Who is responsible for making contribution under Provident Fund Act during acquisition of Company by Purchase of Shares?

In case of ‘Acquisition by Purchase of Shares’ a Company is liable for payment of Employees as well as Employers contribution to the Employees’ Provident Fund under the Provident Fund Act. The Company, in fact, steps into the shoes of the existing Management and is responsible for all statutory compliances with respect to its employees. Therefore, if the Provident Fund amount is deducted and not deposited, the Company and the Promoters at that relevant point of time will be responsible for damages and interest to the Provident Fund Commissioner. The damages will be minimal and there is a fair possibility of part-waiver of the same. The new Promoters will not be prosecuted but civil liability such as damages and interest cannot be avoided.

In case of ‘Take Over’ the Company will be responsible for all the payments due to the employees. The said payment includes all statutory payments such as Employees State Insurance, payments under Provident Fund Act etc. New Promoters cannot escape any of the liabilities in case of a take over. In case of purchase of Assets, the Provident Fund department can always claim rights to recover dues under Provident Fund Act of employees and may even seal the premises till the time Provident Fund dues are paid. Non- payment of Provident Fund will lead to litigation which should be avoided.