When the time comes to sell a business, several legal steps are required to formalize the transaction. Among these steps, the promise, the compromise and the reiterative deed are distinguished by offering varying levels of commitment and legal certainty. In this article, we explore the essential differences between these three types of legal instrument, to better understand their implications for the parties.
The unilateral promise: the least binding deed
A unilateral promise, as its name suggests, commits only one of the parties. It may be a unilateral promise to sell, in which the promisor grants the beneficiary, who accepts but does not undertake to buy, the right to acquire the business.
The promise specifies the conditions under which the sale is to take place. The promise generally secures the availability of the business for a buyer, while certain aspects of the transaction are negotiated, and ensures the financing of the operation.
It may also, but much more rarely, be a promise to purchase in which the promisor promises to buy the business, but the beneficiary does not promise to sell.
The preliminary sales agreement, also known as a “promesse synallagmatique
This is a binding deed in which the seller sells his business to an assignee. It is carried out subject to conditions precedent, meaning that the sale will not actually take place until certain conditions have been met.
The suspensive conditions are generally as follows:
- Assignee obtains credit,
- Obtaining various permits for works, operations, etc.
- Completion of certain formalities,
- Expiration of pre-emption periods where they exist.
The compromis de vente enables both parties to make a commitment and secure the transaction, even though there are still several aspects to be settled. This avoids the need for the parties to spend time on detailed negotiations, when there is a risk that one of them may back out.
Reiterative deed: final deed of sale
The acte réitératif is simply the name given to the deed of sale which confirms the compromis de vente. If a compromis has been signed and the suspensive conditions have been fulfilled, the acte réitératif must be signed. If one of the parties to the compromis decides not to sign, it is generally possible to force them to do so through the courts, or to impose a severe financial penalty.
The choice of deeds depends on the situation. A lawyer will be able to advise you on the deeds that are best suited to your operation and provide you with the greatest security.
