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Force majeure and commercial contracts: what happens when the unexpected happens?

1. What is force majeure?

Force majeure is a legal concept used in commercial contracts to deal with unforeseen situations beyond the control of the contracting parties. It is often the subject of a specific clause in contracts.

However, force majeure can still be invoked outside the contract, within the framework of the law.

Force majeure is defined inarticle 1218 of the French Civil Code as ” an event beyond the debtor’s control, which could not reasonably have been foreseen when the contract was concluded, and whose effects cannot be avoided by appropriate measures, prevents the debtor from fulfilling his obligation “.

force majeure contrats commerciaux

In order for force majeure to be recognized in a contract, four conditions must be met:

  • The event affecting the contract must be external, i.e. not dependent on the will of the debtor of the obligation.

    For example: in a contract, the occurrence of a health crisis such as Covid-19 and, in particular, the first containment, is an event totally beyond the debtor’s control.

  • The event must be reasonably unforeseeable: the occurrence of the event must not have been reasonably foreseen when the contract was concluded.

    For example: the fact that the creditor of the obligation does not perform is an event that was foreseeable when the contract was concluded. It does not, therefore, fall within the scope of force majeure.

  • An insurmountable event for the debtor: the debtor was unable to avoid the effects of this event by taking appropriate measures.

    For example: containment.

  • The event must prevent performance of the debtor’s obligation: this impediment may be temporary, in which case performance is suspended. If the impediment is definitive, the contract is terminated ipso jure.

2. What happens if the conditions of force majeure are met?

2.1. Proof and notification :

Only the debtor can invoke force majeure. Force majeure is a mechanism for protecting only the debtor, not the creditor. Proof is therefore generally provided by the debtor, and is assessed in a sovereign manner by the courts.

It should be noted that force majeure may be invoked by contracting parties outside the context of any dispute. It can also be negotiated between the parties.

2.2 Effects on the contract :

If the event in question definitively prevents the debtor from performing his obligation, the contract will be rescinded. Termination has retroactive effect, meaning that the contract is deemed never to have existed.

However, if the event in question only temporarily prevents the debtor from performing his obligation, the contract is only suspended until the force majeure ceases.

3. How best to take force majeure into account when drafting your commercial contracts?

Article 1218 of the French Civil Code, which deals with force majeure, is not of public order. This means that it can be derogated from.

This implies that the parties to a contract have the possibility of defining the contours of force majeure, including the events considered as such and their consequences (such as suspension of the contract, its termination, the possibility of further negotiations between the parties).

It is therefore common, particularly in contracts between professionals, for a clause governing force majeure to be included: we recommend that you examine it carefully before committing yourself.

Events commonly mentioned directly in current force majeure clauses include health crises, natural disasters and strikes.

Commercial contracts may therefore contain specific provisions limiting or excluding liability in the event of force majeure. It is important to understand these clauses when drafting or negotiating a contract.

That’s why we’re here to help you draw up your commercial contracts.

The health crisis has shown us the importance of a well-drafted contract to protect ourselves and avoid being caught in the trap of a contract that has become impossible to enforce.

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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.
recouvrement créance entreprise

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.

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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.

a vendre fonds de commerce

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.

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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.
cheffe d'entreprise bail commercial commerce ouvert

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.

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ESSENTIAL CLAUSES TO INCLUDE IN YOUR COMMERCIAL CONTRACTS

clauses contrats obligations contrat vérification contrat

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.

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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.

rupture relations commerciales

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.

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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.

achat vente fonds de commerce

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.

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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.

compromis

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.

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Formalities to be completed following the sale of a business

Once the final deed of sale has been signed, the procedure is far from over, and a number of formalities still need to be completed. These formalities must be completed so that the funds, sequestered in the secure account of one of the lawyers, can be released.

1. Registration of the assignment and payment of registration fees

The transferee must register the deed of transfer with the registration office of the tax department (SIE) in the area where the business is located. This formality must be carried out within one month of the date of the deed of sale, or the date on which the transferee takes possession of the property, whichever is earlier. Failure to meet this deadline will render the advertisement null and void.

Please note: in practice, the registration deadline is reduced to fifteen days, as the sale must be announced in a legal gazette within fifteen days of signing the deed, and registration must precede publication in the legal gazette. As the SIE is not always very reactive, it is important to follow up the file carefully, and even to follow them up with perseverance.

At the time of registration, unless the deed of transfer provides for costs to be shared or borne by the transferor, the transferee must pay transfer duties.

The transfer tax rates are as follows:

  • 3% of the sale price of the business for the portion of the price between 23,000 and 200,000 euros;
  • 5% for the portion of the price exceeding 200,000 euros.

Since January 1, 2016, an additional tax of 0.6% has been applied to transfers for valuable consideration of office, commercial and storage premises located in the Île-de-France region.

2. Publication in a legal gazette

Within 15 days of the sale, the transferee must publish the business sale in a legal gazette in the département where the business is located. The announcement must include the following information:

  • The date of the sale of the business ;
  • The identities and addresses of the previous and new owners of the business;
  • The nature and address of the business
  • The price at which the business was sold, broken down into tangible and intangible elements;
  • Information relating to the registration of the deed with the SIE ;
  • An election of domicile (within the jurisdiction of the commercial court of the transferred establishment);
  • Deadline for creditor objections.
publication journal annonce légales

3. Publication in BODACC

Three days after publication of the announcement in the legal gazette, the transferee must ask the clerk of the Commercial Court where the business is located to publish a notice in the BODACC.

Creditors of the business have 10 days from publication in the BODACC to object to the sale price.

4. Expiry of opposition period

The lawyers responsible for receiving objections must receive and process them.

More often than not, tax (or, more broadly, administrative) objections arise in view of taxes still to be paid (corporate income tax, VAT, CFE, etc.). There may also be objections from finance leasing companies.

Only in the absence of opposition, or after paying off creditors who have lodged opposition, will the transferor receive the transfer price.

If the sale price is not high enough to pay all the creditors who have lodged objections, these creditors can request a public auction of the business.

That’s why it’s important to obtain a statement of liens and pledges from the clerk’s office before finalizing the sale of a business, and to understand the importance of preferential and registered creditors.

5. Transferor’s tax returns

The seller of the business then has several deadlines to file his tax returns:

  • Within 45 days of publication of the sale in a legal gazette, the seller must close its accounts and notify the tax authorities of the sale;
  • Within 60 days of publication of the transfer in a legal gazette, the transferor must file all declarations relating to profits, capital gains, etc., with the relevant authorities.
  • VAT returns are subject to different deadlines, depending on the applicable system. However, the sale of the business is exempt from VAT if the sale concerns the entire business and if the purchaser is himself liable for VAT.

If all these steps are followed to the letter, then the tax solidarity deadline is 30 days after the tax returns have been filed. The funds can then be released to the seller.

If you’ve sold your business, or are considering selling your business or acquiring a business, we’re here to help.

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How to buy a business

Achat acheter fonds de commerce

You want to start your own business without starting from scratch. Buying a business is for you. Here’s how.

  1. Define your purchasing criteria

    Identify the type of business you wish to acquire, its geographical location, the size of the business, etc.

  2. Evaluate your budget

    Analyze your financial capacity and determine the budget you are prepared to allocate to the purchase of the business.

    Meet with lending institutions to secure financial partners.

  3. Searching for goodwill

    Look for opportunities that match your criteria. Use online platforms, specialized ads, or specialist agencies.

  4. Meetings and negotiations

    Meet potential sellers, visit business premises, and enter into negotiations to reach agreement on the price and conditions of sale.

    Perform due diligence to assess the financial health of the business, check current contracts, legal aspects, etc.
    If you haven’t already done so, this might be a good time to contact a lawyer.

  5. Drafting and signing the promise to sell

    The promesse de vente, also known as the compromis de vente, is a legal document that commits the seller and buyer to the sale of a business or other asset (real estate, shares, etc.).

    The promesse de vente formally commits the seller to transferring the property (in this case, the business) to the buyer, and the buyer to acquiring the property under the conditions defined in the document. During the period between the promesse de vente and the definitive purchase, the buyer can carry out in-depth due diligence (checking accounts, contracts, etc.) before the final conclusion of the sale.
    The promesse de vente is most often concluded subject to conditions precedent, such as obtaining financing or administrative authorizations, but also the absence of pre-emption by the town hall, the obtaining of certain building permits, the termination of certain contracts, etc.
    The promesse de vente is as important as the deed of sale itself. Failure to comply with it will have consequences, most of which are set out in the contract itself.

  6. Financing

    Finalize your financing with the lending institutions you contacted when evaluating your budget.

  7. Signature of the deed of sale

    Once all the checks have been successfully completed, and the suspensive conditions lifted, the final deed of sale is signed. This officially transfers ownership of the business to the buyer.
    The day before signing, you must transfer the funds to the secure account of the lawyer acting as escrow (usually the seller’s lawyer). These funds will be remitted to him once the tax solidarity deadlines have expired.

  8. Administrative formalities

    The lawyers will take care of all commercial and tax formalities following the sale. They will also follow up any objections from creditors.

We are available to support you at every stage of your business acquisition, and are particularly well versed in rapid transfer exercises between parties with short, imperative deadlines.