Business acquisition in France: frequent deal structures

What are the main corporate entities used for private acquisitions?

• Simplified joint stock companies (SAS), and Joint-stock companies (SA), in which no restrictions apply against acquisitions by foreign buyers, unless mentioned otherwise in the company’s articles of association or a shareholder’s agreement.
• Private limited liability companies (SARL), in which an approval by decision of the shareholders (equivalent to 50% of the share capital of the company at least) is required for any transfer to a third party.

How to acquire a private company?

The legal and tax framework vary dramatically depending on whether the transaction is structured as an asset acquisition, or a share purchase.

Key figures of a share sale?

It is possible to acquire a private company by a share sale. In this case, all the assets of the company will be acquired, in addition to the liabilities, if not mentioned otherwise. Due diligence is required to list all the warranties that are required by both of the parties. The buyer here receives all liabilities, contracts, and assets of the company.

Key figures of an asset sale?

It is also possible to acquire a private company by an asset sale that helps the buyer avoiding the acquisition of undesired liabilities, hence getting significantly more precise disclosure. In this case, assets and liabilities will not be transferred automatically, an authorization is requested. And unlike a share sale, this operation happens without needing any transfer of liabilities, unless they concern employment contracts per example.

The deed will mention specifically the assets in question as well as their price, so that they constitute an identifiable business or “Fonds de commerce” in French. In this case, the sale will be subject to transfer tax. And the sale must comply with mandatory formalities and needs a business transfer agreement in French and in euro.

Within fifteen days, a notice of the transfer in question must be published in the BODACC and in a local legal gazette. Suppliers, and any other co-contractors, should give their consent beforehand. And the seller’s creditors will have 10 days to oppose against the purchase.

The municipality has a right of preemption if the business is situated in a specific and protected area, so they can acquire the business. Hence, a notification should be sent to the municipality beforehand, so the municipality has two months to decide whether they want to use their right, or not. Not proceeding to this declaration could make the business transfer invalid in the eyes of the court.

Unless the seller has an express written agreement saying otherwise, they stay jointly liable towards third contracting parties.

Once you are perfectly able to discern what the common deal structures are, and how they apply, you will be able to proceed with the purchase of your business in France. At DELCADE, we make sure you follow the right track, no hack, just some professionals who got your back!