Transfer of the business to employees

Verified 03 October 2024 - Directorate for Legal and Administrative Information (Prime Minister)

The purchase of the goodwill may be offered to its employees. The assignment is subject to the completion of several formalities in order to ensure the protection of the transferor, the purchaser and creditors company.

Step-by-step approach

The transfer of the goodwill entails the transfer of all the elements which constitute the goodwill. However, certain elements of the company are excluded from this transfer.

Divested Items

The sale of the goodwill involves the transfer of the following:

  • Clientele
  • Sign and trade name
  • Right to lease : the right to take over from the holder of a commercial lease, to occupy the premises and to enjoy a right to renewal of the lease.
  • Employment, insurance and publishing contracts
  • Property rights literary, artistic and industrial (patents, software, trademarks, domain name)
  • Licenses or administrative authorizations : for regulated businesses, e.g. pharmacies or beverage outlets.
  • Furniture
  • Hardware and tooling : the assets needed to operate the fund (machinery, computers, offices).

Please note

It is advisable to determine precisely which are the goods included in the transfer to avoid potential disputes. For example, the stock of goods is not included in the value of the goodwill, it is valued separately.

The transfer of a goodwill may also include the transfer of digital fund elements, crucial for the continuity of the company:

  • Domain Name and linked business email addresses
  • Website
  • Accommodation contract
  • Google My Business (GMB)
  • Client File and audience analysis services (e.g. Google Analytics)
  • Social media accounts (Facebook, Twitter, Instagram, LinkedIn)
  • Account on a marketplace or a booking tool (e.g. Amazon, Cdiscount, Booking, Tripadvisor...)

These digital elements enable the purchaser toaccelerate its implementation local and on the internet. They may do so be valued on the transfer of the goodwill.

Please note

The transferor may use a FranceNum activator (digital expert) to be accompanied when selling its digital assets.

Items excluded from disposal

On the other hand, the transfer of the goodwill does not understand the following:

  • Claims and liabilities : debt repayment obligations and operating debts are not transferred, they remain the responsibility of the transferor.
  • Building : the premises in which the fund is operated.
  • Miscellaneous Contracts : For example, a supplier contract, except for lease, work, and insurance contracts that are automatically passed in.
  • Books of commerce and accounting documents : these documents are not transmitted, they only have to remain at the disposal of the purchaser for 3 years.

Please note

The transferor may provide with the acquirer that the transfer of the goodwill also include the transfer of such other items, including debts and premises (if owned).

What information?

In the companies of less than 250 employees, the transferor must inform the employees of:

  • of its willingness to sell the company,
  • and the possibility for employees to to submit an offer to purchase to acquire the company.

FYI  

From 250 employees, no information is required.

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 process that can attest to the date of receipt with certainty
  • By Delivery in your own hand : with signature or receipt
  • By act of a commissioner of justice (formerly bailiff's bill) or lawyer, etc.

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 the transferor without delay. However, this offer does not no priority character compared to other offers.

The transferor is completely free to enter into negotiations with the employees or not. Refusal to consider or accept an offer need not be motivated. The transferor has the right not to reply.

When each employee has made known his decision not to present a bid, the sale of the company may take place before the expiration of the 2 months.

What sanctions?

If the company is sold without the employees having been informed, the latter may bring the matter before the judge for compensation for their loss.

In this case, the transferor shall be ordered to pay damages rising 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.

If employees do not have sufficient funds to acquire the goodwill, they have the option of setting up a so-called business takeover holding. The holding company can take any legal form: SA, SAS, SARL, etc.

The holding company will be responsible for to take out the loan necessary to take over the fund. Loan (or financing debt) maturities will be settled through dividends distributed by the resumed business.

The drawing up of an act of assignment shall be obligatory. It shall include the following:

  • Divested intangible and tangible assets : customer, brand, trade name, right to lease, patent, equipment, tools, stock, etc.
  • Identity of the parties : full name, date and place of birth, address of domicile
  • Date and nature of the act : authentic instrument or private act
  • Sale price and payment terms
  • Origin of the transferred goodwill : identity of the predecessor, date on which the transferor acquired the company himself and at what price to establish any capital gain
  • Turnover and operating income : over the last 3 financial years prior to the transfer
  • Statement of pledges encumbered on the fund : these are pledges which have been granted to creditors of the company in the 10 years preceding the date of the sale. If the company is not pledged, the instrument must also state that fact.
  • Commercial lease terms : date and duration of the lease, amount of rent, conditions for renewal, identity and address of the lessor
  • Agreement of the spouse : if the transferor is married under the community system

Since 21 July 2019, the disclosure of information on the origin of the company, the statement of collateral and the results of the last 3 financial years no longer required. Nevertheless, the disclosure of all this information allows the assignment to be concluded in full transparency between the parties.

Registration procedures

The deed of assignment must be filed with the tax office of the registration without waiting if it is a privately signed document or, in a 1-month period after the sale is signed, if the authentic instrument.

You must submit to the registration department, on site or by mail, the following items:

  • Deed of transfer of the goodwill in 2 copies
  • Trade Transfer Declaration Form in 3 copies
  • Form for declaring the condition of equipment and goods transferred in 3 copies
  • Payment of registration fees (in cash up to €300, by check or by transfer)

Declaration of transfer of goodwill or goodwill

Declaration of transfer of goodwill or goodwill: condition of equipment and new goods transferred

Who shall I contact

Payment of the registration fee

The transfer of the goodwill shall give rise to the payment of a registration fee to the tax administration. This right is calculated on the sale price as follows:

  • 0% up to €23,000
  • 3% between €23,001 to €200,000
  • And 5% beyond €200,000

The registration fee may not be lower €25. If the sale transaction includes sales of new goods, they shall be exempt from the registration fee.

The cost of registration is in principle at the expense of the purchaser. However, the deed of assignment may provide that the payment of the fee is to be borne by the transferor or shared between the two parties.

Moreover, where the assignment is granted to an employee of the company, a abatement of €500,000 may be applied to the value of the fund before the registration fee is calculated.

This arrangement shall apply if following conditions the following shall be combined:

  • The company carries out a commercial, craft, industrial, agricultural or liberal activity (except for the management of its own movable or immovable property).
  • The assignment is granted to an employee of the company who has had a permanent employment contract for at least 2 years and who is working there full-time. The assignment may also be granted to the holder of an apprenticeship contract in progress on the day of the assignment.
  • The transferor must have held the transferred fund for more than 2 years.
  • The purchaser undertakes to pursue the professional activity and to ensure the effective direction of the company for at least 5 years from the takeover.

The deed of assignment must be published in a legal listing support in the department in which the fund is operated, in a 15-day period after the sale is signed.

If it is an act of assignment under private signature, that publication must be preceded by its registration with the tax department responsible for registration. L'authentic instrument The transfer may be published before registration.

The advertisement must include the following information:

  • Elements concerning the registration of the document (office, date, volume, number)
  • Date of transfer
  • Surnames, forenames and domicile of the transferor and the purchaser
  • Nature and seat of the fund
  • Selling price and breakdown between tangible and intangible items
  • Deadline for possible opposition of creditors (10 days from publication in the Bodacc).

Thereafter, the purchaser must apply to the Registrar of the Commercial Court within a period of 3 days following the publication of legal announcements in a medium. The Registrar shall then publish a notice in the Official Civil and Commercial Advertising Newsletter (Bodacc).

Who shall I contact

From the time of advertising at the Bodacc, the creditors of the company shall have a10 days for oppose payment of the price of the goodwill in the hands of the transferor. The creditors shall indicate, by registered letter with acknowledgement of receipt or by extrajudicial document sent to the domicile of the acquirer, the amount and causes of the claim.

During this period, the transfer price shall be referred to as " unavailable the purchaser shall not pay the price of the land in the hands of the transferor before the expiry of the period.

Then, if there are objections, the price is unavailable prolonged. The transfer price is then temporarily retained by a legal receiver (lawyer or notary of the buyer).

The receiver is then required to make the amicable distribution of the price to the creditors in the 105 days which follow the date of the deed of sale.

FYI  

The opposing creditor, whose rights have not been respected, may bring proceedings before the court to have the payment of the irregular price declared unenforceable and obtain an order for payment of his claim.

Automatic receivership allows tax authorities and creditors to claim any money that was not paid to them before the assignment.

The fees and expenses of the receiver shall be borne by the purchaser, unless the bill of sale provides for another distribution.

Individual business The transfer of the cessation of activity. This shall be declared on the website of the company formalities office, within 45 days from the publication of the assignment in the legal advertisement medium.

From a fiscal point of view, this cessation carries the costimmediate taxation of profits carried out since the end of the last financial year for which payment of VAT.

Declaration of results

In order to allow the assessment to be made, the transferor must carry out a statement of result. The approach to be taken differs according to the taxation system company.

Company imposed in BIC

The transferor must make a statement of result No. 2031 in the 60 days from the publication of the assignment in a legal listing support.

Industrial and Commercial Benefits (BIC) Return [2024 Income Statement 2023]

Company imposed in BNC

The transferor must make a statement of result #2035 in the 60 days from the publication of the assignment in a legal listing support.

Non-Commercial Profit Reporting (NTB) - Controlled Reporting Regime

Company imposed on the SI

The transferor must make a statement of result #2065 in the 60 days from the publication of the assignment in a legal listing support.

Income Tax Return - business Tax (SI)

The declaration must be made electronically, in accordance with the procedure of his choice:

  • Either in EDI-TDFC mode, this is the transmission of declarations from accounting files, via a EDI partner (e.g. accountant, specialized contractor).
  • Either in EFI mode, i.e. from its Professional area accessible from impots.gouv.fr (open) only for companies falling under the simplified system of taxation).

Value added tax (VAT)

If he is liable for VAT, the transferor shall to declare and pay VAT on all transactions that have not yet been reported at the date of transfer.

He shall be given the following time to make his declaration:

  • If under the jurisdiction of simplified real regime : time limit of 60 days from the publication of the assignment in a legal advertisement medium.
  • If under the jurisdiction of normal real speed : time limit of 30 days from the publication of the assignment in a legal advertisement medium.

Warning  

However, this operation is exempt from VAT if the sale concerns all the components of the business and the purchaser is himself liable for VAT. The exemption then concerns all goods and services transferred on the occasion of the transfer of the fund.

At the time of the assignment, the assignor may carry out a professional added value which is the difference between the sale price and the original value of the company.

The applicable tax regime distinguishes between short-term capital gains and long-term capital gains.

Presentation of capital gains

Capital gains are referred to as " short-term where they arise from the transfer:

  • elements of any kind acquired or created by the company since under 2 years.
  • or ofdepreciable items detained since at least 2 years, for the part corresponding to depreciation deducted for the tax base.

Please note

The 2-year period is calculated day by day, since the date of entry into the asset company.

On the contrary, capital gains are referred to as “ long-term” where they arise from the transfer:

  • non-depreciable items held since at least 2 years
  • or ofdepreciable items detained since at least 2 years to the extent that the capital gains exceed the overall amount of depreciation deducted for the tax base.
Tableau - Distinction between short-term and long-term capital gains

Duration of ownership of the property

Non-depreciable items

Depreciable Items

Less than 2 years

Short-term gain

Short-term gain

2 years or more

Long-term gain

Short-term gain within the limit of the depreciation deducted (then long-term beyond)

Taxation of capital gains

Short-term gain

The sum of the short-term gains and losses realized during the financial year shall constitute the short-term net gain.

Short-term net gain is added to taxable profit under the conditions and in the income tax rate (progressive scale of 0% to 45%).

The capital gain is also taxed at 17.2% under social security contributions on income from assets.

Individual business The spread taxation over three years in equal parts (over the year of implementation and the following 2 years).

Long-term gain

The long-term net capital gain is subject to the flat-rate levy (PFU) at the overall rate of 30%, which is broken down as follows:

  • 12.8% in respect of income tax (IR)
  • 17.2% social security contributions on income from assets.

Please note

The company may charge for any long-term losses that have been incurred in the previous 10 financial years on the long-term net gain realized in respect of a financial year.

In case of death of the farmer, established capital gains shall be subject to the long-term capital gains tax system. A general netting shall be made between the gains and losses recorded, without regard to the length of detention elements fixed assets correspondents. Thus, where compensation reveals a long-term net gain, it is taxed at the overall rate of 30%.

FYI  

There are several tax exemption schemes on professional capital gains.

Disposal price exemption

In order to benefit from the sale price exemption, the transferred company must be active for at least 5 years.

The capital gain shall be exempted in one of the following ways:

  • Exemption from totality the capital gain, where the value of the items transmitted (excluding immovable property) is less than €500,000.
  • Exemption partial the capital gain, where the value of the items transmitted (excluding immovable property) is between €500,000 and €1 000 000. The exemption rate is calculated as follows: (1 000 000 - Value of items transmitted) / 500 000.

If transfer price is equal to or greater than €1 000 000, no tax exemption shall apply to the capital gain.

Example :

Individual business A is sold for a price of €1 300 000. Among the items submitted is a building whose sale price is €620,000. Deducting this amount, the envisaged transfer is therefore equal to €680,000.

The capital gain realized on the sale is €110,000.

The exempt amount of the capital gain is: 110 000 x (1 000 000 - 680 000) / 500 000 = €70,400.

The capital gain will therefore be taxed at 110 000 - 70 400 = €39,600.

Exemption in case of retirement

A capital gains exemption applies in the case of retirement if all the following conditions have been completed:

  • The professional activity has been carried out for at least 5 years. The activity may be of a commercial, industrial, craft, liberal or agricultural nature.
  • The company ceded is a SMB.
  • The transferor shall cease all functions in the transferred company, that is to say, all managerial and salaried activities within the company.
  • The transferor shall assert his pension rights either within two years of the transfer or within two years prior to the transfer.

Warning  

In the case of retirement, the capital gains exemption relates only to income tax, social security contributions and 17.20% remain due.

Exemption for VSEs on the basis of revenue

In order to benefit from the exemption, the operator has to carry out a professional activity since at least 5 years.

The capital gain shall be exempted in one of the following ways:

  • Exemption from totality the capital gain, where the annual revenue is less than or equal to €250,000 (activity of buying and reselling or supplying housing) or €90,000 (provision of services or non-commercial benefits)
  • Exemption partial of the capital gain, depending on the revenue and the activity company:
    • Activity of purchase-resale or supply of housing. When revenues are greater than €250,000 and less than €350,000, the exemption rate is calculated as follows: (350 000 - Revenue) / 100 000.
    • Provision of services or non-commercial profits (NBC). When revenues are greater than €90,000 and less than €126,000, the exemption rate is calculated as follows: (126 000 - Revenue) / 36 000.

Beyond these thresholds, the added value is not exempt country.

The amount of annual revenue shall be the average of the duty-free revenue for the financial years ended (reduced to 12 months where appropriate) during the preceding 2 calendar years the closing date of the year in which the capital gains are realized.

If the operator or business was several activities, revenue generated in all activities shall be taken into account.

Example :

An operator engaged in an activity ofpurchase-resale has realized, in year N, a capital gain from the sale of €70,000. Its accounting year shall coincide with the calendar year and its revenue shall be:

  • Revenue N-2: €320,000
  • Revenue N-1: €240,000

The average revenue for 2020 and 2021 is: (320 000 + 240 000) / 2 = €280,000.

The exempt amount of the capital gain shall be: 70 000 × (350 000 - 280 000 / 100 000) = €49,000.

The capital gain will therefore be taxed to the tune of 70 000 - 49 000 = €21,000.

FYI  

Exemption is not cumulative pitch with the sale price exemption scheme (detailed below). However, it can be cumulative with the exemption of capital gains realized on retirement.

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