The Employees Provident Funds & Miscellaneous Act, 1952
[This Act is applicable only if entity is registered under EPF Act]

  • To make provision for the application & institution of Provident Funds, Pension Funds and Deposit – Linked insurance Funds for employees in Factories and other establishments
  • The act aims to ensure retirement benefits to secure the future of the employees.


  • It applies to
  • Every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed
  • to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify, in this behalf

Provided that the Central Government may, after giving not less than two months notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than twenty as may be specified in the notification.

However this act shall not apply to certain establishment specified in the Act.


  • An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.



For Definitions please refer Definition Annexure.

When we talk about Demerger (under section 230 to 232 of the Companies Act, 2013) under EPF Act, there are three parties involved in a transaction i.e.,

  1. Demerged Company, (Seller Company)
  2. Resulting Company and (Buyer Company)
  • Employees of demerged company which will get transfer in course of demerger

An employee proposed to be transferred have an option not to  work under the management of Resulting Company and under the circumstances Demerged Company needs to absorb the said employee or pay all the dues  as per the terms of the appointment and also under various labour laws including retrenchment compensation if so applicable.

Otherwise, after completion of the transaction, Liability of demerged Company towards its employees get transferred to Resulting Company and Resulting Company is liable to pay Contribution towards EPF of employees of Demerged Company.


Transfer of Establishment

Section 17B of the Employees Provident Funds & Miscellaneous Act, 1952 (EPF Act) -

“Liability in case of transfer of establishment - Where an employer, in relation to an establishment, transfers that establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay the contribution and other sums due from the employer under any provision of this Act or the Scheme or the Pension Scheme or the Insurance Scheme as the case may be, in respect of the period upto the date of such transfer:

Provided that the liability of the Resulting Company shall be
limited to the value of the assets obtained by him by such transfer.” (Gross value of assets)

For determining the liability of the Resulting Company under this Act, the value of assets shall be taken at market value.

Therefore, as per Section 17B of the EPF Act –

Transfer of Establishment” also include transfer of establishment “in whole or in part” and “in any other manner whatsoever” – modes of transfer can include transaction/ arrangements in addition to sale, gift, lease or licence, etc.

“The period up to the date of such transfer” shall mean the contribution or any amount due under this Act up to the effective date.

So, transfer of assets & liabilities of Demerged Company, in the course of demerger (under section230 to 232 of the Companies Act, 2013 ); to the Resulting Company, shall constitute Transfer of Establishment. Whether or not these transaction/ arrangements are incompliance with the Income Tax Act, 1961