Buying a Business in France: Should You Buy the Shares or the Business Assets?

Buying a French business can mean two very different transactions. You may acquire the shares in the company that operates it, leaving that company in place with its assets, contracts and liabilities. Alternatively, you may purchase the operating business itself, usually through a transfer of a fonds de commerce, with a specifically defined perimeter of assets and rights.

For a foreign buyer, the distinction affects much more than the acquisition agreement. It determines where historical liabilities remain, how contracts and employees are dealt with, what must happen before completion, how the purchase is taxed and whether the business can operate effectively the next morning. An apparently attractive price can become less attractive once these consequences are included.

Neither structure is inherently preferable. A share purchase can preserve an operating platform that would be difficult to reconstruct. A business asset purchase can allow a more selective acquisition. However, buying assets does not create a universal exemption from employment obligations, tax exposure or third-party rights; buying shares does not make every historical problem the buyer's personal debt.

The useful question is therefore not simply which structure is cheaper. It is which structure delivers the business you intend to operate, with risks you can identify, finance and allocate contractually. That assessment should begin before a letter of intent fixes a price or commits the parties to an unsuitable transaction structure.

This article concerns negotiated acquisitions of privately owned French operating businesses. Court-supervised sales, regulated professions, listed-company transactions and acquisitions principally involving real estate require additional analysis. The legal and tax references below reflect the position checked on 24 October 2026.

I. The acquisition structure determines what continues, what transfers and where the risks remain

A. Buying the shares preserves the company, including the history behind its balance sheet

The company remains the owner and the contracting party

When you buy shares, you purchase an ownership interest in a legal entity. You do not personally acquire each machine, receivable or customer contract appearing in its accounts. Those items continue to belong to the company. Its debts also remain its debts. The transaction changes its shareholders, not ordinarily the identity of the person operating the business.

This is the starting point for understanding a French cession de titres. The securities may be actions, for example in a société par actions simplifiée or SAS, or parts sociales, for example in a société à responsabilité limitée or SARL. Both can be described broadly as shares in English, but the French legal form matters for transfer restrictions, governance and registration duties.

The distinction between corporate liability and the buyer's economic exposure is particularly important. If a target company owes tax for a period before completion, the tax authority will generally pursue the company. The new shareholder suffers because the company must use cash to pay the assessment, its value falls or additional financing becomes necessary. Personal liability of the shareholder requires a separate basis; it is not the automatic consequence of purchasing the shares.

A seller's indemnity can shift the economic burden back to the seller if its wording covers the claim. It does not, by itself, prevent the tax authority, an employee or a supplier from pursuing the company. The acquisition agreement operates between its parties. The company's obligations to outsiders require a distinct analysis.

For a foreign group, corporate continuity can be valuable. A French trading subsidiary may already have functioning banking arrangements, trained staff, customer accounts, insurance and administrative registrations. Retaining the same entity can reduce the operational work required to move the business into another company. That advantage must be measured against the history that remains inside it.

The seller must own the shares that the buyer expects to receive

Before reviewing the company's commercial performance, establish who owns its capital and who is entitled to sell it. A current corporate extract is useful, but it is not a substitute for the relevant share registers, securities accounts, articles of association, previous transfer documents and any shareholders' agreement. Different documents answer different questions.

An acquisition described as buying the whole company may involve several sellers, different classes of securities, outstanding subscription rights or contractual rights to acquire shares later. A transaction involving 100% of the ordinary shares does not necessarily eliminate all other rights over the capital. The buyer should reconcile the legal capital table with the financial assumptions used in the offer.

Existing pledges, options and competing promises also need attention. Where a lender holds security over the shares, the sale requires an agreed mechanism for releasing that security. A promise that a release will follow later does not provide the same protection as completion against a properly documented release or enforceable discharge arrangements.

Transfer restrictions differ between legal forms. In an SAS, the articles can contain approval, pre-emption and temporary transfer restrictions. In an SARL, transfers to outsiders are subject to a statutory approval framework. The practical task is to identify the relevant rules and obtain the necessary decisions or waivers before the buyer pays. The official guidance on SAS share transfers and SARL share transfers provides a useful starting point.

Where some shareholders remain, the acquisition agreement cannot do all the work. A shareholders' agreement and appropriate articles should address decision-making, funding, access to information, distributions and exit. The purchaser should identify which decisions it must be able to take alone and which protections minority investors legitimately require.

For example, a foreign buyer may purchase a majority stake while the founder retains the remainder and continues to manage the company. Commercially, that may preserve expertise and customer relationships. Legally, it creates an ongoing partnership. The parties should resolve the treatment of disagreements, further capital needs, the founder's departure and a later sale before those issues become contentious.

A contract can remain in place and still be affected by a change of control

Because the contracting company remains the same, a share sale does not generally involve assigning each commercial contract. That does not mean the contractual review can be skipped. A loan, distribution agreement, software licence, insurance policy or major customer contract may contain a change-of-control provision.

Depending on its wording, the provision may require prior consent, notification, repayment, renegotiation or permit termination. The definition of control may also be wider or narrower than the parties expect. An indirect acquisition through an overseas holding company can matter just as much as a direct transfer of the French company's shares.

The buyer should build a consent schedule around the contracts that support the valuation. For each material agreement, identify the relevant clause, the consequence of the proposed transaction, the person authorised to grant consent and the evidence needed at completion. A spreadsheet recording that consent is “in progress” should not conceal the fact that a major customer can leave.

Consider a fictional company whose largest customer represents 35% of revenue. If that customer can terminate following a change of control, purchasing the shares may preserve the contract formally without preserving the expected revenue. The buyer might require consent as a condition of completion, change the price or reconsider the acquisition. A general warranty about valid contracts does not necessarily solve that commercial risk.

The same reasoning applies to group arrangements. The target may use its seller's brand, IT system, purchasing contracts or premises without having independent rights that survive separation. The business may be operational today only because it sits inside a wider group. Acquiring the company requires identifying what that group currently supplies and what must be replaced.

The balance sheet is an entry point, not a complete map of liabilities

A share buyer needs to distinguish liabilities that are recorded, liabilities that are disputed and exposures that have not yet produced an invoice or claim. Filed accounts describe a financial position under accounting rules. They do not certify the absence of tax, employment, environmental, contractual or regulatory problems.

Tax due diligence should connect the figures in the accounts with returns, payment records, correspondence and the underlying transactions. Areas for review may include VAT treatment, related-party charges, deductible expenses, payroll taxes, tax credits and dealings with overseas entities. The objective is to identify specific positions, supporting documents and amounts at risk, rather than request a general assurance that the company is compliant.

Employment diligence should similarly move beyond the latest payroll total. Working-time arrangements, variable remuneration, unpaid overtime claims, occupational risks and the status of people treated as independent contractors can affect the economics of the acquisition. A company may report a stable salary cost while carrying a separate exposure that will emerge only after completion.

Commercial liabilities can be hidden in ordinary operations. A longstanding practice of accepting returns, an unrecorded rebate commitment, a customer deposit, a warranty programme or a threatened product recall may alter the value of the business. The relevant information may sit with the sales or technical team rather than in the legal folder.

For a foreign buyer, language adds another layer. A translated financial summary may omit a reservation in an auditor's report, a qualification in an insurance document or a warning in correspondence with the landlord. Documents that determine the price or a material risk should be reviewed in their original language as well as explained to the decision-makers.

Shareholder loans and intercompany balances are separate from the shares

A frequent source of misunderstanding is the seller's compte courant d'associé: a shareholder loan or other amount owed by the company to its shareholder. Transferring the shares does not automatically transfer or extinguish that receivable. The purchase agreement must say whether it will be repaid, assigned, capitalised or otherwise dealt with.

Suppose a fictional target is valued at €1 million on an agreed equity basis, but it also owes its departing shareholder €250,000. If the offer fails to address that balance, the parties may discover late in the process that they understood the acquisition funding very differently. The seller may expect both the share price and repayment of the loan.

The solution is to reconcile the price mechanics with a complete funds-flow statement. That statement should identify who receives each payment, which debts are being discharged and which amounts remain within the target. It should also distinguish the buyer's acquisition funding from the cash the business needs to trade after completion.

Intercompany balances require the same discipline. A target leaving a group may owe cash-pool balances, management charges, tax-sharing payments or amounts for inventory supplied by another group entity. The legal basis, accounting treatment and settlement of each material balance should be understood before the parties describe the business as debt-free.

A share purchase does not automatically refresh the tax value of the operating assets

The buyer's cost of acquiring shares and the target company's tax basis in its assets are different things. Paying a premium for the company does not ordinarily give the company a corresponding new deduction or automatically increase the tax basis of its machines, customer relationships or goodwill.

The commercial valuation may recognise growth prospects and intangible value that are not represented by an equivalent deductible asset in the target's tax accounts. Consolidated acquisition accounting should therefore not be confused with the tax result in the French operating company. A group-level accounting entry is not, by itself, a French tax deduction.

For the investment model, ask where each expected deduction arises, which entity claims it and which legal rule permits it. If the answer depends on a later restructuring, that restructuring should be separately analysed, costed and tested. It should not be treated as a routine administrative step that will inevitably produce the modelled tax benefit.

Tax losses also deserve caution. A buyer should not value historic losses as cash or assume that acquiring shares allows losses to be used anywhere in its group. Their availability and use depend on the applicable French rules, the company's history and the contemplated changes to its activity or structure. In particular, a change in the actual activity can have consequences for loss carryforwards under the cessation rules. A reliable model separates verified tax attributes from contingent benefits. BOFiP, corporate cessation and changes of activity.

When corporate continuity justifies a share purchase

A share acquisition may be attractive where the value depends on a coherent, functioning legal entity: a dense network of customer contracts, a workforce with established arrangements, authorisations attached to the company, or an operating system that would be expensive to transfer. The buyer then focuses on testing that continuity and controlling historical risk through diligence, pricing and contractual protection.

It may be less attractive where serious liabilities cannot be quantified, essential assets sit outside the company or the seller cannot support a meaningful indemnity. The absence of reliable records can be a commercial problem even when the seller is willing to sign broad warranties. A contractual claim after completion is a different asset from an operating business without the problem.

The decision should therefore be evidence-based. Which specific advantages would be lost in an asset acquisition? Which specific liabilities make a share purchase difficult? Can those liabilities be removed, insured, secured or priced? A useful acquisition recommendation answers those questions with documents and numbers.

B. Buying the operating business defines a different perimeter, without making the transaction risk-free

A fonds de commerce is not simply an English-law bundle of assets

The French fonds de commerce is an organised commercial business centred on its clientele. Depending on the business and the transaction, it may include the trade name, lease rights, equipment and relevant intangible assets. Its exact content must be established and described. It is neither a separate company nor a synonym for every asset used by the seller.

An asset purchase is a useful English description, but it can cover transactions with very different French consequences. Buying a single machine, buying an operational business with its clientele and acquiring a complete branch of activity are not interchangeable. The substance of what is transferred matters more than the label chosen for the agreement.

The business premises are especially important. Acquiring a fonds does not ordinarily transfer ownership of the building. The seller may be a tenant, or the property may belong to the founder or a separate property company. If the buyer also wants the premises, that requires its own ownership, financing and tax analysis, with the formalities applicable to real estate.

Nor should the acquisition of a fonds be confused with the universal transfer of an individual entrepreneur's professional estate. That separate mechanism can include liabilities as well as assets. The distinction matters whenever the seller trades personally rather than through a company. The official guidance on transaction structure and on transfers by individual entrepreneurs should be read together.

Define what is needed to operate, not only what appears in the inventory

The asset schedule should reflect how the business actually earns revenue. A list of equipment is insufficient if the buyer cannot use the brand, contact the customers, access the premises or fulfil existing orders. The acquisition perimeter should be tested against an ordinary trading day after completion.

For a distributor, that may mean stock, supplier relationships, customer data, product documentation and access to the ordering platform. For a manufacturer, it may include tooling, drawings, maintenance records and the right to use particular software. For an online business, it may depend on domain names, hosting arrangements, payment systems and access permissions.

Ownership needs verification. Equipment may be leased, financed or subject to a retention-of-title arrangement. A brand may be registered in the founder's name. Software may have been developed by a contractor whose agreement does not give the seller the rights it assumes it owns. The seller cannot transfer more rights than it has.

A practical approach is to identify an owner, supporting document and transfer mechanism for every asset essential to the investment case. Missing information should lead to a specific action: obtain a licence, secure an assignment, pay off financing, require a release or change the perimeter. A long inventory with unresolved ownership questions is not a completed diligence exercise.

The price should then be consistent with that perimeter. If stock is valued separately, the agreement should establish when it will be counted, how obsolete or damaged items are treated and how disagreements will be resolved. A stock adjustment based on quantities alone may overvalue products that cannot be sold at the assumed margin.

Historical debts usually stay with the seller, but important exceptions remain

An ordinary fonds acquisition does not generally transfer the seller's entire balance-sheet debt. That is one reason buyers consider it. However, the general proposition must not be turned into an assurance that the buyer is insulated from every consequence of the seller's past conduct.

Some obligations follow by statute, some arise through contracts that transfer and others are assumed expressly. The transaction can also expose the buyer through tax solidarity, employment rules or failures in the purchase-price release process. Existing security interests and regulatory conditions must be addressed separately from the general allocation of debts.

Article 1684 of the French Tax Code provides, within its scope and statutory limits, for joint liability of the business purchaser for specified taxes owed by the seller. This is not a transfer of all tax debts, but it is a real exception to a simple “assets only” description. The relevant taxes, statutory periods, filing dates and conditions for shortening the period need to be checked against the transaction. Article 1684.

For an industrial operation, the legal position of the operator and any site-related obligations also require specific review. An asset acquisition is not a reliable substitute for environmental diligence. Equally, a purchase of selected assets should not be assumed to cure defective products, missing licences or unsafe operating conditions merely because the historical seller remains a separate person.

The correct contractual response is to identify the particular exposure and agree who bears it between buyer and seller. That allocation must then be distinguished from the rights of employees, public authorities and other third parties, who may not be bound by the parties' private agreement.

Employees may transfer even if the agreement says otherwise

Article L.1224-1 of the French Labour Code protects continuity of employment in relevant transfers. In an asset transaction, the key inquiry is whether an autonomous economic entity retaining its identity is transferred and its activity is continued or resumed. The assessment is factual. The parties cannot settle it merely by calling the acquisition a sale of equipment. Article L.1224-1.

The Court of Justice's judgment in Spijkers, 18 March 1986, Case 24/85, remains a foundational reference for the identity-based assessment. The circumstances must be considered as a whole, including the activity and the resources transferred. It is not a mechanical test based on one asset or one contractual phrase. Spijkers, official judgment materials.

Where the transfer rules apply, the buyer cannot simply select the employees it wants and leave the others behind through the acquisition agreement. Nor should it assume that transferred employees must sign new contracts on less favourable terms. Any proposed reorganisation requires its own employment-law analysis.

Article L.1224-2 also addresses the new employer's obligations towards transferred employees, including obligations existing at the transfer date, subject to statutory exceptions and the reimbursement framework between employers. That is another reason an asset deal requires historical employment diligence. The agreement should identify accrued entitlements and allocate their financial treatment without purporting to remove employees' rights. Article L.1224-2.

A foreign buyer should therefore have an employee-transfer analysis early in the process. The questions include which employees belong to the transferred activity, whether functions are shared, whether protected employees are concerned and how collective arrangements are affected. Partial business transfers can be particularly sensitive because legal allocation may not follow the seller's preferred organisational chart.

The financial model should reflect the workforce that legally and practically accompanies the business. Pricing an acquisition on the assumption that the buyer can retain the revenue but remove most of the staff immediately is unreliable unless that assumption has been tested independently.

Commercial contracts require their own transfer analysis

Unlike a share purchase, an asset transaction changes the person operating the acquired business. Ordinary customer and supplier contracts do not all move automatically merely because the agreement transfers the clientele or the fonds. Statutory exceptions and specific contractual arrangements must be identified.

Under Article 1216 of the Civil Code, the transfer of a party's contractual position requires the other contracting party's agreement, which may have been given in advance, and the assignment must be recorded in writing. The legal effect of advance consent and the necessary notification or acknowledgement should be checked. Article 1216.

This creates a practical difference between buying a customer base and acquiring enforceable contracts with those customers. A loyal clientele can have substantial value, but a buyer should not equate historical sales with a binding commitment to place future orders. The valuation should distinguish recurring contractual revenue from business dependent on relationships or habit.

For each important contract, decide whether an assignment, a replacement contract or a different arrangement is needed. Obtain the relevant consent in a form that matches the transaction. A commercial email saying that a customer welcomes the new owner may not answer a legal question about assignment, release of the seller or outstanding obligations.

Orders spanning completion need special attention. Who receives the customer's deposit? Who supplies the goods? Who pays the supplier? Who handles returns and warranty claims? If the seller retains pre-completion receivables but the buyer must perform the associated work, the purchase-price and working-capital calculations must reflect that split.

The commercial lease can determine whether the acquisition works

For a location-dependent business, the lease is part of the investment thesis. The buyer needs to understand the permitted activity, duration, rent, service charges, repair obligations, guarantees and any outstanding disputes. A profitable business can become materially less attractive if premises costs or required works have been underestimated.

Article L.145-16 of the Commercial Code prevents contractual provisions from simply prohibiting assignment of the lease to the purchaser of the tenant's fonds or business. This protection does not mean that the lease can be ignored: valid formalities or conditions governing assignment may still need to be observed. An isolated assignment of lease rights also requires a distinct analysis. Article L.145-16.

The proposed activity should be compared with the lease's authorised use. An overseas purchaser may intend to add production, delivery, evening opening or a different product range. Those changes may require steps beyond taking over the existing lease. The acquisition should not be completed on the assumption that the premises permit an untested business plan.

If the founder owns the building and will remain the landlord, negotiate the lease alongside the acquisition. Rent, security, works, access and renewal expectations can materially affect the price the buyer should pay for the business. Leaving the lease until the end gives a commercially essential issue too little attention.

Digital assets need a legal and an operational handover

The seller's website may be the principal route through which customers find the business. Its domain name, hosting contract, content, customer database and platform accounts may nevertheless belong to different people or be governed by different terms. “All digital assets included” is too imprecise for a business that relies on them.

A purchaser should identify the registered owner and administrator of each critical resource, the contractual rights available, the transfer process and the credentials or permissions required. Where an account or licence is not transferable, the business needs a lawful alternative. Delivery of a password does not itself establish ownership or permission to use the service.

Customer information raises a separate question. Personal data cannot be treated as unrestricted merchandise. The CNIL explains that the sale of customer files must comply with data-protection requirements, including the lawful constitution of the file and the rules governing the purchaser's intended marketing use. Consent, information and opposition rights must be considered according to the use concerned. CNIL guidance on customer-file sales.

The transaction should also address access by the seller after completion. An otherwise complete handover can fail if former staff or service providers retain administrator access, recovery details or control of the domain. A documented change of permissions and recovery arrangements is therefore part of delivering the business, alongside the legal assignments.

The purchase price cannot always be released directly to the seller

French fonds transfers have publicity and creditor-protection rules that foreign buyers may not expect. Article L.141-14 allows the seller's creditors to oppose payment of the price within ten days following the last required publication. Article L.141-17 provides that a buyer paying without the prescribed publications, or before the period expires, is not discharged against third parties. Article L.141-14; Article L.141-17.

This explains the practical use of a séquestre, an escrow arrangement for the price. The escrow holder deals with release in light of the agreed terms and applicable requirements. That is different from a negotiated retention securing warranties. The two mechanisms may coexist, but they serve different purposes and should not be merged casually in the drafting.

The buyer should distinguish paying the purchase price into the agreed escrow from the seller receiving unrestricted cash. The transaction can complete and the buyer can take over the business while release to the seller remains subject to the relevant process. Funding documents, seller expectations and the timetable should all reflect this distinction.

The safest operational plan assigns responsibility for registration, publication, creditor correspondence and release decisions. The buyer needs evidence that the process has been followed, rather than a general assurance that the seller will handle the formalities after being paid.

II. A sound acquisition aligns the price, tax treatment and contractual protections with the business being delivered

A. Due diligence must change the deal where necessary, not merely describe the target

Start with the reason for buying the business

An acquisition audit becomes more useful when it begins with the buyer's investment thesis. If the attraction is access to particular customers, those relationships deserve priority. If it is a production capability, equipment, staff, know-how and authorisations become central. If the purchase is intended to provide a French platform for a foreign group, the capacity to operate independently and within that group needs testing.

This approach prevents due diligence from becoming an accumulation of documents without a decision. Every material finding should lead to a response: accept the risk, investigate it further, change the price, obtain a specific indemnity, require remediation before completion or withdraw. A report that identifies a major issue but leaves the transaction unchanged has not completed its commercial purpose.

The buyer and its advisers should agree materiality in advance. Materiality is not only a financial threshold. A missing operating authorisation or an unenforceable right to use the principal brand may be decisive even if no historical liability appears in the accounts. Conversely, numerous minor housekeeping issues should not obscure the matters that determine whether the acquisition works.

The review should also reflect the proposed structure. Share diligence concentrates on the entity and its history; asset diligence concentrates on ownership, perimeter, transferability and the obligations that accompany the business. There is considerable overlap, but the questions and remedies are not identical.

A letter of intent should preserve room for an informed decision

The letter of intent is often treated as a commercial document to be agreed before lawyers become involved. That can be a costly sequence. Its provisions may shape the price, exclusivity, transaction perimeter, access to information and allocation of expenses before the buyer understands the French legal consequences.

The document should distinguish clearly between provisions intended to be binding and those that record a proposed transaction subject to further agreement. A heading saying “non-binding” is not a substitute for reviewing the obligations actually expressed. Confidentiality, exclusivity, governing law and dispute clauses may be intended to take effect immediately even where the acquisition itself is not yet committed.

French law also regulates the conduct of negotiations. Article 1112 of the Civil Code requires good faith in their initiation, conduct and termination. The possibility of ending negotiations does not remove the need to manage them properly. A buyer should not promise certainty to secure access or exclusivity while privately treating the process as consequence-free. Article 1112.

Price wording should be particularly precise. “€2 million for the business” leaves too many questions unanswered. Is that enterprise value or equity value? Does it include stock, cash and shareholder loans? Is the price based on a normal level of working capital? Is the buyer purchasing all shares, selected assets or a business that must first be separated from other activities?

Where structure remains open, the letter should say so. The buyer may need to compare a share transaction with a fonds purchase after receiving tax and contract information. A price that makes sense under one structure may not make sense under the other, particularly when the seller's own tax position changes.

Ask questions that produce evidence

General questions tend to produce general answers. Asking whether there are any disputes is less useful than requesting claims received, threatened proceedings, lawyer correspondence, settlement agreements and material customer complaints for the relevant period. Asking whether all taxes have been paid should be supported by returns, payment records and the explanation of any outstanding balances.

Where the buyer's intended use is decisive, put it in writing. If the premises must accommodate a particular production process, or a contract must permit sales into a specified territory, identify that requirement explicitly. This helps focus the investigation and creates a record of what matters to the purchaser's consent.

Article 1112-1 of the Civil Code imposes a pre-contractual information duty where its conditions are met. It is not an unlimited obligation to reveal every fact the other party might find useful, and it does not concern an estimate of value. The conditions relating to decisive information, knowledge and legitimate ignorance or reliance must be examined. Article 1112-1.

In its judgment of 14 May 2025, joined appeals Nos. 23-17.948, 23-18.049 and 23-18.082, the Commercial Chamber of the Cour de cassation explained that the information duty concerns information having a direct and necessary connection with the contract or the parties' qualities and whose importance is decisive for the other party's consent. The practical lesson is to establish why the relevant information matters, rather than assume that every undisclosed fact automatically supports a claim. Official decision.

Intentional concealment raises the separate issue of dol, or fraud affecting consent, under Article 1137. Its existence must be established; it is not a convenient substitute for negotiating appropriate protections. An acquisition strategy based on proving dishonesty after completion is usually a poor replacement for obtaining information and contractual remedies before paying. Article 1137.

Preserve the data room and the answers that influenced the decision

The evidence reviewed should remain identifiable after completion. A data room that changes without a final index can create avoidable disputes about which version of an agreement was available, whether a schedule was missing or when a particular risk was disclosed. The buyer should retain a closing copy of the material reviewed, together with the questions and answers.

This is particularly relevant where the seller seeks to qualify its warranties by everything disclosed in the data room. The agreement should define the standard and scope of disclosure. Is a risk disclosed only if it is described clearly enough to understand its nature and implications, or is a reference buried in an unrelated document sufficient? That is a negotiation point with direct financial consequences.

Suppose a tax exposure appears in a short email among thousands of uploaded files. The buyer may consider that it was never adequately disclosed; the seller may argue that access to the email excludes the claim. The outcome will depend on the agreement and applicable law. The better course is to resolve the standard of disclosure and address known material issues expressly.

The same discipline helps internal decision-making. The person approving the acquisition should be able to see the outstanding issues, the proposed treatment and the residual risk. A clean executive summary should not remove qualifications that materially change the meaning of the underlying diligence findings.

Enterprise value is not the amount paid to the shareholders

Many negotiations begin with an enterprise value derived from earnings or another business metric. The final equity price may then be adjusted for financial debt, cash and working capital. These are negotiated accounting and contractual concepts. There is no single definition that automatically fits every transaction.

Consider a fictional deal with an enterprise value of €2 million, cash of €200,000, agreed debt of €500,000 and a €100,000 shortfall against normal working capital. Under a formula that adds cash and deducts debt and the shortfall, the equity price would be €1.6 million. The arithmetic is straightforward; the definitions determine whether it is right.

Does debt include shareholder loans, unpaid acquisition bonuses, overdue tax, finance leases or disputed balances? Is all cash available, or is some restricted or required to support ordinary operations? Does working capital include customer advances and provisions for doubtful receivables? An agreement using undefined financial vocabulary merely postpones the negotiation until after the buyer owns the company.

Working-capital targets should reflect the business cycle. A seasonal company may hold unusually low inventory or high customer deposits at a particular date. Using one convenient month-end figure without examining the cycle can transfer a funding burden that the buyer did not price.

The buyer's accountants and lawyers should therefore work from the same model. Accounting principles determine the numbers, while the contract determines which numbers count and how disagreements are resolved. An elegant formula with inconsistent schedules is a predictable source of litigation.

Completion accounts and locked-box pricing allocate different risks

Under a completion-accounts mechanism, the parties adjust the price using accounts drawn up for completion, according to agreed rules. This can align the price with the position delivered, but it requires precise accounting policies, preparation responsibilities, review periods and a dispute process.

A locked-box mechanism fixes the price by reference to an earlier balance-sheet date and controls value leaving the target after that date. It can give more price certainty, but its reliability depends on the quality of the reference accounts, the definition of prohibited leakage and the treatment of any permitted payments.

Neither mechanism is a statutory guarantee of fairness. A buyer accepting a locked box must understand the trading period between the reference date and completion. A buyer using completion accounts must avoid assuming that every adverse development can later be recast as a price adjustment.

For a founder-owned business, examine payments to the founder and connected persons carefully. Salary, dividends, loan repayments, rent, management charges and transaction costs may have different treatment. The acquisition documents should distinguish ordinary permitted expenditure from transfers of value that the price was not intended to allow.

Known risks need a negotiated answer of their own

A warranty package is usually designed to deal with inaccuracies or undisclosed exposures within its agreed scope. A known issue requires deliberate treatment. If the buyer already knows that a tax audit is in progress, a broad tax warranty subject to disclosure may provide less protection than expected.

Possible responses include a specific indemnity, a price reduction, a funded retention, a condition requiring resolution before completion or a change in structure. The choice depends on the probability, amount and timing of the exposure, as well as the seller's ability to pay. These mechanisms can be combined, but their interaction must avoid double recovery or accidental gaps.

A specific indemnity should identify the issue accurately. “All consequences of the audit” may leave unanswered questions about periods, taxes, penalties, defence costs and future effects. The parties should also decide who controls correspondence with the authority, who can agree a settlement and how the buyer keeps its rights while meeting procedural deadlines.

For example, assume a fictional target faces a potential €180,000 tax assessment and the seller offers a general indemnity capped at €100,000. The buyer should not describe the exposure as fully covered. It should identify the uninsured amount, the relevant exclusions and whether the cap is shared with other claims. The investment decision depends on the net risk remaining.

French garanties de passif must be read as contracts, not translated labels

A garantie d'actif et de passif is commonly used to allocate financial consequences of inaccurate asset values or liabilities linked to an agreed pre-completion period. Its operation depends on its terms. It should not be assumed to reproduce automatically the effect of warranties and indemnities in an English or American agreement. Official guidance on negotiating the acquisition agreement.

The parties need to identify the beneficiary. Is compensation paid to the buyer or to the target company? What loss is covered? How are tax savings, insurance recoveries, provisions and payments by third parties taken into account? Is the mechanism a price adjustment, an indemnity or another contractual undertaking? Those choices can affect both enforcement and tax treatment.

The reference date also matters. A claim received after completion may relate to an earlier event, while a liability recorded before completion may be discharged through the price mechanism. The agreement should explain the required link with the protected period and prevent contradictory treatment across the price and indemnity provisions.

Different warranties may justify different periods and caps. Ownership of the shares, authority to sell, tax matters and ordinary business warranties do not necessarily warrant identical treatment. The buyer should negotiate the package around the actual risks rather than accept a single number because it appears conventional.

Thresholds require equally careful reading. A minimum amount per claim, an aggregate deductible and a basket that becomes recoverable in full after a threshold is reached do not have the same effect. A short worked example attached to the negotiations can reveal differences that several pages of terminology conceal.

A strong indemnity still needs a solvent debtor and a workable claims process

The seller's financial position after completion is part of the protection analysis. A holding company intending to distribute the sale proceeds may be a less useful indemnity provider than the buyer assumes. A promise lasting several years has limited value if the promisor has no accessible assets when a claim arises.

Possible security arrangements include a price retention, an escrow, a bank guarantee or an appropriate guarantee from another person. Each has a cost and its own conditions. The buyer should consider amount, duration, release stages, drawdown requirements and the relationship between the security and the underlying indemnity.

A bank guarantee expiring before the last contractual claim can be notified may leave an unintended gap. A retention released automatically while a disputed claim remains unresolved may do the same. The documents should distinguish the period for notifying claims from the time needed to determine and pay them.

Notice provisions can also be decisive. The buyer should know where notice must be sent, what information it must contain and whether a late or incomplete notice affects the claim. Management should not assume that telling the seller informally about a problem satisfies the acquisition agreement.

Warranty insurance, where available and appropriate, should be assessed against the actual policy. It does not remove the need for diligence, and known issues or particular categories of risk may be excluded. The buyer should compare the insured protection with the residual seller obligations and the risks retained on its own balance sheet.

Integration planning should test whether the business is genuinely separable

Some of the most expensive acquisition problems arise from dependencies rather than hidden debts. The target may rely on the seller for payroll processing, IT hosting, quality certification, procurement or treasury. An asset package may omit a shared warehouse or a technical employee whose work supports several divisions.

The transaction may therefore require a transition services agreement. This should identify the service, price, duration, performance standard, access arrangements and exit plan. A promise to provide reasonable assistance for a few months is difficult to operate when the buyer cannot invoice customers without the seller's system.

The buyer should cost the permanent replacement solution as well as the transition. A low temporary service fee can conceal substantial migration expenses. If the replacement cannot be ready before transition support ends, the timing risk belongs in the transaction analysis, not only in the integration team's project plan.

At the same time, integration must respect the separation between signing and completion. The buyer should not behave as if it already owns the target merely because negotiations are advanced. Information-sharing, commercial coordination and control before completion require particular care, including where competition rules are relevant.

B. Tax, approvals and completion mechanics should be designed before the buyer commits its funds

Compare the whole transaction cost, not only the registration duty

Registration duties often make a share purchase look immediately attractive. Under the ordinary rules, transfers of actions are generally taxed at 0.1%. Transfers of parts sociales are generally subject to 3% after the statutory allowance, calculated by reference to €23,000 and the proportion of the company's shares transferred. Transfers involving qualifying real-estate-rich entities can fall under the separate 5% regime. Exemptions and special cases must be checked. Article 726 of the French Tax Code.

For an ordinary fonds transfer, the standard combined registration-duty scale is 0% on the fraction up to €23,000, 3% on the fraction between €23,000 and €200,000, and 5% above €200,000, subject to the minimum charge and any applicable relief. Qualifying merchandise separately identified is treated differently. Official acquisition formalities and duty guidance.

On a simplified taxable consideration of €1 million, an acquisition of SAS actions would ordinarily produce €1,000 of duty. A transfer of all the parts in an ordinary SARL would produce €29,310 after the full €23,000 allowance. A fonds transfer with the same taxable base would produce €45,310: €5,310 on the middle band and €40,000 on the balance.

These figures are illustrations, not a recommendation to choose the lowest-duty structure. They assume that the stated consideration is the relevant taxable base, that the ordinary regime applies and that there is no qualifying real-estate predominance or special relief. They exclude fees, financing costs, other taxes and any separately treated stock or property.

More fundamentally, €1 million for shares and €1 million for a fonds may not purchase the same economic position. One company may retain cash, debt and working capital; an asset package may require separate funding for stock and operations. The comparison becomes meaningful only after the acquisition perimeter and funding needs have been aligned.

The seller's tax position influences the negotiation

Where a company sells its operating business, the price is received by that company. Any subsequent distribution to its shareholders is a separate step with its own consequences. Where shareholders sell their shares, they receive the consideration directly, subject to the rules applicable to them.

This helps explain why a seller may favour a share deal even where the buyer prefers assets. The seller's net proceeds can differ materially. A commercially viable agreement may require modelling both sides' positions and negotiating an adjustment, rather than assuming one structure is neutral for everyone.

The buyer should nevertheless keep the seller's tax advice separate from its own. A structure that is efficient for the seller may leave the buyer with more historical risk, fewer deductions or a more complicated funding arrangement. The negotiated price should reflect those differences openly.

For cross-border parties, the analysis must also account for residence, entity classification and any applicable tax treaty. A tax result described in a French seller's memorandum may not be the result for an overseas corporate shareholder or an individual with connections to more than one jurisdiction.

Goodwill amortisation is a current issue, not a fixed assumption

The tax treatment of acquired fonds commercial deserves particular attention in 2026. This accounting concept concerns residual commercial goodwill and should not be confused with the entire legal fonds de commerce or every asset purchased with it.

The general French rule excludes tax deduction of amortisation of fonds commercial. A temporary exception permits qualifying accounting amortisation for funds acquired during the statutory period. Article 13 of the Finance Act for 2026 extended that period to 31 December 2029. The tax administration's update of 5 August 2026 confirms the extension. An analysis still stopping at 31 December 2025 would therefore be outdated. BOFiP update ACTU-2026-00042.

The extension does not make every goodwill payment deductible. The accounting conditions, acquisition date and exclusions remain important. In particular, the official guidance addresses limited useful life, the simplification available to qualifying small businesses and exclusions for acquisitions from related businesses or businesses under the relevant common control. BOI-BIC-AMT-10-20, section II-A.

For the buyer, the practical task is to distinguish identifiable assets, residual goodwill, accounting amortisation and tax-deductible amortisation. A purchase-price allocation should be supportable and consistent with the assets acquired. It should not be adjusted artificially to produce the most convenient deduction.

Suppose, purely as a modelling example, that a qualifying acquisition produces €600,000 of goodwill validly amortised over ten years and fully deductible under the applicable regime. The annual deduction would be €60,000. Its actual cash value depends on the purchaser's tax position and timing; it is not €600,000 of tax saved and not an immediate refund of the purchase price.

The deduction may influence the comparison with a share deal, but it should not dominate it. A tax benefit spread over years can be outweighed by a key contract that cannot be transferred, additional integration costs or a need to renegotiate the premises. The transaction model should show those effects together.

A going-concern transfer may receive specific VAT treatment

An asset acquisition does not necessarily require VAT to be charged on the entire consideration. Under Article 257 bis of the French Tax Code, as applicable at the date of this article, a qualifying transfer of a totality of assets or part thereof between persons liable for VAT is treated under a no-supply mechanism. The conditions need to be established; the parties cannot obtain the treatment simply by writing the article number in the agreement. Article 257 bis.

In Zita Modes, 27 November 2003, Case C-497/01, the Court of Justice explained the relevant concept by reference to a business, or an independent part of one, capable of carrying on an economic activity. The purchaser must intend to operate it, rather than immediately liquidate the activity and sell the stock. This distinguishes an operating business transfer from a mere sale of disconnected assets. Zita Modes, official judgment.

The VAT assessment should therefore examine what is transferred and what the buyer will actually do. It should also identify any succession to VAT adjustment obligations and retain the supporting records. A transaction can be attractive from a cash-flow perspective while still carrying obligations that must be documented after completion.

If the conditions are not met, the VAT treatment of the relevant components must be analysed under the ordinary rules. The purchase agreement should address invoicing, cooperation, adjustments and the consequences if the expected treatment is challenged. For completions after the date of this article, the provisions and codification in force at completion must be checked again.

Choose the acquisition vehicle for operational and financial reasons as well as tax

A foreign company can consider acquiring shares directly or through a French holding company, depending on the transaction. An acquisition of an operating business raises a separate question: which entity will employ staff, contract with customers and carry on the French activity? The answer should be decided before the documents are finalised.

A French acquisition vehicle may assist with organisation, financing and local operations, but it is not automatically the best structure. The analysis should include the buyer's home-country rules, the intended ownership chain, distributions, financing and a possible future sale. A structure designed only around the purchase date can create unnecessary costs later.

The place where management decisions are actually taken also matters. Corporate documents should be consistent with the intended governance and operational reality. A foreign group should not assume that appointing a nominal director or using a registered address resolves all questions of management, residence or permanent establishment.

Where a direct asset acquisition results in the foreign company operating in France, French registration, employment and tax obligations must be assessed. Owning shares in a French company and directly carrying on its business are different situations. The group needs a clear description of which entity performs each function and bears each risk.

The internal financing documents should reflect the same structure. Equity, shareholder loans and bank debt have different legal and tax consequences. The lender, borrower, security provider and recipient of operating cash must be identified rather than treated as interchangeable members of the group.

For the earlier decision between operating cross-border and establishing a French platform, see Can a Foreign Company Sell in France Without a French Subsidiary?. Acquiring an existing business involves additional questions because an operating history and an acquisition price are already present.

Acquisition debt cannot simply be pushed into the target

A buyer may expect the acquired company's future profits to support the acquisition financing. That commercial expectation does not establish that the company can lawfully pay the purchase price, guarantee the buyer's borrowing or deduct the buyer's interest.

Article L.225-216 of the Commercial Code restricts advances, loans and security provided for the acquisition of a company's own shares, subject to the statutory framework and exceptions. Its application, including through the rules governing an SAS, must be checked for the relevant structure. Corporate interest and other company-law restrictions also require attention. Article L.225-216.

This means that the finance documents and acquisition documents should be reviewed together. A bank's request for security over the target's assets does not establish that the target can validly provide it. The intended use of funds, the timing of the security and the legal basis for each company participating in the financing need analysis.

Interest deductibility is a separate inquiry. French rules include limitations on financial charges and restrictions relevant to related-party debt. Tax consolidation, where available and properly implemented, has its own conditions and consequences. It should not be treated as an automatic device for offsetting every acquisition expense against the target's profits. BOFiP, financial-charge framework.

The buyer should request a financing model showing the legal flow of cash and the tax treatment entity by entity. It should identify the assumptions that depend on elections, future profits, a restructuring or administrative acceptance. The acquisition should remain financeable if a contingent tax benefit is delayed or unavailable.

Foreign investment screening can apply to assets as well as shares

France does not require prior investment-screening authorisation for every acquisition by a foreign buyer. The analysis combines the investor's status, the nature of the transaction and the sensitivity of the activity. However, the review should be carried out early enough to affect the timetable and conditions of completion.

The relevant transactions can include acquiring control, acquiring all or part of a branch of activity and certain voting-rights threshold crossings. Buying assets is therefore not a general way to avoid screening. The ownership chain and the target's actual activities should be examined rather than relying only on its trading name or a broad industry classification. French Treasury guidance on qualifying transactions.

For an ordinary authorisation application, the Treasury describes an initial review of 30 working days from receipt of a complete file and, where further examination is needed, an additional 45 working days. Silence is not approval. Preparing the file and dealing with completeness can add time before the statutory review runs. French Treasury investment-screening procedure.

The acquisition agreement should address who prepares the filing, what cooperation the seller must provide, the conditions the buyer is willing to accept and what happens if approval is refused or delayed. An approval that requires significant operational restrictions can change the value of the business; the contract should not leave that issue unresolved.

Merger control and sector-specific authorisations are separate from investment screening. A transaction can require one review, several reviews or none of them. Their triggers and procedural consequences should be assessed independently. A clearance under one regime should not be described as a comprehensive permission to complete under every other regime.

Employee information and consultation must be built into the timetable

Employee information about a proposed sale and consultation of the comité social et économique are distinct processes. Their application depends on the transaction and the company. They should be analysed before the parties commit to a signing sequence that makes compliance difficult.

The rules changed in 2026. For sales within the amended framework applying from 27 July 2026, the direct employee-information period is generally one month where the obligation applies, rather than the former two months. The provisions distinguish businesses with fewer than 50 employees and relevant situations without a CSE from larger businesses with a CSE. Exclusions and the possibility of earlier completion following the required employee responses must be checked. Commercial Code, Article L.23-10-1; Article L.141-23.

This information process does not give employees a general priority right to purchase the business. Nor should the buyer confuse it with obtaining the CSE's opinion where consultation is required. The proper sequence depends on the legal obligations applicable to the particular transaction, not the parties' preferred announcement date.

The buyer should ask for evidence of the steps taken, including the relevant dates and recipients. A completion certificate saying that all employee formalities have been complied with is useful only if supported by the necessary process. If the timetable depends on an exception or an early-completion mechanism, the basis should be documented.

Employee communication also has an operational dimension. Staff may need clarity about the employer, payroll continuity, management and practical arrangements. The legal process and the communication plan should be consistent without making promises that the acquisition documents or integration plan cannot support.

If the buyer also intends to expand the French workforce after completion, the organisational choices are discussed separately in Hiring Your First Employee in France: Subsidiary, Branch, Employer of Record or Direct Employment?. Those recruitment choices should be distinguished from the mandatory rules governing an existing workforce that accompanies an acquired business.

Other approvals can arise from the location and the assets

A fonds transaction may be affected by a municipality's commercial pre-emption right where the relevant perimeter has been established. This is a separate issue from a landlord's consent or a foreign investment filing. The location should be checked early and any required declaration included in the conditions and timetable. Official guidance on fonds transfers.

Operating licences and professional authorisations require their own review. The fact that the seller holds an authorisation does not prove that it transfers with the assets or remains unaffected by a change in ownership. Where a permit is essential, the buyer should identify the issuing authority, the legal holder and the process required for the intended transaction.

Property, environmental and product-specific requirements can similarly affect whether the buyer can implement its plan. They should be investigated in proportion to the activity. A small acquisition is not necessarily a simple one if the business depends on a particular licence, regulated site or protected right.

The completion checklist should distinguish approvals that must already exist from filings that follow completion. The distinction matters because an undertaking to file later cannot cure the absence of a legally required prior authorisation.

Signing and completion should be separated where the transaction requires it

In some acquisitions, the parties sign and complete at the same time. In others, they sign an agreement subject to conditions and complete later. The sequence should follow the required approvals, financing, consents and delivery obligations, rather than an assumed international template.

Where there is a gap, the agreement should regulate the business during that period. The buyer may seek covenants concerning unusual expenditure, new borrowing, changes to key contracts or distributions. These need to preserve the target's ability to trade and respect the legal limits on the buyer exercising control before completion.

The agreement should identify what happens if a condition is not fulfilled by the long-stop date. Does either party have a termination right? Can the date be extended? Which conditions can be waived, and by whom? A mandatory regulatory requirement cannot be waived merely because the parties are commercially impatient.

Material deterioration between signing and completion also needs deliberate treatment. If the parties negotiate a material-adverse-change provision, its scope should be understandable and consistent with the risks already known. A broad label imported from another legal system is not a substitute for defining the events that matter to this transaction.

The buyer should also decide which warranties are repeated at completion and what remedy follows if they are no longer accurate. The right to damages after completion is different from a right not to complete. That difference should be visible when the parties negotiate protection against changes during the interim period.

A complete funds flow is as important as the acquisition agreement

Before completion, the parties should reconcile the final price, debt repayments, shareholder-loan treatment, escrow deposits, fees, taxes and any retained amounts. The payment schedule should identify each recipient and the conditions for releasing each transfer.

This is particularly valuable where funds arrive from abroad or several lenders and sellers are involved. Banking checks, proof of funds and foreign-currency conversion can take time. The buyer should confirm that the required money can reach the agreed account in the correct currency and under the intended conditions.

Payment instructions should be verified through an agreed, reliable process. Changes to bank details shortly before completion deserve independent confirmation. The purpose is practical: the transaction documents do not deliver the business if the acquisition funds are sent to the wrong recipient.

For a share purchase, the funds flow should be coordinated with the transfer documents, ownership records, releases and management changes. For a fonds purchase, it should also reflect the agreed escrow and the legal process governing release. In either case, the parties should know which documents and payments are exchanged simultaneously.

The first day after completion should be designed before the last day before it

The buyer's operational checklist should answer simple questions. Who can authorise payments? Who has access to accounting and payroll? Can invoices be issued correctly? Are insurance arrangements effective? Can the business use its premises, systems, website and essential contracts?

In a share deal, existing arrangements may continue, but mandates and access rights still need attention. The departing founder may remain the only person authorised to use online banking or communicate with a key service provider. In an asset deal, new operational arrangements may be needed because a different legal entity now trades.

The handover should include records required to substantiate the business's rights and obligations, subject to confidentiality and data-protection requirements. Legal possession of the business is of limited practical use if essential documents remain inaccessible in a former group system.

The buyer should also appoint responsibility for post-completion obligations. Registration filings, beneficial-ownership updates where required, tax formalities, price-adjustment deadlines and warranty notices need named owners. These tasks can otherwise fall between the transaction team and the new management.

Three examples show why the answer depends on the business

First, consider a fictional software company with long-term customer agreements and licences that would be difficult to transfer. A share acquisition may preserve the platform more effectively. The decisive work then concerns intellectual-property ownership, change-of-control clauses, data practices, historic liabilities and the seller's indemnity capacity. A lower asset price would not compensate for losing the contracts that generate the revenue.

Second, consider a fictional retailer whose owner operates several unrelated activities through one company. The buyer wants one established shop, its clientele, equipment and lease rights. A fonds acquisition may better match that commercial objective. The transaction still requires attention to the lease, employees, stock, customer commitments, price escrow and the assets needed to operate independently.

Third, consider a fictional industrial target with uncertain historic liabilities but indispensable authorisations and customer approvals. Neither structure provides an obvious answer. The parties may need a pre-completion separation, a narrower perimeter, specific third-party consents or a secured indemnity. If the required conditions cannot be achieved, declining the acquisition can be the rational outcome.

These examples are deliberately different. They show why the transaction should be organised around the economic activity and the legal rights supporting it. The buyer should be able to explain not only why it prefers one structure, but what would be lost, added or left unresolved under the alternative.

Before agreeing the price, establish what the price must buy

The strongest acquisition file connects four elements: the business being acquired, the rights needed to operate it, the liabilities the buyer will bear and the means of recovering from the seller if the agreed position proves inaccurate. Tax and financing should support that structure, with their assumptions made explicit.

For a foreign purchaser, the French legal analysis should therefore begin before the transaction is presented as settled. It can influence the perimeter, the acquisition vehicle, the timetable and the documents, not merely the wording of the final agreement.

Rodolphe ROUS Avocat advises on the French legal and tax aspects of business acquisitions, including the choice between a share purchase and a business asset purchase, due diligence, negotiation and contractual protection. Where the transaction involves an overseas buyer, that work should be coordinated with the buyer's advisers in its home jurisdiction and with the financial review of the target.

The first useful step is to examine the proposed transaction structure, the seller's legal identity, the latest accounts, the material contracts and any draft offer. Those documents usually reveal which questions must be resolved before a headline price can become a reliable acquisition commitment.