Debt collection: when and how to call in a lawyer?

Business failures are often due to late payment.

Faced with unpaid invoices, business owners often feel overwhelmed, and need support in their efforts to recover these sums. Unpaid invoices are a direct threat to a company’s cash flow. That’s why they need to be collected. Debt collection is an activity that involves using a variety of means to obtain payment from a debtor. It is at the end of this process that the lawyer has a role to play.

You don’t have to wait until the unpaid debts accumulate or the situation becomes contentious before calling in a lawyer. We can support you from the outset, whether you wish to recover your debt by amicable or legal means.

To help you decide when it’s time to call in a lawyer for debt collection, we’ve drawn up a list of warning signs that you should be aware of.

When should you call on the services of a debt collection lawyer?

- Large receivables: if the amount of unpaid debt is significant
- Unsuccessful out-of-court attempts: You have tried to collect your debt by negotiating with your creditor, by means of reminders by post, e-mail or telephone. However, these efforts have been unsuccessful and you are unable to obtain payment.
- Debt dispute: you and your creditor disagree on the nature, amount or very existence of the debt. There is, therefore, a dispute about the claim and a dispute between the parties that a lawyer’s expert eye can shed light on.
- Litigation: if amicable collection is not enough, you need to take legal action to obtain payment.

How can I call on the services of a debt collection lawyer?

Select a specialized lawyer: debt collection is a business law matter. You need to choose a law firm with a business law practice, which will enable you to be represented effectively.
Gathering evidence: before contacting your advisor, we recommend that you have the necessary evidence to prove the existence of your claim: invoices, purchase orders, delivery notes, account books, contracts, correspondence (…). The more evidence you have on file, the more effective your approach will be.
Contact with the lawyer: call the business lawyer to ask for an appointment. This will enable you to clearly explain the facts of your case, the documents you have in your possession to back up your arguments, and your collection objectives.
Action plan: depending on the situation, a plan to collect your debt will be implemented. This may include sending demand letters, negotiating or taking legal action, such as injunctions to pay.
Follow-up: the lawyer will keep you informed of the progress of the recovery. Depending on the outcome, further steps may be taken.

A lawyer is your ally throughout the entire debt collection process. He or she will bring an expert eye to bear on your situation, and use the legal tools at his or her disposal to unblock it.

DESRUMAUX AVOCATS is an expert in business law and can help you with all your legal needs.

25 January 202417 April 2025

Redundancies: how can you preserve your company’s reputation?

Are you facing economic difficulties and forced to make redundancies?

Your company’s reputation may be affected by these changes.

A company’s reputation refers to the assessment of its credibility, reliability and reputation by its stakeholders, i.e. customers, employees, investors and business partners.

Reputation influences the trust and loyalty of customers and employees, public perception of the company and can have an impact on financial performance.

It is therefore important, in a context of redundancy, to preserve one’s reputation. This involves a number of steps, which cannot be listed exhaustively.

In this article, we present the various steps we recommend you take to preserve your company’s reputation when implementing a redundancy procedure.

Comply with legal procedures

The French Labor Code sets out a specific procedure for redundancies, designed to preserve the social climate, mitigate the consequences for employees and avoid litigation.

So, when it comes to informing and consulting the CSE, it is essential to work closely with employee representatives, and to explain the company’s situation clearly and transparently.

☝ It is also important to seek out genuine proposals for adaptation and redeployment, for example by sending letters to outside companies to find out about their available positions. During preliminary interviews with the employees concerned, the reasons for the dismissal should be discussed, as well as existing training and redeployment measures.

Propose accompanying measures

The French Labor Code provides for various measures to support employees and limit the consequences of redundancies for economic reasons.

Priority for re-employment

It enables former employees made redundant for economic reasons to be given priority for any job that becomes available within the company, for a period of one year from the termination of their employment contract. This possibility must be specified in the letter of dismissal.

If the employee accepts the contrat de sécurisation professionnelle, this possibility must be included in the written document setting out the economic reason for the termination.

The job must be compatible with the employee’s qualifications at the time of his departure, or with any new qualifications he may have obtained subsequently, if he has informed the employer in advance. To benefit from this scheme, the employee must request it.

When several employees wish to benefit from the priority of re-employment in the same position, it is possible to freely choose the future employee according to the interests of the company and according to criteria that you yourself can freely define. There is no imperative order determined by legal texts.

If these provisions are not complied with, both in terms of informing the employee in the letter of dismissal and informing the employee of available positions, the employee may seek damages, depending on the prejudice suffered.

If the employee has at least two years’ seniority in a company with at least 11 employees, the amount of damages will correspond to at least one month’s salary.

The professional security contract (CSP)

Once the employment contract has been terminated, the employee benefits from a range of accelerated redeployment measures offered by France Travail (formerly Pôle emploi). The employee receives redundancy pay, compensation in lieu of notice and an allocation de sécurisation professionnelle (at least equivalent to the ARE), as well as job-search support.

Reclassification leave

Any company with more than 1,000 employees must offer this leave, unless the company is in receivership or liquidation. All employees who may be dismissed for economic reasons must be informed in advance of the conditions for implementing redeployment leave. Such leave must be proposed in the letter of dismissal.

This enables the employee to benefit from training and assistance from a job search support unit, including assessment interviews and VAE… During this leave, the employee receives his usual remuneration for the duration of the notice period, then an allowance of not less than 85% of the minimum wage.

Mobility leave

The aim of this leave is to help the employee return to stable employment at the end of the leave, by providing support and training. The employee is supported in his or her transition to a new position. Periods of training and work are therefore alternated, within or outside the company (via permanent or fixed-term contracts). Employers can offer this leave to employees as part of a collective agreement or a Collective Bargaining Agreement. During this leave, employees receive their usual remuneration for the duration of the notice period, followed by an allowance of no less than 65% of their average gross remuneration over the previous 12 months.

Maintaining dialogue with employees

A company’s reputation depends first and foremost on its employees. It is therefore necessary to be clear and transparent with all partners: employees, employee representatives, managers, external collaborators… This requires several elements:

Being transparent: communicating the difficulties encountered by the company as early as possible, to avoid rumors and speculation, and receiving the difficulties encountered by employees is essential.
Know the current situation and be able to predict the future, so that solutions can be devised to secure employees’ future. It is important to communicate how the company is taking steps to recover and preserve remaining jobs.
Find solutions and offer different types of support by referring employees to professionals (psychologist, social worker, France Travail, etc.).
Raise awareness among managers and employees who are always present: make them aware of the difficulties perceived by employees and encountered by the company, (re)work on team spirit and corporate culture, to maintain a positive image of work within the company.

Monitor your e-reputation

Today, most corporate communications and information take place on websites and social networks.

The Commission Nationale de l’Informatique et des Libertés (CNIL) defines e-reputation as the online image of a company or an individual. It develops from information posted online on new media: websites, social networks, blogs, forums, video-sharing platforms… The information is visible to all, and comes from a wide variety of sources.

It’s through this means of communication that many customers and employees, potential or otherwise, find out about and develop the company’s reputation.

This means responding to criticism in a professional and balanced way. To maintain the company’s image, external communications may be necessary to communicate transparently about the company’s situation and, above all, to explain the measures taken to mitigate the consequences.

Naturally, DESRUMAUX AVOCATS will be happy to assist you with your dismissal procedures.

25 January 202417 April 2025

What are the benefits under the Syntec agreement?

Are you covered by the Syntec collective bargaining agreement and want to know what benefits you are entitled to?

The Syntec collective bargaining agreement contains special provisions enabling employees subject to this agreement to benefit from various advantages.

These benefits include: paid vacations, working conditions (remuneration, sick leave), health and professional training.

Vacation pay benefits

The Syntec collective bargaining agreement offers employees additional paid leave based on seniority, in addition to the 25 days of annual paid leave provided for by the French Labor Code. An additional day is granted for every 5 years of seniority:

After 5 years’ seniority, 1 additional day’s leave is granted
After 10 years of seniority, 2 additional days of leave are granted
After 15 years of seniority, 3 additional days of leave are granted
After 20 years’ service, 4 additional days are granted.

Advantages in terms of working conditions

A vacation bonus: every employer subject to the provisions of the Syntec collective bargaining agreement must set aside, each year, the equivalent of at least 10% of the total amount of vacation pay earned under the collective bargaining agreement, for the payment of a vacation bonus to all company employees. This makes it possible to pay employees a vacation bonus, according to a calculation method chosen by the employer and stipulated in the agreement. This bonus can be paid in several instalments. However, it is not possible to replace this bonus with a 13th month’s pay or another bonus (e.g. target-based).
Salary continuation in the event of sick leave, without waiting period, for employees with at least one year’s seniority (or without condition in the event of sick leave or occupational accident).

Health benefits

Pregnant employees benefit from a paid 20-minute reduction in working hours per day, from the 3rd month of pregnancy. Employees who have a spontaneous termination of pregnancy, as well as their spouse, PACS partner or husband, are also entitled to 2 days’ leave.

Professional training benefits

The agreement pays particular attention to employee training. Training courses can be set up, using innovative methods such as on-the-job and distance training sequences, both collective and individual (MOOC, e-learning, SPOC, etc.). The Collective Bargaining Agreement also provides for the possibility of employees obtaining professional accreditations and certifications (registered with the RNCP or specific repertory), through the professional training account (CPF).

Benefits of complementary health care

The supplementary health plan set up by the Syntec branch provides for individual social benefits, such as :

Social assistance coverage for single-parent families,
Social assistance to cover a dependent spouse,
Financial assistance for alternative medicine, up to a maximum of €120/year,
Assistance with the cost of a sports season ticket, up to a maximum of €200/year.

DESRUMAUX AVOCATS is naturally at your disposal to discuss the terms and conditions of the Syntec agreement in terms of employee benefits, and more generally all the provisions of this agreement.

24 January 202417 April 2025

Overtime under the Syntec agreement: rules and remuneration

The legal working week in France is 35 hours. A collective agreement can modify this working week, which is not the case for the Syntec collective bargaining agreement, apart from the special arrangements provided for in this agreement.

Hours worked in excess of this are referred to as overtime. In this case, they are subject to special rules concerning their execution and remuneration, which may be set by collective agreement.

The Syntec collective bargaining agreement sets out the framework applicable to these hours for the employees it governs.

⚠ Please note: these provisions do not apply to employees covered by a fixed annual number of days. The working hours of these employees are calculated in days, over the year, without taking into account the number of hours worked.

Overtime is worked at the employer’s request, or with the employer’s agreement, or when it is made necessary by the tasks entrusted to the employee.

⏰ There is a limit to the amount of overtime an employee can work. An annual quota sets the number of hours an employee can work over and above his or her statutory or contractual working hours. To set this quota, the Syntec collective bargaining agreement distinguishes between :

ETAM (Employees, Technicians and Supervisors), for whom the annual overtime quota is 130 hours.
Managers, for whom the legal overtime quota of 220 hours applies.

Overtime pay is subject to a premium. A distinction must therefore be made between :

The first 8 hours of overtime worked in a single week (i.e. between the 36th and 43rd hour of overtime for a 35-hour working week), which are increased by 25%.
For subsequent hours, 50% extra.

Therefore, if a collective agreement so provides, the payment of these hours may be replaced, in whole or in part, by an equivalent compensatory rest period. As the Syntec collective bargaining agreement does not contain any such provision, this possibility must be covered by a company agreement.

If you wish to make changes to your overtime arrangements, we recommend that you adopt an agreement within your company to set different arrangements to those provided for by law. DESRUMAUX AVOCATS is at your disposal to help you set up such an agreement, and more generally to answer any questions you may have about overtime under the SYNTEC agreement.

23 January 202417 April 2025

Understanding the sale of a business in 5 key questions

The sale of a business is the operation by which the owner of a business transfers ownership to a transferee in return for a price.

This is a complex operation involving legal, financial and practical aspects. It is more complex than a simple sale. The interests at stake are more important, and require protection for the seller, his creditors and the purchaser. First and foremost, it is particularly important to define precisely which elements are to be transferred, and which are not, and to draw up a clear deed of transfer. In addition, it is important to diligently follow the post-assignment formalities through which creditors may oppose the sale. This can be particularly serious if total claims exceed the sale price.

To help you better understand the sale of a business, we suggest you think in terms of 5 key questions.

What is goodwill?

A business is a collection of tangible and intangible assets that enable a commercial or craft activity to be carried out. This generally includes tangible assets such as premises, equipment and inventories, as well as intangible assets such as clientele, trade names, contracts, etc.

The sale of a business concerns the sale of this set of elements.

The most important element of a business is its clientele, without which it could not exist. This clientele can be defined as all those who regularly buy from the merchant. As long as a customer base has not been established, goodwill has no existence. Consequently, the transfer of a business also includes the transfer of its clientele.

What distinguishes the sale of a business from similar situations?

→ Partnership contributions: Partnership contributions are frequently used when an individual entrepreneur decides to contribute an asset with the aim of forming a company. In return for this contribution, the partner receives shares. On the other hand, in the case of a business sale, the business is simply “sold” to a buyer. In return, the owner only receives a sum of money.

→ Location gérance: here, the owner of the business leases all or part of the business to a manager, who operates it at his or her own risk, in return for rent. All that is involved is transferring the operation of the business to another party, in exchange for a fee. However, the transfer of a business also transfers title to the property.

→ Sale of all shares: the sale of shares concerns the sale of ownership of part of a company’s share capital, while the sale of a business concerns the sale of a set of elements enabling the exercise of a commercial activity.

What constitutes a deed of sale of a business?

→ The spouse’s consent: the validity of the sale of a business by a spouse with joint property requires the consent of his or her spouse.

→ The price must be fixed or, failing that, determinable

→ The transfer deed must be in writing

→ The seller has a pre-contractual obligation to provide information

→ The buyer must have had access to the fund’s accounting documents

What are the legal formalities?

→ Pre-contractual information for employees : The seller of a business is legally obliged to inform its employees of the sale.

→ Informing third parties: publication within 15 days in the Journal d’Annonces Légales and Bulletin Officiel Des Annonces Civiles et Commerciales.

→ Registration: publication of the sale of the business must be preceded by registration for the purposes of informing the tax authorities.

How much does it cost to sell a business?

→ The services of a legal professional, a lawyer specializing in business law, are often required to draft the deed of assignment, ensure legal compliance and advise the parties throughout the process.

→ Advertising costs: the sale of a business must be announced in a legal gazette and in the Bulletin Officiel Des Annonces Civiles et Commerciales (the costs of these announcements depend on the gazette chosen and the size of the announcement). Publication of the business sale must be preceded by registration for tax purposes.

→ Tax charges: The sale of a business may have tax implications, particularly in terms of registration duty and capital gains tax. The registration duty for a business sale is made up of a budget duty, a departmental tax and a communal tax, the rates of which vary according to the sale price. It is payable on the sale price of the business, plus any charges imposed on the purchaser. The amount of the fee may not be less than €25, corresponding to the minimum collection amount.

→ Commercial lease costs: If the business is operated from leased premises, there may be costs associated with amending the lease or notifying the lessor.

It’s clear that the transfer of a business is a complex process that requires the support of a law firm. We can help you draw up your deeds of sale, as well as any additional steps you may need to take.

23 January 202417 April 2025

Commercial lease law: what every landlord should know

In order to run their business, retailers need a place where they can reach potential customers. Unless he buys premises, the merchant will usually have to rent them. Signing a commercial lease will enable you to operate your business within “walls” made available to you by a lessor.

Commercial lease law governs the relationship between the owner of a commercial property (the lessor) and the lessee operating a commercial activity on that property (the lessee).

As a reminder, the lessor can be any natural or legal person who owns buildings, premises or sites.

This article focuses on the rules governing commercial leases for business owners. To this end, we’ve decided to reveal to you, the owner, the key points to be aware of when it comes to commercial leases.

1) What you need to know before signing a commercial lease

To validly enter into a commercial lease, you must ensure that you have the power and capacity to do so.

You must be 18 years of age or over. If you are under guardianship, your guardian can sign a commercial lease on your behalf. However, to renew the lease, you will need the agreement of the family council or, failing that, the guardianship judge.
When it comes to power, two situations stand out:
If you are married under the legal regime of community of property or universal community, and the property is shared, you must seek your spouse’s written agreement, failing which the commercial lease will be null and void.
If you are a usufructuary, you cannot enter into a commercial lease without the written agreement of the bare owner, on pain of nullity.

2) What you need to know when signing a commercial lease

You are obliged to draw up an inventory of fixtures both when you take possession of the premises and when you return them.
You’ll also need to draw up an inventory of rental charges and taxes, so that you and the lessee can agree on a breakdown.
Lastly, you are obliged to inform the lessee of: the categories of charges, taxes and fees each year and whenever they are new, as well as any work carried out or to be carried out. In the interests of transparency.

3) What you need to know during your lease

Early termination of the lease: the minimum term of a commercial lease is 9 years. However, you can give the lessee notice to quit after 3 years in the event of work or demolition, or if the commercial lease contains a resolutory clause, or if the two parties agree otherwise.
On the lessee’s total change of activity: possibility of objecting on serious and legitimate grounds, particularly if this is likely to compromise your interests.
On subletting: you are advised to oppose subletting directly by means of a specific clause included in the commercial lease contract. If necessary, you can refuse the sublease at a later date. If the sublease is irregular (against your agreement, but nevertheless carried out), you can terminate the main lease and obtain payment of the rent received by your tenant.
Refusal to renew the lease: if you decide to refuse to renew the tenant’s lease, you will have to pay him eviction compensation (a sum of money), unless you can prove a serious and legitimate reason.
On the possibility of revising rents: you will be able to modify the amount of rent every 3 years or through specific clauses.

All these factors lead us to believe that, as an owner, you need to take the time to think about the commercial lease agreement you wish to enter into. We can help you define your needs, provide you with legal protection when drafting the commercial lease, and assist you during the term of the lease.

23 January 202417 April 2025

ESSENTIAL CLAUSES TO INCLUDE IN YOUR COMMERCIAL CONTRACTS

The drafting of commercial contracts is of vital importance in the business world, particularly in defining the contours of the commercial relationship. Whether you’re a sole trader or a company, sooner or later you’ll be faced with a commercial contract. It governs relations between the company and its partners, customers, suppliers or any other commercial player. More broadly, the commercial contract frames the relationship between buyer and seller.

The purpose of this article is to explain the essential clauses to be included in your commercial contracts, to avoid having a “standard” contract that is unsuited to your needs, and to protect you against the risks associated with contract performance.

First and foremost, it’s worth recalling the specifics of commercial contracts and those that are most common.

1) What is a commercial contract?

As a reminder, commercial contracts are legal acts whose object is commercial or which are performed by a merchant for the needs of his trade. As only one of the parties may be a trader, the contract becomes a mixed commercial contract.

The particularities of commercial contracts lie in :

Purpose: commercial
The parties: at least one of the parties to the contract must be a trader
Breach of contract: notice period required
Jurisdiction: that of the defendant, as a matter of principle

2) Different types of commercial contracts

There are several types of commercial contract in the business world, each corresponding to specific needs and situations.

Sales contract: sets out the terms and conditions of the sale of goods between a seller and a buyer.
Supply contract: sets out the conditions for the supply of goods or services between a supplier and a customer.
Distribution contract: governs the conditions under which a distributor will distribute the products or services of a manufacturer or supplier.
Commercial leases: govern the leasing of real estate for commercial purposes (mainly business premises).
The partnership contract: sets out the terms of a collaboration between two parties within the framework of a joint venture.
Contract for the provision of services: provides a framework for the provision of services by a service provider to a customer.

3) Essential clauses in commercial contracts

The commercial contract is standardized and must include various clauses. It is important to draft it as precisely as possible.

We offer you examples of essential clauses to include in the drafting of your commercial contracts in order to protect you against any resulting disputes:

Clear identification of the parties to the contract: this makes it possible to be certain who is committing and who is not.
Purpose of the contract: specifies what the contract covers
Financial terms: this clause specifies the price, consideration, method of payment, any discounts or penalties for late payment.
Contract duration: this determines whether the contract is for a fixed term (clearly defined period) or for an indefinite period (undefined period).
Confidentiality: this is relevant if the information contained in the contract requires protection.
Termination of the contract: indicates the conditions under which the contract may be terminated without recourse to a judge.
The liability clause: it may be restrictive if it aims to reduce liability in the event of non-performance of the contract or a contractual obligation to compensation, or even exclusive if it aims to exclude all liability in the event of breach of contract.
Penalty clause: provides for a financial penalty, generally a fixed sum of money, to be paid by one party in the event of a breach.
Revision clause for unforeseen circumstances: this obliges the parties to renegotiate the contract if changes in circumstances have made its performance too onerous for one of the parties. They are particularly useful in times of economic crisis or pandemic.
The force majeure clause: offers protection to the debtor if he is unable to perform his obligation due to an external, unforeseeable and insurmountable event.
Disputes: sets out the procedures to be followed in the event of a dispute between the parties, such as mediation or arbitration.
Attributive of jurisdiction: It indicates the jurisdiction that will govern the contract in the event of a dispute, and could therefore save you having to take proceedings in a distant court.

Because of their importance in framing the contractual relationship, these clauses must be drafted with great care. Thanks to contractual mechanisms, it is possible to avoid the impact of any disputes that may arise in the commercial relationship.

That’s why our firm can help you draw up your commercial contracts.

23 January 202417 April 2025

The legal consequences of sudden termination of established commercial relations

In the complex world of business, established commercial relationships often represent the fruit of considerable investment in terms of time, resources and trust. However, within this delicate fabric, ruptures sometimes emerge that upset the precarious balance between economic partners.

The termination of an established commercial relationship, defined as the sudden and unilateral interruption of a commercial collaboration, is however strictly regulated by law, which provides remedies for economic players who are victims of a sudden and unjustified termination.

Whether you are the cause or the victim of a breach of commercial relations, it is important to understand the law governing this practice and its risks.

1. Definition of the abrupt termination of an established commercial relationship

Under French law, the abrupt termination of an established commercial relationship is governed by article L. 442-6 of the French Commercial Code. This provision aims to protect commercial partners against unfair practices that may result from a sudden and unjustified termination of commercial relations.

Brutal severance of an established commercial relationship is characterized by a sudden and abusive unilateral act, leading to the sudden termination of commercial relations between two parties, without sufficient notice. Such termination must occur in the context of an established commercial relationship, i.e. a regular and stable collaboration between the parties, generally formalized by a contract or by tacit agreements over time.

The elements constituting the brutal rupture of established commercial relations must include :

The existence of an established commercial relationship: There must be regular and stable collaboration between the parties;
Unilateral and sudden: The termination must be the result of a unilateral decision by one of the parties, without sufficient notice or valid justification.

An abuse of economic dependence is also often, but not necessarily, characterized: the party terminating the relationship must exert unjustified economic pressure on the other party, thereby exploiting a dominant position.

2. What are the consequences of the sudden termination of an established commercial relationship?

French case law has established that the brutal severance of established commercial relations may result in financial compensation for the injured party.

According to case law, the amount of the loss is determined on the basis of lost earnings (calculated using a margin on variable costs) during the period of notice that should have been respected.

3. How to avoid being accused of brutally severing an established commercial relationship

Termination of an established commercial relationship may be justified if your commercial partner has committed a fault, provided that the fault is substantial and justifies the end of the commercial relationship.

Here are a few points to consider:

Seriousness of the fault: make sure that the fault committed by your business partner constitutes legitimate grounds for termination. Legitimate grounds may include unfair behavior, serious contractual breaches, or other actions detrimental to the business relationship.
Proof of fault: It’s important to be able to demonstrate your business partner’s fault. Gathering solid evidence will strengthen your position in the event of a later challenge.

Finally, the best way to avoid being accused of a brutal breach of commercial relations is to give sufficient notice, taking into account the duration of the broken commercial relationship and the degree of economic dependence of your commercial partner.

It is strongly recommended that you consult a commercial lawyer before taking any action, to ensure that the move complies with current legislation and any contracts in place. Careful management of the situation can help minimize legal risks and protect your business interests.

22 January 202417 April 2025

Obligations of the seller of a business

The seller of a business has certain obligations, the most important of which is to hand over the business. But how does this obligation materialize? And what are the seller’s other obligations?

1. The obligation to deliver goodwill

The sale of a business involves the transfer of ownership of the business in its entirety. It is the seller’s responsibility to ensure that all the components of the business are transferred and easily accessible to the buyer. For example, he must ship any equipment not located on the premises, and hand over the keys to the storage facilities.

When selling a business, the seller’s obligation to deliver concerns :

Tangible items such as equipment, furniture, tools, etc. are not included.
Intangible assets such as leasehold rights, brand names, trade names, clientele, employment contracts, intellectual property rights and patents, etc., are not included.

To avoid any subsequent disputes, and to guard against possible penalties for non-compliance with the obligation to deliver, it is advisable to draw up a precise inventory of the items transferred as part of the sale of the business, and to have this signed by the transferee.

2. What other obligations does the seller of a business have?

In addition to the obligation to deliver, the sale of a business requires the seller to assume the responsibilities associated with the guarantee of eviction and the guarantee of hidden defects.

The eviction warranty can be likened to a non-competition clause set out in the French Civil Code. The seller of a business is prohibited from establishing a similar activity in the vicinity of the business sold. This obligation also extends to the seller’s close relations and to former usufructuaries of the business.

The eviction warranty is compatible with your freedom of establishment and is therefore not absolute. If you plan to re-establish yourself after the sale of your business, you should discuss this with your lawyer to assess the feasibility of the project and limit the risk of recourse by the transferee.

As for the warranty against hidden defects, this requires the seller to inform the transferee of all defects and deficiencies concerning the items sold. This applies to defects of which he is aware or of which he cannot be unaware.

To hold the seller liable for latent defects, the purchaser of the business must demonstrate (i) that the defect existed prior to the sale, (ii) that it was not apparent, and (iii) that its existence complicates, or even renders impossible, the operation of the business.

3. Does the seller have any obligations to third parties?

The seller’s obligations are not limited to his relationship with the transferee. In the event of the sale of a business, the seller’s obligations are not limited solely to the buyer. The seller is also obliged to respect his commitments towards his employees and the municipality.

When selling a business, the seller has a duty to inform its employees. He must inform them of the sale of the business if the company meets certain conditions, in particular if it does not have a Social and Economic Committee (CSE), has fewer than 250 employees, and generates sales of less than 50 million euros or has a balance sheet of less than 43 million euros. All employees must be informed, whether by posting with acknowledgement of receipt, e-mail with acknowledgement of receipt, hand-delivery or bailiff’s deed. This obligation does not apply in the event of a sale to a family member or the opening of collective proceedings.

What’s more, in certain cases, the local council has a right of pre-emption over the business. This means that the municipality of the commune where the business is located can buy it in priority to any other buyer. In order for the town council to exercise its right of pre-emption, the seller must inform it of the sale of the business. The mayor then has two months to indicate whether or not he intends to acquire the business, in order to protect local shops and crafts. This right of pre-emption is often included as a condition precedent in the sales agreement.

Are you planning to sell or buy a business? We can support you from negotiation through to sale, including post-sale formalities.

22 January 202417 April 2025

Compromise or promise to sell a business

1. What is a compromis or promesse de cession de fonds de commerce?

A “compromis de vente de fonds de commerce” is a legal agreement between a seller and a buyer for the sale of a business. As a reminder, a business encompasses all the elements required to carry on a commercial or industrial activity, such as clientele, leasehold rights, equipment, merchandise, and so on.

The compromis de vente, also known as promesse de vente, is a preliminary contract that seals the agreement between the parties on the conditions of the sale. It specifies the essential elements of the transaction, such as the sale price, terms of payment, date of transfer of ownership, any guarantees, conditions precedent, etc.

2. Why draw up a compromise or promise to sell before a deed of sale?

The most obvious reason to draw up a compromise before concluding the deed of sale is the possibility of inserting suspensive conditions.

A suspensive clause is a contractual provision that makes the completion of a sale or contract conditional on the occurrence of a future, uncertain event. In other words, it stipulates that an obligation will only take effect if certain conditions specified in the contract are met. If these conditions are not met, the contract may be cancelled without either party being bound by its obligations.

3. What are the most common conditions precedent for the sale of a business?

The following are among the most common conditions precedent for the sale of a business:

Obtaining financing: If the buyer fails to obtain the necessary financing within the time specified in the clause, the sale will not be finalized, and the contract may be cancelled without penalty to the buyer.
Administrative authorizations: The sale may be conditional on obtaining all necessary authorizations from the authorities responsible for operating the business, such as licenses, permits or specific authorizations.
Absence of disputes: The sale may be conditional on the absence of any ongoing disputes or litigation likely to affect the goodwill. This may include disputes with customers, employees, suppliers or other third parties.
Regulatory compliance: Completion of the sale may depend on confirmation that the business complies with all applicable regulations, such as health and safety standards.
Tax and social audit: The sale may be conditional on a positive tax and social audit, confirming that there are no major tax or social debts linked to the business.
Prior information of employees: In certain cases, the sale may be conditional on the prior completion of an information and consultation procedure with employee representatives or employees, in accordance with current legislation.
Town-planning conditions: If the business is linked to commercial premises, the sale may be conditional on verification of the town-planning conformity of the business premises.
Non-pre-emption: if the business is located in an area designated as a “perimeter de sauvegarde du commerce d’artisanat de proximité”, the sale may be conditional on the town council not exercising its right of pre-emption.

Suspensive clauses are used to protect the parties by introducing conditions that must be met for the contract to become binding. They can also be found in other types of contract, such as loan agreements, real estate contracts, etc. These clauses are precisely drafted to clearly define conditions, deadlines and the consequences of non-fulfillment.

4. When does the sale take place?

Once the compromis de vente has been signed by both parties, the seller undertakes to sell the business to the buyer according to the agreed terms, and the buyer to acquire the business under the same conditions. The signing of the compromis is generally followed by the signing of the final deed of sale, which formalizes the transfer of the business.

Normally, the compromis specifies the deadline by which the suspensive conditions must be fulfilled and the final deed of sale signed. If the conditions are not fulfilled within the deadline, the sale may not go ahead.

Our firm can support you from the initial negotiations right through to the final deed of sale.