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Securitization of the transfer of business: for a comprehensive protocol for the transfer

Home > French Business Law | Published 2015-10-23

In every field there is a tendency towards specialization. The transfer of business does not escape this rule.

Thus, in the small world of business lawyers, writers of the acts related to the transfer of business, hyper specialization is often used from the the opening of preliminary negotiations of the transfer, making a true team of the sharpest lawyers necessary.

Featured on the team: a professional in transfer of business of titles, a professional in guarantees of assets and liabilities, a professional responsible for auditing, one responsible for the reduction of the fiscal costs of the operation of the transfer of business, one responsible for accompanying and supporting the transferor and the noncompetition clause, one responsible for the retirement of the transferor, one responsible for questions pertaining to finances, etc.

This multiplicity of contributors can lose contact with the real mission of the operation of the transfer of business; it should not be to draft a single legal act but to create a comprehensive, all encompassing, operation. However, experience shows that the writing of this sort of act is difficult, and can only be undertaken by a limited number of individuals. Thus a legal expert is necessary.

Therefore, in our opinion it is necessary to advise each party transferring or acquiring, to entrust the management of the entire transfer to a suitably experienced lawyer who will act as the true orchestrator of the process, capable of directing all of the issues from management to comprehensive protocol helping throughout the entire process of the transaction.

In regard to practicality, thanks to the progress of computer technology, one can simply extract, using “copy-paste,” the different methods necessary for the drafting of separate acts or necessary formalities (for example, the acts of transferring of titles for records) making them easily distributed.

Legally, the act of transferring of a business should itself be as seamless as possible, which is to be prepared to face all questions and problems, and to result in the most “final” solution possible.

Often after signing the letter of intention, which is usually imperfect but nonetheless dense in content, the parties submit to the signature of a promise under a suspensory clause under the condition of returning for a reiteration (the signing of a final act confirming the demonstration of will).

It can be more effective to agree and sign a definitive act of transfer with potential suspensory conditions. The realization of these suspensory conditions automatically make the operation of the transfer of business definitive, without necessitating a new writing of legal acts slowing down the process of the transfer or risking serious disagreement.

It also frequently happens that legal acts regarding the transfer of business cannot sufficiently foresee all of the restrictive clauses, thus opening the door for a number of contentions.

Lawyers pleading this type of contention, we see our clients confronting two types of problems related to traditional contract law:

  • A problem or the disagreement regarding a substantial element of the process (regarding the price of the transfer for example) which challenges the sale of the transfer itself
  • A problem regarding less foundational information, but which could potentially cause great tension

Remember here that global protocol of transfer of business should have a minimum of clauses; and one should note that this list is not exhaustive nor ordered by the importance of the clause:

  • the legal identification of parties
  • a forward exposing the principal methods and the process of transferring
  • affirmations of sincerity about the business
  • the origin of the property of the titles
  • the relation with and the analysis of the law of the society
  • the legal definition of what is being transferred (titles, numbering, valuation…)
  • the principal mode of transfer: what is being sold and the price paid (sold in the sense of civil code: agreeing on what is being sold and price)
  • the mode(s) of payment
  • the property taken and the enjoyment by the acquirer
  • the suspensory condition relative to the restructuring of the company concomitant with the transferred
  • statements relating to the privilege and collateral (reference to the traditional procedure of the transfer of commercial funds is often useful)
  • the suspensory condition relating to obtaining financing
  • the suspensory condition concerning the preliminary audit
  • asset and liability guarantee
  • the guarantee of a warranty
  • the accompaniment of the transferor
  • the non-competition clause
  • the agreement of associates
  • the agreement of formalities correlating to the transfer
  • the approbation of accounts and grant of transfers
  • the clause concerning the pursuit of regulated activities
  • the methods pertaining to the management of the company during the interim period
  • the fair execution
  • the publicity
  • the discharge of the editor

We hope to have clarified, in a practical fashion, these fundamental aspects of the transfer of business in the name of the security of the operation and its sustainability.

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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