undertaking, purpose'. which would defeat the useful effect of the directive.

13. The Court derived its second argument in support of its judgment from the aim of 14. According to the Court, that difference the directive. Referring to its preamble, it of opinion showed that there was stated that the directive aimed to afford considerable uncertainty about the impact protection to workers in the event of on the labour market of transfers of under- transfers of undertakings in view of the takings in the event of an employer's need, referred to in Article 117 of the EEC insolvency and about the appropriate Treaty, 'to promote improved working measures to be taken in order to ensure the conditions and an improved standard of best protection of workers' interests. The living for workers'. Court's conclusion from this was that:

'. . . a serious risk of general deterioration in 15. The Abels case also raised the question working and living conditions of workers, whether a transfer taking place in the contrary to the social objectives of the Netherlands 'surséance van betaling' Treaty, cannot be ruled out. It cannot procedure fell outside the ambit of Directive therefore be concluded that Directive 77/187. According to Advocate General Sir 77/187 imposes on the Member States the Gordon Slynn, in such a context it was obligation to extend the rules laid down simpler to consider the sale of the under- therein to transfers of undertakings, busi- taking by the owner as a contractual nesses or parts of businesses taking place in transfer. the context of insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the super- vision of the competent judicial authority.' (paragraph 23) That observation must be considered against the background of the provisions of the Netherlands Faillissementswet (Law on insolvency) relating to surséance van betaling.16 In accordance with those However, the Court went on to state that, provisions, the court first grants a even though transfers of that kind did not provisional surséance, which, however, it can fall within the scope of the directive, the do only upon the application of the debtor Member States were at liberty indepen- himself on the ground of his belief that he is dently to apply the principles of the no longer in a position to meet his debts directive, wholly or in part, on the basis of which have fallen due (Article 213 of the their national law alone. Article 7 in fact Faillissementswet). The court then appoints provides that the directive 'shall not effect one or more administrators to manage the the right of Member States to apply or debtor's business affairs together with the introduce . . . provisions which are more debtor. At a later stage it decides whether to favourable to employees'. order a definitive suspension of payments. However, even after a definitive suspension, the debtor does not lose his power of disposal and control over his assets but simply has no power to effect transactions The Court thus arrived at the same concerning his assets without consultation conclusion as Advocate General Sir Gordon with, or the authority or assistance of the Slynn who, in his Opinion, had warned administrator or administrators (Article against the perverse affect of the application 228(1) of the Faillissementswet). The clear of the directive: aim of the surséance procedure is to prevent liquidation brought about by agreement between the creditors (Article 252 of the Law) and is not intended to produce a 'forced' liquidation of the debtor's assets. 'The counterproductive result of applying the Directive, which seems to be a real possibility, is so contrary to its objectives that in the absence of other clear indi- cations, it seems to me that the intention Despite the clearer consensual nature of the was not to apply the provisions to under- sale of an undertaking in a surséance takings which are in liquidation.' ' 5 16 — See in this regard N. J. Polak, Faillissementirechl, third 15 — [1985] ECR at p. 475. revised edition, 1986, at p. 149 et seq.

16. On this point, the Court did not follow the Advocate General. Proceedings such as those relating to a surséance van betaling ' . . . the mere fact that the transfer of an have, according to the Court, certain undertaking, business or part of a business features in common with liquidation has occurred after the transferor has proceedings in so far as both are of a suspended payment of its debts is not judicial nature. They are, however, different enough to exclude the said transactions from liquidation proceedings from the scope of Directive 77/187. It therefore applies to a transfer as defined in Article 1(1) which is effected in the course of a procedure, or at a stage, prior to the 'in so far as the supervision exercised by the commencement of liquidation proceedings' court over the commencement and the (paragraph 10). course of such proceedings is more limited. Moreover, the object of such proceedings is primarily to safeguard the assets of the insolvent undertaking and, where possible, On my understanding of that ground of the to continue the business of the undertaking judgment, it is not sufficient, in order for by means of a collective suspension of the the transfer of an undertaking to be payment of debts with a view to reaching a excluded from the scope of the directive, for settlement which will ensure that the under­ the conditions under which the transferring taking is able to continue operating in the undertaking would be adjudged insolvent to future. If no such settlement is reached, be fulfilled; the transferring undertaking proceedings of this kind may, as in the must actually be adjudged insolvent. present case, lead to the debtor's being put into liquidation' (paragraph 28).

19. The expression 'anajogous procedures' (that is to say procedures similar to bank- ruptcy, winding-up and like procedures) also appears in other Community law texts. For example, the second subparagraph of Article 1(2) of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and 18. I infer from the Court's judgment in the Commercial Matters excludes from the Abels case that it did not wish strictly to scope of that convention 'bankruptcy, limit its assessment to a situation in which proceedings relating to the winding-up of the transferor has been adjudged insolvent. solvent companies or other legal persons, In both paragraph 17 and paragraph 19, the judicial arrangements, compositions and Court refers to 'liquidation or similar analogous proceedings'. 2 1 In the Gourdain proceedings', thus suggesting that a transfer case 22 in which the Court was asked to rule taking place in a procedure other than a on the question whether a judgment liquidation procedure may also be excluded delivered by a French court in a action en from the scope of the directive. It is only in comblement du passif social fell within the regard to a transfer effected in the course of scope of that convention, the Court (in a procedure of the surséance van betaling paragraph 4) defined the terms used in type, in contrast to a transfer in liquidation Article 1 as follows: proceedings, that the Court has hitherto held that it is not excluded from the scope of Directive 77/187, on account of the clear 'Les faillites, concordats et autres differences between the two procedures and procédures analogues sont des procédures thus a lack of any 'similarity'. fondées, selon les diverses législations des parties contractantes, sur l'état de cessation de paiement, l'insolvabilité ou l'ébranlement du crédit du débiteur impliquant une inter- vention de l'autorité judiciaire aboutissant à une liquidation forcée et collective des biens

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ou, à tout le moins, un contrôle de cette surséance van betaling procedure (see below autorité.' 23 paragraph 21).

23 — This definition corresponds word for word with ihat given 22. In the Abels judgment, the Court also by Mr Jenard in his report on the Brussels Convention (OJ 1979, C 59, p. 1, at page 12); Article 1(2) excludes indicated the differences between bankruptcy bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial (faillite) and surséance (suspension of arrangements, compositions and analogous proceedings, payment). In my view, there are three. i.e. those proceedings which, depending on the syslem of law involved, are based on the suspension of payments, the insolvency of the debtor or his inability to raise credit, and 25 — As I have already stated, in the Abels case the Court had which involve the judicial authorities for the purpose to consider the surséance procedure as it is regulated in either of compulsory and collective liquidation of the Netherlands law, that is to say a procedure which is assets or simply of supervision. designed to prevent liquidation and is comparable to the 24 — Bulletin of the European Communities supplement 2/82. Italian amministrazione contrai/ata procedure (paragraph 5).

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23. According to what the Court stated in Abels (see above, at paragraph 16), a second 24. A third difference is closely connected difference consists in the fact that, in the with the two previous ones and resides in case of a suspension of payments, 'the the fact that, as mentioned above, the more supervision exercised by the court over the extensive supervision of the court in the case commencement and the course of such of bankruptcy is accompanied by the impo- proceedings is more limited'. sition of a thoroughgoing form of adminis- tration or receivership in order to ascertain the assets, realise the assets and discharge the liabilities, the reverse side of which is that the debtor is placed under compulsory As far as the commencement of the receivership and loses all powers of dispo- proceedings is concerned, the Court had in sition and control. Here again, the situation view the Netherlands rules according to is totally different than in the case of a which a suspension of payments may be suspension of payments: at the most, one or applied for only by the debtor (and not by more auditors or administrators are appointed who supervise the debtor who is 26 — In some countries, suspension of payments is accompanied by a preventative agreement whereby it is also intended to resolve reversible problems of solvency, for example by a 27 — The situation is the same under the Italian amminis- partial remission of debts. In the latter case, otner trazione controllata procedure (Article 187 of Royal countries have a special preventative composition Decree N o 267) or under the concordato preventivo procedure. See also footnote 20. procedure (Anieles 160 and 161 of Decree N o 267).

assisted by them and authorized to carry As regards the similarities, it is clear that the out certain acts but who does not, however, special administration procedure is also lose his powers of disposal and control over based on 'inability to meet liabilities, his property. insolvency or the collapse or the debtor's creditworthiness', to use the terms used in the Gourdain judgment (see above at paragraph 19). Indeed, before the decision to commence the procedure is taken by In the judgment in Abels, this third ministerial decree, the court must have first difference was not explicitly mentioned. The declared a state of insolvency or a failure to Court did, however, point out (see pay salaries (see above at paragraph 5). paragraph 11 above) that in some Member States a sale carried out in the course of bankruptcy proceedings is regarded as a normal contractual sale, even though the intervention of the judicial authority (or, more precisely, the intervention of the 26. As regards the first difference, regarding receiver acting under the supervision, or the purpose of the proceedings, the national with the authority, of the court) is first court and the parties differ in their view as required for the conclusion of such a to whether the special administration contract, whereas under other legal systems procedure is designed to restructure or the sale is regarded as taking place by virtue liquidate the undertaking. In my view, this of a measure adopted by a public authority. difference of opinion is based on a However, common to both views is the fact misunderstanding and, more precisely, on a that the sale carried out pursuant to bank- confusion between (compulsory) liquidation ruptcy proceedings may take place without of the assets and the continuity of the the consent or cooperation of the bankrupt undertaking transferred. person and in this sense constitutes a 'forced' sale in his regard. In the case of a suspension of payments, the situation is again different since the debtor retains his power to carry out acts of disposition, even if with the assistance, cooperation or auth- In this regard, it must be recalled that, orization of an auditor or an administrator. according to the national court, which refers in this regard to the preamble to Law N o 95/79 (see above at paragraph 7, point 1), the purpose of the special administration procedure is to 'save the parts of an under- Non-applicability of the directive to transfers taking or group of undertakings which are carried out in a 'special administration basically sound, by transferring ownership procedure' of the undertaking — but not its debts — from the insolvent transferor to the transferee'. The process is therefore one of transferring a set of assets, in the form of a 25. Where, then, having regard to the simi- 'going concern', with a view to discharging larities and differences described above, the liabilities which are not transferred and does a procedure of the 'special adminis- which therefore remain in the estate under tration' kind appear on the scale of administration. As mentioned above analogous procedures: is it more akin to (paragraph 22), the aim of bankruptcy bankruptcy or more akin to a suspension of proceedings is also to realize the assets in payments? order to discharge the liabilities, but the

assets may be transferred separately or 17. As regards the second difference, together, as elements of a 'going concern'. regarding the supervision exercised by the What distinguishes the special adminis- court over the commencement and course tration procedure from bankruptcy of the procedure, one particular feature proceedings is therefore the fact that, for must be noted. Whereas in bankruptcy the sake of preserving jobs, it gives pref- proceedings it is the court which supervises erence to the second mode of transfer, that the commencement and the course of the is to say transfer (by way of sale or contri- proceedings, in a procedure of the special bution of capital) of a set of assets which administration kind, this supervision may be together form a going concern (and not of exercised by an administrative authority, separate assets), which enables the under- with the qualification, however, that, as in taking's business to be maintained as far as the case of the Italian legislation in question possible. (see above, at paragraph 5), the prior inter- vention of the court is necessary in order for the state of insolvency to be determined and, as in the case of bankruptcy, that

If a sale of assets does take place, this is not the The fact that the course of the procedure is result of any compulsory liquidation. subject to administrative supervision rather than judicial supervision — the difference cannot be over-estimated since in both cases the conduct of the procedure is de facto in I would make one final point: having regard the hands of the auditors or receivers — is to the fact that under the special adminis- not, in my view, a reason for considering tration procedure the emphasis is that a procedure such as the special admin- placed — even more than in bankruptcy istration procedure is more akin to one proceedings — on the protection of jobs, providing for the suspension of payments the risk of a counterproductive effect which than to bankruptcy proceedings.

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This same reason explains why in many supervision respectively) without the invol- countries 2 9 undertakings such as credit vement of the debtor and are not therefore institutions and insurance companies which agreements freely entered into by him. In play an important role in the economy and my view, that last factor has decisive savings activities of a country are excluded importance since it means in effect that the from the bankruptcy procedure which is non-applicability of the directive in the normally applicable and are liquidated event of the transfer of an undertaking according to special administrative under a special administration procedure, as procedures. 30 in the case of bankruptcy proceedings, is not independent on a decision of the under- taking's owners.

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and its purpose is, depending on the circum- scope of the directive. In the event that, stances, to enhance the value of assets contrary to my expectations, the referring pending their sale. Moreover, declaring the court should decide that the procedure does directive applicable where trading is not have the aforementioned characteristics, continued and declaring it inapplicable I must still answer the first question. where trading ceases may bring about an immediate cessation of trading although this may be the least favourable solution from the social point of view. 32. By its first question the referring court asks the Court to interpret the first subparagraph of Article 3(1) of the directive: is the effect of that provision that the transferor's rights and obligations Nor can I share the French Government's arising from contracts of employment or view that a transfer which takes place in a employment relationships existing at the procedure prior to a declaration of bank- time of the transfer are automatically trans- ruptcy is not excluded from the scope of the ferred to the transferee? directive. This view is based on the idea that, chronologically, bankruptcy pro- ceedings are the final stage, which is not so in the case of a special administration pro- cedure which is established in order to re- In the order for reference this question is place bankruptcy proceedings. clarified in the following way:

30. In view of the foregoing considerations, 'The question is whether, by virtue of that I propose to reply to the second question in provision, the contract of employment the way indicated at the end of this existing on the date of the transfer is Opinion, at paragraph 37. binding on the transferee of the business, without there being any need for, or regardless of, an expression of intent by the parties at the time of the transfer. In other words, the question is whether the Community directive corresponds to the The first question: are rights automatically first paragraph of Article 2112 of the Civil transferred? Code, thereby reinforcing it'.

transferred from the transferor to the expressly affirmed by the Court in its transferee, even if this was not intended by judgment in Daddy's Dance Hall1*: the parties. The national court is probably alluding in this regard to the fact that, in accordance with the agreements concluded with the trade unions and the possibility 'As was stressed above, the purpose of afforded by Article 3 of Decree-Law No Directive 7 7 / 1 8 7 / E E C is to ensure that the 835 of 9 December 1986, the transferor and rights resulting from a contract of the transferee expressly settled the question employment or employment relationship of of the continuance of the employment employees affected by the transfer of an relationships, at the time of the transfer of undertaking are safeguarded. Since this the E M G business, but not for all of EMG's protection is a matter of public policy, and employers, since only some of them were therefore independent of the will of the transferred. parties to the contract of employment, the rules of the directive, in particular those the protection of workers against dismissal by 33. The first subparagraph of Article 3(1) of reason of the transfer, must be considered Directive 77/187 provides that: to be mandatory, so that it is not possible to derogate from them in a manner un- favourable to employees (paragraph 14).' 'The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing Not only the transferor and the transferee on the date of a transfer within the meaning but also the employees themselves, acting of Article 1(1) shall, by reason of such directly or through their trade unions, may transfer, be transferred to the transferee.' not renounce the protection afforded by the directive : In its judgment in the Berg case, 3 2 the Court stated (in paragraphs 11 and 13) that the obligations arising from contracts of 'It follows that employees are not entitled to employment are automatically transferred waive the rights conferred on them by the from the transferor to the transferee. It directive and that those rights cannot be follows that such obligations are transferred restricted even with their consent to the transferee as soon as an undertaking (paragraph 15)'. is transferred within the meaning of Article 1(1) of the directive, even if the parties (that is to say the transferor, the transferee and the worker concerned) have not made any 34. The Italian Government and the agreement on this point. defendants in the main proceedings maintain that, although it is true that the parties may not waive the rights which the In the event that the transferor and the directive confers on the employees who are transferee have nevertheless expressly dealt transferred, nevertheless the directive does with the situation of workers in the contract not provide that all the employees working of transfer, they still may not derogate from in the undertaking transferred must be the provisions of the directive. This was taken on by the transferee.

In my view, that view must be rejected. It 'The transfer of an undertaking, business or follows from the very wording of the first part of a business shall not in itself subparagraph of Article 3(1) of the directive constitute grounds for dismissal by the that the protection which it affords covers transferor or the transferee. This provision all the employees who, at the time of the shall not stand in the way of dismissals that transfer, have a contract of employment may take place for economic, technical or with the transferor or are in an employment organizational reasons entailing changes in relationship with it. Moreover the effet utile the workforce.' of the directive would be very limited if the parties could determine for themselves The Italian Government deduces from that which employees are to be transferred and provision that the directive does not thus define the scope of the obligations preclude collective dismissal nor, conse- incumbent upon them under the directive. quently, national rules more favourable to employees than collective dismissal because it allows some of the jobs to be saved. However, a qualification must be added in the event that the transfer relates not to the I do not share the view that the directive whole of the undertaking but only to part of allows any kind of dismissal on economic, the undertaking. As can be inferred from technical or organizational grounds. The the judgment in Botzen cited in footnote 17 directive expressly prohibits such dismissals (paragraph 15), in such a case the where they occur as a result of the transfer protection extends only to employees in of the undertaking. It is only where the service with the part of the undertaking dismissals have already taken place, for which was transferred. example if they had already been decided on before the question of any transfer of the undertaking arose, that they come under 35. In support of its view the Italian that derogation. 34 Article 4 of the directive Government also derives an argument from cannot therefore be used as an argument to the first subparagraph of Article 4(1) of the dismiss some of the employees on account directive, which reads as follows: of the transfer of the undertaking.

'Article 1(1) of Council Directive 77/187 of 14 February 1977 is not applicable to the transfer of an undertaking, business or part of a business where the court has adjudged the transferor to have suspended payments, to be insolvent or to be unable to raise credit and where the transferor is subject to a procedure which, by analogy with a bankruptcy procedure, has the following characteristics:

— its purpose is to realize the assets of the estate under administration, even if it favours the continuance of all or part of the business by giving preference to the realization of a whole set of assets as elements of a going concern;

— from its commencement to its conclusion it is conducted like a compulsory procedure in the sense that it may be imposed against the will of the under- taking's management bodies, its effect is that those bodies lose their powers of management and disposal over the undertaking's property which are then conferred on special administrators appointed for this purpose by a public authority and the transfer may be decided on by those administrators without the involvement of those bodies.'

In the event that this answer should prompt the referring court to consider that the procedure in question does fall within the scope of Directive 77/187, I propose that the first question submitted by that court should be answered as follows:

'The first subparagraph of Article 3(1) of Directive 77/187/EEC is to be inter- preted as meaning that the rights and obligations which the transferor has under the contracts or relationships of employment existing at the time of the transfer are automatically transferred to the transferee.'