Transfer of company: transfer of shares to a third party
Verified 01 January 2024 - Legal and Administrative Information Directorate (Prime Minister)
Legal situation that third parties cannot ignore and must respect, even if they are not signatories
Amount of money intended to compensate for the damage suffered
Property that cannot be moved (e.g. land or apartment) or an object that is an integral part of it (e.g. land fence)
Flat-rate or proportional reduction applied on the basis of a tax calculation (income, value of property, etc.)
Minimum number of persons present or represented for a vote or decision to be valid
The shares are title to the share capital of the business. Each share represents a fraction of this capital and gives its holder the status of partner (or shareholder in the SA). Thus the disposal of shares means for a shareholder (the transferor) to pass on to an acquirer (the transferee) the rights it holds in the company's share capital. Regardless of the legal form of the company, this operation must follow a number of steps.
What applies to you ?
In principle, the sale of shares in SAS or SA is freeHowever, the law does not provide for any approval procedure.
However, statutes may contain specific clauses to restrict the scope for divestiture.
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Accreditation clause
The approval clause allows share retirements to be submitted to the agreement of the members, unanimously or by a majority of them.
In the case of an SAS, the authorization clause may cover any type of assignment of shares: to the spouse, to a descendant or ascendant, to a partner, to a third party.
A breach of the authorization clause shall render the assignment null and void.
Preemption clause
The pre-emption clause offer to the member referred to in right of priority to redeem the shares you plan to sell.
Thus, this clause obliges you to propose the transfer of your shares to the beneficiary partner before any transfer to a spouse, ascendant, descendant or third party, etc.
The breach of the pre-emption clause does not render the assignment void.
However, you may be ordered to pay damages in compensation for the damage caused to the beneficiary.
Inalienability clause
The inalienability clause prevents the disposal of shares for a period of 10 years maximum.
After this period, the shares shall no longer be held in immovable property and may be disposed of freely.
SA
Accreditation clause
The approval clause allows share retirements to be submitted to the agreement of the shareholders, unanimously or by a majority of them.
In the SA, the approval clause has limited scope, it shall apply only to transfers of shares to shareholders and third parties.
Thus, assignments to the spouse, ascending or descending remain free.
A breach of the authorization clause shall render the assignment null and void.
Preemption clause
The pre-emption clause offer to the member referred to in right of priority to redeem the shares you plan to sell.
Thus, this clause obliges you to propose the transfer of your shares to the beneficiary partner before any transfer to a spouse, ascendant, descendant or third party, etc.
The breach of the pre-emption clause does not render the assignment void.
However, you may be ordered to pay damages in compensation for the damage caused to the beneficiary.
The important thing is refer to the statutes to find out how free you are to sell your shares.
In the context of a share sale, the writing of a letter is not not obligatory.
The transfer of ownership of the shares takes place by bank transfer.
The registration of the shares in the account of the beneficiary makes the transfer enforceable business and third parties.
On the other hand, it is strongly advised to record the assignment in writing for reasons of evidence in the event of a dispute.
Thus, the deed of sale of shares mentions the following :
- Identity of the parties
- Number of shares transferred
- Transfer price
- Method of payment
- Time limit for transfer of shares
What information?
You must inform employees of your willingness to sell your actions and the possibility for employees of to submit an offer to purchase for the acquisition of those assets where all of the following conditions are met:
- The company includes less than 250 employees
- The company's annual turnover shall not exceed EUR 50 million
- The sale of the shares represents more than 50% of the capital of the business
FYI
from 250 employees, no information is required.
When should information be disseminated?
This information must be given to employees at the latest 2 months before the date of conclusion of the contract of sale.
Any purchase offer submitted by one or more employees must be communicated to you without delay.
However, this offer does not no priority character compared to other offers.
You are completely free to enter into negotiations with the employees or not.
Refusal to consider or accept an offer need not be motivated.
You have the right not to answer.
When each employee has made known his decision not to submit an offer, the sale of the shares may take place before the expiry of the 2 months.
How do you disseminate information?
Employees can be informed by any means of such a nature as to make the date of receipt certain:
- During a information meeting : with signature of a attendance register
- By display : with signature of a dated register
- By email : by using a method that can be used to certify the date of receipt with certainty.
- By Delivery in your own hand : with signature or receipt
- By act of a commissioner of justice (former bailiff's act) or lawyer, etc.
What sanctions?
If the company is sold without the employees having been informed, the latter may bring the matter before the civil court to obtain compensation for their loss.
In this case, you may be ordered to pay damages up to 2% of the amount of the sale.
Furthermore, informed employees are subject to an obligation to discretion.
Failure to comply with the obligation of discretion is a fault which justifies a disciplinary sanction up to and including the dismissal of the employee.
Purpose of the guarantee
Unlike the sale of the goodwill alone, the sale of shares involves the sale of the asset, but also liabilities (debts) of the company.
As a assignor, you assign your rights and duties.
The appearance of unknown debts at the time of the sale is a major risk that the buyer must avoid to ensure the company's sustainability.
By the asset-liability guarantee clause, you undertake to guarantee the accuracy of all information provided to the buyer: company activity, social accounts, customers and suppliers, salary costs, possible participation in other businesses, ongoing disputes, etc.
This guarantee clause allows the purchaser to protect himself against:
- The Discovery of a Liability which had not been reported at the time of the assignment (it must be a debt prior to the assignment and disclosed after the assignment to
- Incorrect valuation of the asset whose value is ultimately lower than agreed
If any of these assumptions is confirmed after the sale of shares, the buyer may activate the guarantee to obtain a compensation on your part.
References to the guarantee clause
The asset-liability guarantee clause shall contain the following information:
- Departure Date of the guarantee: the date from which the earlier or later origin of the debt can be assessed.
- Duration of the clause: between 3 and 5 years.
- Calculation of compensation: the percentage of the debt that you are committing to bear. This percentage may decrease over time.
- Floor Amount Warranty: The amount from which the warranty can be activated.
- Ceiling Amount of compensation: the maximum amount to which you are committed. You won't have to pay more than that.
- Implementation arrangements : additional information needed to implement the guarantee (justification of the liability, modalities for sending the claim, etc.).
Declaration of assignment
Assignment established by an act
Assignments of social rights established by an act shall be subject to the formality of registration within the period of 1 month from the date of the act.
The deed of assignment must be deposited on the spot or by post, in 2 copies and accompanied by the payment of fees (by check or transfer) to the department in charge of the registration of the domicile of one of the parties or of the residence of the notary if the assignment is made by notarial act.
Who shall I contact
Assignment not established by an act
Assignments of social rights which are not not established by an act must be declared within the 1 month from the date of transfer:
- or by means of the online service available on impots.gouv.fr in your professional area, under Actions > Assignments of social rights
Impots.gouv.fr professional space
- or by means of Form No 2759, to be filed with the registration department on which one of the parties is dependent.
Assignment of social rights not evidenced by a mandatory instrument to be declared
Who shall I contact
Payment of registration fees
The acquisition of shares shall give rise to payment by the purchaser a registration fee.
However, the deed of assignment may provide that the payment of the duties is to be borne by the seller or shared between the two parties.
The registration fee shall be 0.1% of the transfer price.
The amount collected by the tax department may not be less than €25.
The rate changes to 5% for businesses with a predominance of real estate, i.e. businesses where more than half of the assets consist ofbuildings not used for his professional purposes.
Tax Exemption
The transfer shall be subject to abatement of €500,000 on the value of the shares when carried out at one of the following :
- Let's say one employee of the transferred company. He must have been employed on a full-time contract for at least 2 years or have a apprenticeship contract ongoing at the time of transfer.
- Let's say one family member of the transferor (her Civil partnership or partner, her direct ascendants or descendants, or her siblings).
This reduction shall be applied when all following conditions are respected:
- The company shall exercise commercial, industrial, craft, agricultural or liberal activity, with the exception of the management of its own movable or immovable property.
- The transferor shall have held the securities for more than 2 years (if the transferor has acquired the shares free of charge, no holding period is required).
- The purchaser must to continue the business of the business whose shares have been transferred as a professional activity unique and in an effective and continuous manner, for 5 years after the date of sale.
- The purchaser must to ensure effective management of company during these five years.
In the case of the sale of shares, the amendment to the articles of association is not not systematically obligatory.
It is required only where the articles of association lay down the allocation of the share capital or the identity of the shareholders.
Where it is necessary to amend the articles of association, the terms of the amendment vary according to social form.
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The articles of association must lay down the conditions for their amendment:
- Body empowered to take the decision (Chairman, Governing Board, General Assembly)
- Number of votes required
- Quorum required (in the case of a decision taken at a general meeting)
Warning
in the absence of any details in the articles of association, the unanimous agreement of the members is required.
SA
Amendments to the statutes must be made in special general meeting (AGE)
Any change requires a qualified majority of 2/3 the votes of shareholders present or represented.
The amendment of the articles of association is not subject to any amending registration to the RCS, nor to insertion in a medium of legal announcements.
Please note
where the amendment of the articles of association is not necessary, it is sufficient to enter the assignment in the transaction register which lists all the securities transfers that have taken place.
During the sale, you can realize a capital gain which is the difference between the sale price and the original value of your business securities.
Capital gains realized on the sale of shares may be taxed according to 2 methods of taxation different:
- Flat rate of income tax
- Progressive Income Tax Schedule
Flat rate
In principle, capital gains are taxed to the extent of 12.8% under the flat rate income tax, plus social security contributions at the rate of 17.2%, or a total of 30% on the amount of the capital gain.
Example :
You give up for €150,000 the business titles you originally purchased €100,000. So you realize an added value of €50,000.
- Calculation of social security contributions: 50,000 x 17.2% = €8,600
- Calculation of income tax amount: 50,000 x 12.8% = €6,400
You will therefore have to pay in total €15,000 on the transfer of its shares.
This flat rate of 12.8% is the default regime, you can opt for the progressive scale.
Progressive scale
You can waive the flat rate of 12.8% to choose to be subject to the progressive scale of income tax.
Its tax rate varies between 0% and 45% according to your personal situation.
Social security contributions shall be applied in the same way to the 17.2% on the amount of the capital gain.
When you opt for progressive taxation, you benefit from a abatement on your capital gains from the sale of the securities acquired or subscribed before 1er january 2018.
Warning
if you acquired the transferred securities after 1er january 2018, no allowance may be applied when calculating the amount of tax.
There is an abatement general and an abatement reinforced.
General abatement
L'general allowance is applicable in all situations and is directly related to the length of time the shares are held:
- 50% for securities held between 2 and 8 years
- 65% for securities held since older than 8 years
Reinforced reduction
L'increased abatement is also linked to the length of time the shares are held, but it is more advantageous from a tax point of view:
- 50% for securities held between 1 and 4 years
- 65% for securities held between 4 and 8 years
- 85% for securities held since older than 8 years
The enhanced allowance shall apply in any of the following :
- You divest the shares of an SME under 10 years old : this is a company with less than 250 employees and a turnover of less than EUR 50 million.
- You're a company manager and you're retiring : you must have been a continuous manager and have held at least 25% rights of the business (an SME) during the 5 years preceding the transfer. You must cease all activity in the business and assert your retirement rights within 2 years of the transfer.
Please note
in addition to the enhanced allowance, capital gains realized by retiring managers of SMEs are fixed abatement of €500,000.
If the capital gain is greater than this amount, only the surplus is subject to taxation, at the rate of the increased reduction.
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