HOW DOES THE SALE OF A BUSINESS WORK?

The transfer of a business capital is a major legal and economic operation in the life of a company.

It enables a retailer to transfer his business to a buyer by selling a set of tangible and intangible assets essential to the operation of the business.

Strictly governed by the French Commercial Code, this transaction is subject to a specific procedure designed to protect the buyer, seller, employees and creditors.

Poor anticipation or irregularities can result in significant penalties, or even the sale being called into question.

I.- The components of the business capital and their prior identification

A business is a set of movable assets used to run a commercial activity.

It mainly comprises intangible assets such as customers, trade names, brand names, etc. leasehold rights, These include trademarks, patents and administrative authorisations, as well as tangible assets such as equipment, furniture, tools and merchandise.

On the other hand, certain items are excluded unless otherwise stipulated, such as buildings, the seller's receivables and debts, accounting documents and current contracts (with the exception of employment contracts, which are automatically transferred to the buyer).

Before any sale, it is essential to draw up a precise and detailed inventory of the items being sold.

This inventory not only makes it possible to determine the exact scope of the sale, but also to carry out a reliable valuation of the assets.

In the event of imprecision, the judge has broad discretion to determine the elements included or excluded from the transfer, which may weaken the transaction.

II - Information requirements prior to sale

The law imposes two main obligations on the vendor to provide information before signing the sale agreement.

• Informing employees

If the company has fewer than 250 employees, the seller must inform the employees of the proposed sale so that they can submit a takeover offer if necessary.

In companies with fewer than 50 employees and no representative body, this information must be provided at least two months before the sale.

Between 50 and 249 employees, information is provided through consultation with the Social and Economic Committee (CSE). Failure to comply with this obligation is punishable by a civil fine of up to 2 % of the sale price, without calling into question the validity of the sale.

• Information from the municipality

If the business is located within a local business preservation area, the vendor must declare his plans to the local authority so that it can exercise its right of pre-emption if necessary.

If you fail to do so, the sale may be cancelled.

III - The preliminary contract: promise or provisional sale agreement

The sale is often preceded by a pre-contract, which is designed to secure the transaction and allow prior formalities to be completed (such as the buyer obtaining financing).

A unilateral promise commits only one party, usually the seller, while the beneficiary has a right of option.

It must be registered with the tax authorities within ten days, failing which it will be null and void, and frequently includes an immobilisation indemnity.

In contrast, a synallagmatic agreement is a reciprocal commitment to buy and sell.

If it includes all the essential elements (price, item, conditions precedent), it can be deemed to be the sale as soon as the conditions are lifted.

IV. Drafting and signing the deed of sale

Since the law of 19 July 2019, The mandatory information required under the former article L. 141-1 of the French Commercial Code has been removed.

However, for the sake of legal certainty, the deed of sale generally includes the traditional information relating to the origin of the business, turnover, the commercial lease and any security interests.

The seller remains subject to a general obligation to provide information, and guarantees the accuracy of the declarations made to the purchaser.

In the event of a decisive inaccuracy, the seller may request that the sale be declared null and void, that the price be reduced or that damages be awarded.

It is also worth including a non-competition clause in the deed to secure the sale after the event.

V.- Subsequent formalities and guarantees for the purchaser

After signing, a number of formalities must be completed within strict deadlines:

• Registration of the deed with the tax authorities; ;
• Publication in a legal gazette and then in the BODACC ;
• Compliance with the creditors' objection period, during which the price is generally sequestered.

Purchasers also benefit from legal guarantees, in particular the eviction guarantee and the guarantee against hidden defects, designed to secure their investment.