You want to sell your business and you’ve found a buyer. Congratulations!
You’ve agreed the price, now all you have to do is sign.
Before you can claim victory, however, you need to go through a number of formalities that can delay the receipt of the price and the handover of the keys to the premises by several months.
We’ve outlined these formalities below:
Pre-sale formalities:
- Waiver of the local authority’s right of pre-emption (Art L. 214-1 of the urban planning code)
If your business is located within the area designated by the local council as an area for safeguarding commerce and the craft industry, you must declare your intention to sell before proceeding. In particular, the declaration must contain the identity of your prospective buyer and the sale price you have agreed.
The deadline for a response from the City hall varies between 15 days and 2 months, and failure to respond means that the right of pre-emption is not exercised.
It is particularly important that you comply with this obligation, as if you sell without notifying the City hall in advance, the sale may be cancelled for 5 years.
- Full payment of rent arrears
If your landlord has inserted a clause blocking any transfer of the business in the event of rent arrears, you will not be able to sell. The landlord may apply to the courts to have the sale declared null and void, even if he was involved in the transfer deed (French Court of Cassation, 3rd Civil Chamber – 31 May 1994).
Once these preliminary formalities have been completed, the sale can proceed and the funds will be held in escrow for the time required to complete the formalities following signature.
Post-sale formalities:
- Notice to potential creditors
In the month following the signing of the deed of sale, a notice of sale must be published in the civil and commercial announcements bulletin (BODACC). This notice must include an address for receiving objections to the distribution of the sale price, which must be in the same county as the premises.
This publication opens a period of 10 calendar days during which your creditors can declare any claims they may have against you.
Once this period has elapsed, the claims are examined and settled if they are legitimate.
Accurate monitoring of this procedure is crucial, because if part or all of the sale price is paid to you before these claims have been settled, and the balance is not enough to pay the creditors, your buyer may be obliged to pay them, which means paying a 2nd time the price of the business.
- Registered their claims with the Registry of the Commercial Court
Where applicable, certain organizations may also have registered their claims with the Registry of the Commercial Court. These registrations will then appear on your company registration certificate (K-BIS), and priority must be given to paying them.
- Registration with the Business Tax Department (SIE)
Your buyer must register the transfer with the Business Tax Department within 30 days of signing the sale agreement. From the time of registration, and for a period of 3 months, your purchaser is jointly and severally liable with you for payment to the tax authorities of your corporation tax for the last financial year, your apprenticeship tax and your income tax relating to profits made during the last year of operation.
Because of this solidarity on the part of the purchaser, you will not be able to collect the sale price, or what remains of it, until around 4 months after signing.
This may seem a long time, but it is the price of legal certainty.