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The transfer of a business

Home > French Business Law | Published 2015-11-06

Transferring a business is an essential economic act which necessitates surrounding yourself with all optimal legal precautions.

It is useful to remember from the beginning that transferring a business is a complex act, specifically regarding the texts that concern the transfer, but also regarding the accounts responsible for truthfully recording all funds. These factors present the following intrinsic risks:

  • For the seller, not paying all or the correct part of the decided price
  • For the buyer, buying elements that do not conform to his or her hopes and wishes
  • For one or the other party, seeing the act of transfer reviewed for a breach of procedural rules or formalities specific to the transfer of business

Consequently, it is important to respect the following principals, and of course, to count on professional advice in order to avoid risks.

A rational evaluation of the sale of business

The price is an essential element to the contract of a business transfer and its determination should be executed rigorously in order to avoid the “wrath” of the tax administration.

Also, one should ask if it is good to refer directly to the way the experts or the courts assess the value of your company? For example, experts may estimate the value of the transfer of a watch and jewelry store at a 30% turnover both annually and on average.

It is useful to specify that determining the price is more precise if one takes into consideration the average turnover of the last three years and factors such as the location, the value of stock, the quality of organization, and the system of protection against theft.

A rigorous drafting of the business transfer contract

Pre-registration of the act of transfer

The act of transferring should be registered during the month of signing the tax receipts to give time for the buyer to pay registration fees. Normally, the transfer will be declared by the tax administration within 60 days of the act of signing.

Double Advertising

When transferring, the buyer should declare, within 15 days of the signing the sale, a notice of transfer in a Journal of Legal Announcements (JAL) which includes the place of operation of the business in transfer. A second notice in the Official Bulletin of Civil and Commercial Announcements (BODACC) should be inserted by the court clerk of commercial court by demand of the buyer during the period of the publication of the notice in the JAL.

Respect of opposition delays

The completion of ads runs for 10 days from the last publication, during which the buyer’s creditors can file an opposition to the payment price.

In fact, in case of opposition, the price is not available for many months, given the 60 day declaration of the transfer by the tax administration and the administration limitation period.

In conclusion, it is necessary to specify that the transfer or acquisition of business is not tax-neutral, because firstly, the seller must pay for any eventual capital gains and according to the regime of professional capital gains, and secondly, the buyer will have to pay the registration fee.

This is why it is advised to call an experienced business lawyer who can optimize and guarantee that the operation of the transfer of business is successful.

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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