The sale of a business is always complex. Many factors need to be taken into account before the sale takes place. This section looks at some of these factors. The list below is not exhaustive, and for each sale of a business you will need to take an interest in the business being run, so as to take into account all the factors that may be of interest to the buyer.
- Ownership of the business
It seems logical, but before selling a business, you need to know who the owner or owners are. This question can create difficulties when the owner of the business is married under the reduced community of acquests regime.
If the operator became the owner of the business by creating it when he was already married, or if he acquired it during his marriage, the business belongs to the community. In this case, the sale of the business and the sale orders must be signed by both spouses, regardless of whether or not the spouse works in the business.
It is therefore always important to check the matrimonial property regime of the business seller beforehand.
- the commercial lease
- Furniture and equipment
The furniture and equipment attached to the business must be the subject of a detailed inventory and estimate in a separate statement, three copies of which must be submitted to the tax authorities. It is therefore necessary to draw up a list of all the furniture, equipment and tools and to value them item by item.
- origin of ownership
Under the terms of article L141-1 of the French Commercial Code, the vendor is required to state the name of the previous vendor, the date and nature of the deed of purchase and the purchase price for intangible items, goods and equipment.
- Business contracts
The operation of a business often depends on various contracts that must be continued by the purchaser. (However, the sale of the business does not, in principle, transfer these contracts to the purchaser. This may have an impact on the buyer's future sales, as he will no longer benefit from these contracts.
The law therefore provides for a legal and automatic transfer of certain contracts, while for others the transfer must be agreed.
* Legal transfer of contracts: The law provides for the automatic transfer of certain contracts to the purchaser. This applies in particular to employment contracts, which are automatically transferred to the purchaser of the business. This rule is a matter of public policy. It should be noted that the original employer remains liable for payment of any sums owed to his employee in respect of work performed prior to the sale.
Similarly, the insurance policies attached to the business (excluding those relating to motor vehicle insurance) are transferred by operation of law.
It is therefore important that the new buyer has prior knowledge of these policies.
* Other policies are not automatically transferred. It will therefore be necessary for certain contracts to be transferred by agreement, with the agreement of the third party to the contract. For this reason, before selling a business, it is important to be aware of all the contracts required for the business to run smoothly.
- Accounting documents
Under the terms of article L141-1 of the French Commercial Code, the seller is required to state in the deed of sale "the turnover achieved during the three financial years preceding that of the sale, this number being reduced to the duration of ownership of the business if it was less than three years" as well as "the operating results achieved during the same period". This information will be provided by the business owner's accountant and passed on to the buyer.
Similarly, at the time of the sale, the vendor and the purchaser must refer to all the accounting records kept by the vendor during the three financial years preceding that of the sale. This number is reduced to the length of time the business has been owned, if less than three years. These books are the subject of an inventory signed by the parties, a copy of which is given to each of them. The transferor must make these books available to the purchaser for a period of three years from the date on which the purchaser takes possession of the business.
- Statement of liens and pledges on the business
To enable the buyer to acquire a business that is free of all registrations, it is necessary to request a statement of the liens and pledges encumbering the business before the sale. This statement will be requested by the professional responsible for drawing up the deed of sale (e.g. the notary).
- Mandatory diagnostics
Unlike the sale or lease of a building, the law does not expressly stipulate any diagnostic requirements for the sale of a business. However, when the premises are let and the business sold includes the right to the lease, the compulsory surveys for a commercial lease must be attached to the lease: the asbestos survey, the energy performance survey and the natural and technological risk survey (or even the lead survey if the premises are let for both commercial and residential use).
These diagnostics will normally have been carried out when the lease was signed with the vendor of the business. However, if these inspections have not been carried out in advance, it would be preferable to carry them out when the business is sold.
- Urban right of pre-emption
Some local authorities have introduced a right of pre-emption in the event of the sale of a business. Before each sale of a business, it is therefore necessary to check whether the local authority in which the business is located has made provision for this right of pre-emption, and if so, it must be exercised before the sale is completed.
- Licensing of public houses
If a business wishes to sell drinks to the public, it must obtain a licence from the authorities. There are different categories of licence, depending on the business and the type of drink sold.
The licence forms an integral part of the business and is transferred to the purchaser of the business. However, for the transfer to be truly effective, a number of checks and formalities must be carried out.
First of all, it is necessary to check that the licence has not been out of use for more than three years, otherwise it is automatically cancelled and can no longer be transferred.
In addition, the professional responsible for the sale must check that the pub has not been the subject of a judicial or administrative closure, either temporary or permanent.
In addition, for the transfer to be effective, the purchaser must make a declaration of opening 15 days before the opening date to the town hall or, in Paris, to the police prefecture.
Lastly, a declaration of the transfer of the business must be made to the office of the General Directorate of Customs and Excise.
- Tobacconists
The sale of tobacco is a state monopoly and cannot therefore be part of a business. Where the management of a tobacconist's shop is attached to a business, the purchaser of the business must first obtain approval from the General Directorate of Customs and Excise. Once approval has been obtained, the purchaser must sign a management contract with the authorities.