Businesses

The purchase, creation or sale of a business is an important legal and economic act in the professional life of a businessman or woman.

It is essential to seek the advice of a professional in order to avoid any unpleasant surprises.

• What is a business?

  • The concept of a business has a very precise legal definition.

  • It consists of several tangible and intangible elements that make up the value of the business and which may be disposed of: the customers, the trade name, the brand or sign, the right to a lease , the equipment, the stock, the operating licences, the patents, etc.

• How should the document recording the transfer of a business be drafted?

  • Mandatory legal and tax rules apply when the promise to sell and the agreement to sell (or buy) a business are signed.

  • They are intended to protect the seller, the seller's creditors (supplier, personnel, social security bodies, the tax authority, etc.) and also the buyer and their banker.

  • When a business is disposed of, the fundamental document is the preliminary sale agreement [compromis de vente]. It is better to use the services of a legal professional, such as a notaire. If certain information is missing, the sale will be null and void.

• What should be checked?

  • A detailed study should be carried out in advance as much of the information is important.

  • - What would happen if one or more employment contracts with employees were not mentioned when the purchaser is under an obligation to keep them in force?
    - Another example: is the lease in order or does it contain errors or omissions?
    - Do the premises correspond to the premises identified in the lease?
    - What is the current rent? Is it subject to VAT or not? When must it be revised?
    - Do you have to pay a deposit ?
    - Have you checked that the provisions in the lease allow you to carry on all the business activities that you have planned for?
    - Have you checked that the lease will be renewed by the owner at the end of the current period?
    - Do you have information regarding the urban planning provisions that apply to the premises in which the business will be carried on?

  • Urban planning can totally change the marketability of a place, for better or for worse.

• What should the sale document contain?

  • When the sale agreement (or promise to sell) is signed, certain information must be included in the document, as without it the contract may be held null and void.

  • If certain information is missing, such as the root of title, any charges registered against the business, the turnover and profit achieved in the three preceding financial years or the conditions of the lease, the buyer may ask for the sale to be held null and void.

• At what point does the buyer pay the price and take possession of the business?

  • As soon as the sale agreement is signed.

  • If the price is not paid in cash, a guarantee is set up in order to protect the seller ("seller's lien" or "registered charge" [privilège de nantissement]).

  • The price is paid to an "escrow agent" such as the notaire.

  • Sometimes the money is actually paid to the seller five and a half months after the sale.

• Why does the seller have to wait so long?

  • This long waiting period is the result of a succession of several different periods. Once the sale agreement has been signed, it is published within two weeks in a journal of legal announcements, and is then published in the Bodacc [Official bulletin of civil and commercial announcements].
    These two publications mark the starting point of a period of 10 days during which the seller's creditors may object to the sale.

  • There is then another period of 60 days (which starts to run from the two weeks of publication in the journal of legal announcements) during which time the tax authority may claim any unpaid tax.

  • Finally, 3 supplementary months are then added, during which the buyer has joint and several liability with the seller for the payment of any direct tax that is due on the profit of the business achieved during the year in which the transfer takes place, or the previous year, if no declaration has been made, up to the sale price of the business.

  • In total , the price may be held back for 5,5 months.

• How much are the notaire's fees ?

  • The notaire is free to set the fee for this type of document, and you should ask the notaire concerned.

  • With regard to the transfer of a business, the notaire is a preferred partner.

  • They can advise, draft an instrument including all the required legal information and provide legal security, which is more adapted to the situation than ever. You would be unwise to enter this legal and tax labyrinth without a guide.