Buying a French business: shares or fonds de commerce?

« Do I sell my shares or my business? » It is usually the first question, and it decides everything else. In France these are two different sales, governed by different rules: the sale of the company’s shares, and the sale of its fonds de commerce – the business itself.

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Selling the shares: the buyer takes your place

When you sell the shares of a SARL (parts sociales) or of a SAS (actions), you sell the company with everything in it: its contracts, its employees, its debts and its past disputes. The buyer does not acquire a business; they become the shareholder in your place. The company itself does not change.

Selling the fonds de commerce: the company stays yours

When you sell the fonds de commerce, the company remains yours. You transfer the business only: the customer base, the trade name, the right to the commercial lease, the equipment. The seller’s debts in principle stay with the seller, and the price is received by the company, not by its shareholders.

How to choose

• For the buyer, the fonds is often the safer option: they do not inherit the company’s past.
• For the seller, a share sale is often simpler: one transaction, and the price goes straight to the shareholders.
• Tax treatment differs: registration duties, taxation of the price, distribution of the proceeds out of the company.
• The lease and the employees follow their own rules in each case.

Shares or fonds: the choice is made before negotiating, not after. The letter of intent often already fixes the structure of the deal.

Shares: SARL and SAS are not sold with the same freedom

In a SARL, selling shares to an outsider requires the approval of the other partners (agrément, article L. 223-14 of the Commercial Code). Without it, the sale to a third party cannot proceed freely.

In a SAS, shares are in principle freely transferable, but the articles of association may provide for an approval clause (L. 227-14), a pre-emption right for the other shareholders, or a lock-up period (L. 227-13). A transfer made in breach of these clauses is void (L. 227-15). A shareholders’ agreement may add tag-along, drag-along or first-offer rights.

Before promising your shares, check the up-to-date articles filed with the registry, the shareholders’ agreement and its amendments, the notice periods, and any pledge over the shares.

Buying a fonds de commerce: what you actually buy

You buy a customer base, and everything that keeps it: trade name, sign, right to the lease, equipment, sometimes stock, trademarks, domain names. The deed must list precisely what is transferred.

The seller’s debts and receivables in principle stay with the seller. The employment contracts attached to the business, however, transfer automatically to the buyer (article L. 1224-1 of the Labour Code).

Since the law of 19 July 2019, the deed no longer has to state the turnover and results of the last three financial years. This makes the buyer’s position riskier, not simpler: the figures must be requested, annexed to the deed and warranted. The buyer’s checklist: recent accounts, the commercial lease and its amendments, the list and contracts of the employees, key supplier and customer contracts, and the administrative authorisations attached to the activity.

Watch: these questions are answered on video, in French, in the podcast Cessions d’entreprise – full episode on YouTube.

General information; this article is not individual legal advice. Legal basis: Commercial Code, art. L. 141-1 et seq., L. 223-14, L. 227-13 to L. 227-15; Labour Code, art. L. 1224-1; law no. 2019-744 of 19 July 2019.