Buy, Sell
or Lease Your Business
Our firm regularly advises and assists purchasers and sellers of business assets, which assets can be regrouped together under the French law notion of Fonds de commerce usually (poorly) translated as business goodwill or going concern.
The Fonds de commerce is in fact a concept specific to French law, usually defined as a universality, i.e., “a set of assets forming a whole”.
The Fonds de commerce is generally composed of:
- intangible assets: clientele, goodwill, leasehold rights, signage, patents and trademarks. Certain administrative authorizations may also be important, as they are designed to retain clientele (e.g. concession to operate a terrace, liquor licence), etc.
- tangible assets: equipment, furniture and tools, as well as merchandise, etc.
These items are put together by a merchant to attract and retain customers.
The fonds de commerce can be contributed to a corporation, sold for cash or on credit, leased or pledged.
Unlike the purchase of shares in a company, the purchase of a fonds de commerce enables you to acquire assets without fearing the existence of liabilities. When one purchases a fonds de commerce, one does not take over debts, even if they are related to the purchased activity (unless expressly stipulated in the sale contract). Through such a purchase the purcahser does not need to carry out an audit on all possible liabilities nor does he need any liability warranty. He knows exactly he will not discover any debt in the future : they are not transferred.
The sale of a fonds de commerce requires the completion of a number of essential and compulsory formalities, as well as careful drafting of the sale contract. Failure to comply with these formalities, or the inadequacy of the contract terms, can give rise to a number of disputes, ranging from the nullity of the deed to the contestation of the elements actually transferred, not to mention the difficulties raised by the commercial lease insofar as it is itself an element of the business.
VERY IMPORTANT: The buyer is strongly advised to have the sale price put into escrow to avoid the risk of having to pay the purchase price a second time.