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Sale of a business: the differences between a promise, a compromise and a deed of renewal

When the time comes to sell a business, several legal steps are required to formalize the transaction. Among these steps, the promise, the compromise and the reiterative deed are distinguished by offering varying levels of commitment and legal certainty. In this article, we explore the essential differences between these three types of legal instrument, to better understand their implications for the parties.

The unilateral promise: the least binding deed

A unilateral promise, as its name suggests, commits only one of the parties. It may be a unilateral promise to sell, in which the promisor grants the beneficiary, who accepts but does not undertake to buy, the right to acquire the business.

The promise specifies the conditions under which the sale is to take place. The promise generally secures the availability of the business for a buyer, while certain aspects of the transaction are negotiated, and ensures the financing of the operation.

It may also, but much more rarely, be a promise to purchase in which the promisor promises to buy the business, but the beneficiary does not promise to sell.

The preliminary sales agreement, also known as a “promesse synallagmatique

This is a binding deed in which the seller sells his business to an assignee. It is carried out subject to conditions precedent, meaning that the sale will not actually take place until certain conditions have been met.

The suspensive conditions are generally as follows:

  • Assignee obtains credit,
  • Obtaining various permits for works, operations, etc.
  • Completion of certain formalities,
  • Expiration of pre-emption periods where they exist.

The compromis de vente enables both parties to make a commitment and secure the transaction, even though there are still several aspects to be settled. This avoids the need for the parties to spend time on detailed negotiations, when there is a risk that one of them may back out.

Reiterative deed: final deed of sale

The acte réitératif is simply the name given to the deed of sale which confirms the compromis de vente. If a compromis has been signed and the suspensive conditions have been fulfilled, the acte réitératif must be signed. If one of the parties to the compromis decides not to sign, it is generally possible to force them to do so through the courts, or to impose a severe financial penalty.

The choice of deeds depends on the situation. A lawyer will be able to advise you on the deeds that are best suited to your operation and provide you with the greatest security.

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The value-sharing bonus: The content of the draft bill

The Government has sent the draft law on the value-sharing bonus to the Conseil d’Etat.

This text essentially transposes the national interprofessional agreement adopted by the social partners on February 10.

The aim? To take various measures to develop the sharing of value within companies.

The following is a summary of the main points of this preliminary draft, which is due to be adopted by Parliament before the summer recess.

In particular, this text provides for :

– An obligation to share value in companies with 11 to 49 employees making regular profits from January 1, 2025 until 2028;

– The possibility of derogating from the legal profit-sharing formula, even in a less favorable way, in companies with fewer than 50 employees. This possibility is granted to these companies on an experimental basis.

– In companies with at least 50 employees, it will be compulsory to negotiate on the taking into account of an exceptional increase in their profits as defined by the employer;

– The creation of a company value-sharing plan, which would enable employees to share in the financial value of their company.

More specifically, with regard to the value-sharing bonus mechanism in the strict sense of the term, the draft bill stipulates that the preferential tax and social security regime applicable to companies with fewer than 50 employees will be extended until December 31, 2026.

As a reminder, this bonus is currently exempt from social security contributions, supplementary pension contributions, unemployment insurance contributions and health insurance contributions.

It is also exempt from income tax and CSG CRDS on two conditions:

– It is paid between July 1, 2022 and December 31, 2023;
– It is paid to employees who, over the last twelve months prior to its payment, received remuneration of less than three times the annual value of the SMIC.

As it is tax-exempt, this bonus will not be subject to withholding tax. However, it will have to be taken into account when determining reference tax income.

From January 1, 2024, the value-sharing bonus will no longer benefit from additional exemptions based on the employee’s remuneration.

It will remain exempt from social security and employer contributions up to a limit of €3,000 and €6,000 for companies implementing a voluntary profit-sharing or incentive scheme.

However, regardless of the employee’s remuneration, it will be subject to :

– CSG / CRDS;
– Income tax;
– Flat-rate social security contributions for companies with more than 250 employees.

Once the text has been adopted by Parliament, it will be time to analyze the new provisions that will be officially put in place.

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3 tips for a successful business sale

You’re getting ready to sell your business. You’ve found a buyer and want to get the process moving as quickly as possible. Here are our top 3 tips for speeding up the process, without losing any security.

1. Prepare your parts

Before buying your business, the buyer will conduct a kind of audit of your business, looking at every aspect of your business. You will need to provide a whole range of documents, such as tax and accounting documents for the last few years, employee employment contracts, a list of current contracts, etc.
More often than not, the customer is missing documents. This may be the general terms and conditions of sale of a leasing contract that the customer has lost and that the leasing company has not returned despite repeated requests, a lost employment contract, a certificate from an accountant who is not very responsive.
Our advice is to start, as soon as possible, to take stock of the documents at your disposal, and to look for the missing documents.

2. Purge pre-emptive rights

One of the main reasons for slowing down the sale of a business is the purging of pre-emptive rights.
Pre-emptive rights are the right granted to someone to have priority in the purchase of your business when it is put up for sale. There may be several pre-emptive rights: for employees, for the municipality in certain cases, but also for a co-contractor, if you are a franchisee for example.

To purge a pre-emptive right, you must inform the person holding the pre-emptive right and wait a pre-determined period (usually two months) for them to come forward before you can sell.

However, to move more quickly, you can ask these people for certificates stating that they do not intend to acquire your business, leaving you free to proceed with the sale before the pre-emption period expires.
It is therefore particularly important to identify existing pre-emption rights early on in the process, in order to deal with this formality as a matter of priority.

3. Notify your Board as soon as possible

As a matter of economics, many company directors wait until they are as far along in the process as possible before notifying their lawyer.
However, in the event of a dispute, your lawyer will not have been able to review the letter of intent, or even the promise to sell.

If you try to make small savings, you could end up with big losses.
If you are planning to sell your business, we strongly recommend that you discuss the matter with your usual advisor as soon as possible.

What’s more, this will enable him to get organized and guarantee you maximum reactivity during the busy times of the transfer.

A well-prepared business sale can be completed quickly. Whether you have a simple project in mind, or the sale of your business is well advanced, you’ll save time by turning to a lawyer who specializes in this area.

Our firm, DESRUMAUX AVOCATS, is at your disposal to assist you in this particular operation.