What are the essential elements in a business transfer?

The cabinet FELLOUS AVOCADOS carries out several dozen sales of coffee shops, hotels and restaurants every year.

La Sale of a business requires a high level of expertise in contract law, in order to properly define the fundamental purposes of the transfer.

What do we mean by “goodwill”?

The goodwill is a set of elements assigned to the operation of a commercial or industrial activity.

It is composed of tangible items such as hardware, merchandise, and equipment, and intangible items, such as customers, lease rights, and trade names.

What are the essential elements in a business transfer?

Each of the elements that make up the business must be subject to prior verification (brand, lease rights, customers, etc.).

The provisions of the Commercial Code must not be the subject of any omissions.

The contract must precisely determine: the price, the terms of payment, the identity of the parties and their legal capacity, any suspensive conditions essential to the transaction such as obtaining bank financing, the purging of any pre-emption rights, the necessary administrative authorizations, the necessary administrative authorizations, the guarantee of renewal of the lease and the approval of the lessor, etc.

The purchaser must anticipate the resumption of employment contracts and related social security contributions, and ensure the resumption of all commercial contracts necessary for the exploitation of the fund (possible licenses, distribution contracts, franchises, etc.).

The tax consequences are not negligible for the purchaser.

Whether it is a transfer for a fee or a transfer free of charge (donation/succession), the purchaser of the sole proprietorship will, in principle, have to pay registration fees.

In addition, during a sale of a business during the year, the seller must pay the CFE for the entire year, unless the parties agree that the buyer takes care of part of it.

In practice, a pro rata distribution is provided for between the seller and the buyer in the act of transfer, but if the sale takes effect on 1 January, the buyer is taxed on the tax bases declared by his predecessor in May of the year preceding the transfer.

The new operator must then file an interim declaration before the end of the transfer year.

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What are the conditions for the sale of the business?

The sale of a business must meet general conditions as well as special conditions.

The general conditions

It is necessary to respect the common law of obligations, namely articles 1101 et seq. of the Civil Code.

Often, contesting the sale is based on one of the defects of consent (error, fraud, violence), which is found inArticle 1128 of the Civil Code.

In fact, the Dol The seller is frequently invoked and stays silent about important events because he knows that the party would not have contracted or at cheaper conditions.

The buyer can then request the nullity of the contract or a refund of part of the price paid.

This is the case, for example, of a seller who did not inform the buyer of the opening of a nearby business carrying out a similar activity.

THEArticle 1112-1 of the Civil Code Predicts a Pre-contractual information obligation since the 2016 reform, making it possible to justify the existence of fraud.

In addition, each of the parties must have the commercial capacity.

Special conditions

Buyer protection reduced by the law of 19 July 2019

La Law of 19 July 2019 Will change theArticle L 141-1 of the Commercial Code and will repeal this provision which provided 5 mandatory information vis-à-vis the buyer: name of the previous seller of the business, turnover and results achieved in the business, essential characteristics of the commercial lease. From now on, it is common law that is intended to apply and constitutes the basis for possible litigation. There must be a form of buyer accountability.

The protection of the seller by the grant of a privilege

The sale of business assets is carried out at cash payment. The price is given entirely to Signature day. Protection must be granted if the seller grants credit to the buyer and the sale price is paid in full or in part because the transfer of business is a serious act and makes it possible to obtain a relatively large price. The law therefore provided guarantees for the unscrupulous buyer to force the payment of this price. The legislator established the Privilege of the seller of business, that is to say that the sale of the fund must be confirmed in writing by authentic instrument or private instrument. The privilege must have been registered in a public register kept at the registry of the Commercial Court where the business is operated, under penalty of nullity under the 30 days from deposit, otherwise you will no longer be able to register this privilege. The seller must give details on the basis of his lien, which in principle relates to the elements listed in the sale and included in the registration of this lien. The selling price must be broken down into 3 distinct categories: intangible items, materials, goods. If the constitution of the privilege is regular, there will be 2 essential prerogatives, namely the Right of preference (Article L 141-6 of the Commercial Code) and the Right of suite (Article L 143-12 of the Commercial Code).

The protection of employees through broadcasting

When you sell your business, employment contracts are automatically transferred. The legislator has envisaged a mechanism to facilitate the transmission of the fund in favor of employees. In fact, the Law of 31 July 2014, known as the Hamon law, introduced an obligation to inform employees when selling their company (right to prior information for employees). Mandatory distribution should make it possible to present a takeover offer but interested employees do not have a right of priority to purchase since the owner of the fund remains completely free to choose the purchaser he wishes. The Macron law relaxed the regime of this right to information for employees and exists in the event of transfer of control of company shares and all of these provisions have been integrated into articles L.141-23 and following of the Commercial Code. When the owner wants to sell his business, employees are informed in 2 months that precede the actual sale. The aim is for employees to be able to submit an offer to acquire the fund when the owner of the fund is not operating it (LG). This information will be notified to the person who operates it and will be required to inform the employees of this plan to sell the fund. The operation immediately notifies the seller of any applications from employees for the takeover.

When the fund is operated directly by the owner, he must inform the employees directly (employee information meetings, posting channels, electronic emails).

The seller must be certain of the date of receipt to the employees. Once received, the employees are bound by an obligation of discretion. For a period of 2 months, the transfer cannot be carried out. By way of derogation, it can intervene if each employee has made known his decision not to present an acquisition offer. From the moment when the sale becomes possible then the sale must take place in a period of two years. On the other hand, if this period exceeds two years, the information is repeated. In the event of a violation of the information rule, the judge hearing the case may, at the request of the Public Prosecutor's Office, impose a civil fine which may not exceed 2% of the sale amount.

Les articles L.141-28 et seq. specify what is the situation for businesses from more than 50 employees up to 249. The obligation to provide information must be sent to the CSE, which will inform each of the employees individually so that they can issue a takeover offer.

The protection of creditors by organizing advertising

The transfer of the fund may have an impact on the merchant status of the parties to the contract. If the purchaser achieves this status and the seller loses the quality, then they will have the obligation to register and deregister for the seller with the RCS. The transfer of funds will require the completion of certain advertising formalities intended to inform the seller's creditors. Advertising takes the form of a notice in a JAL and must be submitted to BODACC at the discretion of the purchaser in 15 days following the date the sale was signed. In advance, it is imperative to proceed with the fiscal formality of registering the act signed under private signature. Compliance with this advertising is not a condition of validity and enforceability against a third party. In the absence of advertising, the payment of the sale price by the purchaser is unenforceable against the seller's creditor. The aArticle L 141-17 of the Commercial Code provides that:

” A purchaser who pays his seller without having carried out the prescribed formalities or before the expiration of the 10-day period is not released from third parties. ”.

The purchaser is liable to pay twice the price: the first time to the purchaser by the hasty and effective payment of the agreed price and the second time to the seller's creditor who could apprehend the selling price in the hands of the purchaser since in the eyes of the purchaser, since in the eyes of the prosecuting creditor, the purchaser is always liable for the seller's price. Advertising makes it possible to trigger the opposition process reserved for the seller's creditors: to reinforce the settlement of claims. The purchaser will pay the price to a third person, the receiver. The receiver is released from the sale price and addresses it to the seller at the end of the period of 10 days starting with the advertisement. If the advertisement is incomplete or contains inaccuracies then the judge assesses the error made. If the error is secondary, advertising plays a role. On the other hand, if the error is substantial, the advertisement will be repeated and the information will be corrected. Once notified by advertising, creditors can implement a prerogative in 10 days which follow the last publication made (BODACC). Any creditor of the previous owner, whether or not his claim is due, may file at the elected address, either by extrajudicial act (bailiff) or by LRAR, opposition to the payment of the price. The creditor's opposition must state the number and causes of the claim and must contain an election of address. The lessor is the only creditor who cannot file an objection for current or due rents (public order provision).

THEArticle L 141-14 of the Commercial Code Indicates that” No amicable or judicial transport of the price or part of the price is enforceable against the creditor who has thus made themselves known within this period of 10 days from the last advertisement. Any payment of the price therefore becomes unenforceable against the opposing creditor. ”. The creditor may discharge a voluntary objection. The seller may refer the matter to the President of the Commercial Court in summary proceedings to try to unblock the situation. The judge may authorize the seller to receive his price despite the opposition subject to sequestering the amount of the sum wanted by the judge.

The protection of the general interest by granting a communal right of pre-emption

The aim of the legislator is to combat the desertification of certain rural areas and to diversify essential businesses. The law established this right of pre-emption in municipalities. The municipality then benefits from a commercial pre-emption right when certain sales take place in a specific area called the perimeter of protection of local trade and crafts are sold. The City Council may, by reasoned deliberation, deliberate, a safeguard perimeter. Therefore, before any transfer project, the seller must inquire with the town hall to find out if there is a perimeter to protect local businesses and crafts. Once informed, the municipality may decide to exercise the right of pre-emption and acquire it. She can also give up. Its renunciation may be tacit. The silence of the holder of the right of pre-emption for a period of 2 months from the date of receipt of this declaration constitutes a renunciation of the exercise of the right of pre-emption. The renunciation can be Express.

As soon as the refusal is certain, the transferor can carry out the sale at the price and conditions set out in his declaration. The price will be paid by the municipality at the time the act is drawn up. The municipality can operate it either in person or by agreeing to a rental management. Within 2 years from the acquisition of this business, the municipality may return the business, commercial lease or commercial land to a company registered in the Trade and Companies Register or in the Trade Register.