Sale in liquidation: rules to be respected

Verified 19 February 2024 - Directorate for Legal and Administrative Information (Prime Minister)

The sale in liquidation is a commercial operation enabling the trader to dispose of his stock quickly. Whether it is justified by a seasonal suspension or by a definitive cessation of activity, the liquidation shall be legally framed.

The sale in liquidation is a commercial transaction in which the traders reduce their price on all or part of their stock in order to accelerate the disposal thereof.

The trader may resort to the sale in liquidation only in one of the following cases :

  • Permanent cessation of activity
  • Seasonal suspension of activity. The suspension must be effective for at least five months after the winding-up operation.
  • Change of activity. The change entails the elimination of a significant activity within the establishment (e.g. a shop replaces its toy sales activity with the sale of sporting goods).
  • Substantial change in operating conditions. The modification may concern the place of operation (e.g. transfer of the premises or renovation works to the commercial premises resulting in a prolonged closure) or the legal form of the company (e.g. termination of a contract for the exclusive supply of the premises).

The sale in liquidation must be accompanied or preceded by publicity (ex: poster on the shop window, sending invitations...). Such publicity must mention the date of the declaration receipt and the nature of the goods covered by the operation if it does not concern all the establishment's products.

Please note

Unlike one-off promotional transactions (e.g. private sales, Black Friday), sale in liquidation allows the resale at a loss.

Any winding-up operation shall be subject to a settlement procedure prior declaration.

Where and when to declare liquidation?

The winding-up operation must be reported to the town hall by registered letter with notice of receipt or by delivery to the mayor.

The declaration must be sent at least 2 months before the date on which the sale is scheduled to start.

However, that period shall be reduced to 5 days where the liquidation is justified by a unforeseeable fact of such a nature as to interrupt the operation of the establishment (e.g. fire, flood, act of vandalism, death of a person indispensable to the operation, etc.).

Who shall I contact

What should the declaration contain?

The declaration shall contain following information :

  • Contact details of the declarant (surname, forenames, address, telephone...)
  • Contact details, activity and unique identification number of the commercial establishment
  • The date on which the proposed sale begins and its duration
  • Reason for winding up
  • Nature of liquidated goods.

Please note

One model for prior notification is available on Legifrance.

The prior declaration must be accompanied by subsequent parts :

  • Documents justifying the reason for the liquidation (e.g. work forecast quotes)
  • Detailed inventory of goods concerned by the liquidation operation: precise nature and description of the products, quantity, selling price, average purchase price excluding tax (products whose selling price is less than € 5 may be described in homogeneous lots). Only goods in inventory may be sold in liquidation.
  • Copy of power of attorney, where the declaration is made by an authorized representative.

What is the response time from the city hall?

Upon receipt of the declaration file, the mayor shall have a period of 15 days to deliver the declaration receipt. If the liquidation is justified by an unforeseeable fact (fire, flood, vandalism...), the receipt is issued as soon as the file is received.

If the folder is incomplete, the mayor shall notify the declarant of the list of missing documents within 7 days from receipt of the declaration. The declarant shall then have a period of 7 days, as from the receipt of the notification of the missing documents, to complete his file.

No sale in liquidation may take place until the receipt has been issued. A copy of the return receipt must be displayed at the point of salethroughout the period of liquidation, in such a way as to be legible from the public highway.

Please note

Where the event giving rise to the winding-up has not occurred no later than 6 months following the declaration (e.g. cancelation of renovation works that were to take place in the premises), the declarant must inform the City Hall.

What sanctions does the trader face?

A trader who does not comply with the rules on prior notification may subsequent criminal sanctions :

  • Winding-up without prior notification shall be punished by a fine of €15,000 for individual entrepreneurs and €75,000 for businesses.
  • The fact of do not display the return receipt at the place of sale shall be punished by a fine of €1,500 for individual entrepreneurs and €7,500 for businesses.
  • Making a prior false declaration constitutes forgery and use of forgery liable to 3 years imprisonment and €45,000 fines for individual contractors and €225,000 for businesses.

The winding-up operation may concern all or part of the stock, on goods new or used. However, only inventory goods provided as an annex to the prior declaration may be subject to winding-up proceedings.

In addition, products must originate from the commercial establishment (including reserves) of the person making the winding-up declaration. Those held in warehouses outside the establishment shall be excluded from liquidation. If a product is no longer available, the trader cannot therefore replenish himself in these warehouses to sell it at a reduced price.

Reminder

During the sale in liquidation, the trader must comply with the price display rules.

The maximum duration of the sale in liquidation shall be regulated by law.

General case

The duration of the sale in liquidation shall be Maximum 2 months.

Seasonal suspension of activity

The duration of the sale in liquidation shall be reduced to Maximum 15 days it is justified by a seasonal suspension of activity.

The trader may be required to postpone the winding-up operation. As soon as he knows it, he must inform the mayor by registered letter with notice of receipt, giving the reason for the change in date.

If the deferral of the liquidation is greater than 2 months, the trader must carry out a new prior declaration.

Who can help me?

Find who can answer your questions in your region