Transfer of the goodwill to a third party

Verified 05 May 2023 - Legal and Administrative Information Directorate (Prime Minister)

The goodwill may be transferred to one-third outside the company. The assignment is subject, after the signature of the deed of sale, to the fulfillment of many formalities. The purpose of these formalities is to ensure the protection of the transferor (you), the transferee (the transferee) and the creditors of the fund.

The sale of the goodwill involves the transfer of the following items.

Intangibles

  • 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.

Body parts

  • Furniture
  • Hardware and tooling : the assets needed to operate the fund (machinery, computers, offices)

It is advisable to determine precisely which are the goods included in the transfer to avoid potential disputes.

The stock of goods is not included in the value of the goodwill, it is valued separately.

The transfer of the goodwill does not understand the following:

  • Claims and liabilities : loan repayment obligations and operating debts are not passed on, you have to pay them
  • Building (premises in which the fund is operated)
  • Miscellaneous Contracts : (for example, supplier contract) except lease, work, and insurance contracts that are passed automatically
  • Books of commerce and accounting documents : these documents are not transmitted, they must only remain at the disposal of the purchaser for 3 years.

Please note

you and the purchaser may provide that the transfer of the goodwill also include the transfer of those other items, including debts and the premises (if you own them).

What information?

In the companies of less than 250 employees, you must inform employees

  • of your willingness to sell the goodwill,
  • and the possibility for employees to to submit an offer to purchase for the acquisition of the fund.

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 (former bailiff's act) 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 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 goodwill may take place before the expiry 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, you may 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 your business is located within the perimeter of local businesses and crafts, it can be subject to a municipality's right of pre-emption and be returned to a trader or craftsman.

The right of first refusal allows the municipality to be priority on purchase of your funds to preserve diversity the commercial activity of the perimeter demarcated by the municipal council. It can be downtown, certain neighborhoods or certain streets.

If this is the case, you must perform a prior declaration to the mayor's office containing the following particulars:

  • Prices and conditions of the proposed transfer
  • Number of employees and nature of their employment contract
  • Company turnover
  • Expected buyer activity
Who shall I contact

The mayor has a deadline of 2 months to exercise the right of pre-emption for the benefit of the municipality.

If he exercises this right, 2 possibilities the following may be considered:

  • If you agree on a price with the municipality, the sale is concluded.
  • On the contrary, if you do not agree on the price, the commune can renounce the purchase or bring the expropriation before the judge (before the court). You may also waive the assignment.

Registration Declaration

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 registration fees

Registration fees are calculated on the transfer price as follows:

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

The minimum registration fee is €25. If the sale of goodwill transaction includes sales of new goods, they shall be exempt from registration fees.

The cost of registration is at the expense of the purchaserHowever, there is nothing to prevent you from covering some or all of these costs.

The publicity formalities are mandatory and allow the transfer to be made enforceable against third parties.

Declaration in a legal advertisement medium

The deed of assignment must be published in a legal listing support 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 (you) and of the transferee (the transferee)
  • Nature and seat of the fund
  • Selling price and breakdown between tangible and intangible items
  • Time limit for possible opposition by creditors

Publication in Bodac

The purchaser must apply to the Registrar of the Commercial Court within a period of 3 days following insertion into a legal advertisement medium. The Registrar then publishes a notice in the Official Bulletin of Civil and Commercial Advertisements (Bodacc).

Who shall I contact

To secure the sale transaction, the sale price is temporarily retained by a legal receiver (lawyer or notary of the transferee) for a period of 105 days from the date of sale.

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

The receiver's fees and expenses shall be borne by the transferee, unless the bill of sale provides for a different distribution.

Immediate taxation of profits

The transfer of the company or business shall entail the immediate taxation of profits since the end of the last completed financial year until the date of transmission.

Profits will be taxed on income tax (IR) or business tax (SI), depending on your company's situation.

You must send the tax department (SIE), on site or by mail, a tax return in the 60 days from the publication of the assignment in a legal listing support.

Depending on the company's tax system, you will have to fill out one of the following forms:

  • Business Tax Return
  • Income Tax Return (BIC)
  • Income Tax Return (NTB)

Business Tax Return (SI)

2023 Income Statement 2022 - Industrial and Commercial Profits (BIC)

Non-Commercial Profits (NTB) - Controlled Reporting Regime

Who shall I contact

Value added tax (VAT)

The transfer of the company or goodwill shall entail the payment of VAT perceived.

If you are liable for VAT, you must make a VAT return to the tax office (SIE) within a period of 30 days from the publication of the assignment in a legal advertisement medium.

This period is extended to 60 days if you are placed under Simplified Taxation Regime (SIR).

However, this transaction is exempt from VAT if the following 2 conditions are met:

  • The sale is for theentirety of the goodwill elements
  • The purchaser is itself liable for VAT
Who shall I contact

During the sale, you can realize a capital gain which is the difference between the sale price and its original value.

We're talking about short-term gain if you have held the goodwill for less than 2 years.

Beyond 2 years, it is a long-term gain.

The taxation of capital gains differs depending on whether the company is subject to income tax (IR) or business tax (SI).

Subject to IR

If it is a capital gain short-term, the capital gain is added to taxable income under the conditions and at the rate of income tax.

If it is a capital gain long-term, the capital gain shall be imposed on the single flat-rate levy (PFU) at 30%, which means:

  • 12.8% income tax,
  • 17.2% in respect of social security contributions.
Subject to SI

There's no no distinction between short-term and long-term capital gains.

The capital gain shall be taxable at the normal rate of business tax.

It exists multiple plans exemption from capital gains tax.

Disposal price exemption

You benefit from a capital gain exemption depending on the selling price :

  • If the price is less than €500,000, your exemption is total.
  • If the price is between €500,000 and €1 000 000, your exemption is partial.
  • If the price is equal to or greater than €1 000 000, you do not have any exemption.

You must have been active in the company for at least 5 years.

Exemption in case of retirement

You benefit from a total exemption if you meet all of the following:

  • You have been in the business for at least 5 years
  • Your company is subject to income tax (not at IS)
  • You're leaving retired and you claim your rights within 2 years of the assignment
  • Your company includes less than 250 employees and has a turnover of less than EUR 50 million.

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

You benefit from a total exemption if you meet all of the following:

  • You have been in the business for at least 5 years
  • Your company is subject to income tax (not SI)
  • Your recipes are less than €250,000 (BIC) or €90,000 (NLC)

Above these thresholds, the exemption is partial if your recipes are:

  • Less than €350,000 (BIC) The exemption rate is calculated as (350 000 - revenue) / 100 000.
  • Less than €126,000 (BNC). The exemption rate is calculated as follows: (126 000 - revenue) / 36 000.

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