1. What is a compromis or promesse de cession de fonds de commerce?
A “compromis de vente de fonds de commerce” is a legal agreement between a seller and a buyer for the sale of a business. As a reminder, a business encompasses all the elements required to carry on a commercial or industrial activity, such as clientele, leasehold rights, equipment, merchandise, and so on.
The compromis de vente, also known as promesse de vente, is a preliminary contract that seals the agreement between the parties on the conditions of the sale. It specifies the essential elements of the transaction, such as the sale price, terms of payment, date of transfer of ownership, any guarantees, conditions precedent, etc.
2. Why draw up a compromise or promise to sell before a deed of sale?
The most obvious reason to draw up a compromise before concluding the deed of sale is the possibility of inserting suspensive conditions.
A suspensive clause is a contractual provision that makes the completion of a sale or contract conditional on the occurrence of a future, uncertain event. In other words, it stipulates that an obligation will only take effect if certain conditions specified in the contract are met. If these conditions are not met, the contract may be cancelled without either party being bound by its obligations.
3. What are the most common conditions precedent for the sale of a business?
The following are among the most common conditions precedent for the sale of a business:
- Obtaining financing: If the buyer fails to obtain the necessary financing within the time specified in the clause, the sale will not be finalized, and the contract may be cancelled without penalty to the buyer.
- Administrative authorizations: The sale may be conditional on obtaining all necessary authorizations from the authorities responsible for operating the business, such as licenses, permits or specific authorizations.
- Absence of disputes: The sale may be conditional on the absence of any ongoing disputes or litigation likely to affect the goodwill. This may include disputes with customers, employees, suppliers or other third parties.
- Regulatory compliance: Completion of the sale may depend on confirmation that the business complies with all applicable regulations, such as health and safety standards.
- Tax and social audit: The sale may be conditional on a positive tax and social audit, confirming that there are no major tax or social debts linked to the business.
- Prior information of employees: In certain cases, the sale may be conditional on the prior completion of an information and consultation procedure with employee representatives or employees, in accordance with current legislation.
- Town-planning conditions: If the business is linked to commercial premises, the sale may be conditional on verification of the town-planning conformity of the business premises.
- Non-pre-emption: if the business is located in an area designated as a “perimeter de sauvegarde du commerce d’artisanat de proximité”, the sale may be conditional on the town council not exercising its right of pre-emption.
Suspensive clauses are used to protect the parties by introducing conditions that must be met for the contract to become binding. They can also be found in other types of contract, such as loan agreements, real estate contracts, etc. These clauses are precisely drafted to clearly define conditions, deadlines and the consequences of non-fulfillment.
4. When does the sale take place?
Once the compromis de vente has been signed by both parties, the seller undertakes to sell the business to the buyer according to the agreed terms, and the buyer to acquire the business under the same conditions. The signing of the compromis is generally followed by the signing of the final deed of sale, which formalizes the transfer of the business.
Normally, the compromis specifies the deadline by which the suspensive conditions must be fulfilled and the final deed of sale signed. If the conditions are not fulfilled within the deadline, the sale may not go ahead.
Our firm can support you from the initial negotiations right through to the final deed of sale.
