M&A – Main differences between Share Deals and Asset Deals in France

• Transferability is subject to any prior shareholder or board approvals that need to be obtained by the seller for share transfers.
• The acquisition process must be fully compliant with the GDPR regulations. 
• The Share Purchase Agreement (SPA) needs to be carefully tailored to include appropriate representations, warranties and indemnities specific to the deal at hand. 
• Parties have a general obligation to negotiate the SPA in good faith, including during the negotiation phase.
• There exists a pre-contractual information duty: a party having knowledge of a fact that is key for the consent of the other party must inform the latter, provided, however, such other party is legitimately unaware of such information or relies on the first party. This duty cannot be contractually excluded or limited by the parties.
• For an SCI (a company with real estate assets), where there exists a local pre-emption right on shares, there is an obligation for the seller to file with the municipality a prior declaration of intent to sell the shares (DIA) (they have 2 months to respond).
  

• Transferability is subject to any prior shareholder or board approvals that need to be obtained by the management of the selling company for the negotiation and execution of a business transfer agreement. 
• The acquisition process must be fully compliant with the GDPR regulations (and the actual transfer of personal data to the purchaser, as new data controller, will also require compliance).
• There is no automatic transfer of all the assets and liabilities regarding a transferred business. The parties may therefore agree to exclude specific assets or liabilities (except for employment contracts, commercial leases and insurance policies, which are automatically transferred – any personal data subjects must be notified of the change of their data controller and their consent may be necessary).
• The transfer of contracts may require the prior approval of the relevant counterparties (unless such contracts provide that they are transferable without the consent of the other party), thus making the prior identification of such contracts essential in the course of the due diligence.
• Specific regulations may govern the transfer of certain assets, such as real estate (where there exists a local pre-emption right on assets, there is an obligation for the seller to file with the municipality a prior declaration of intent to sell (DIA); they have 2 months to respond).
• The seller must provide to the purchaser all decisive elements regarding the business (prior ownership, turnover and results over the past 3 years, commercial lease information, employee information, etc).
• The business transfer agreement needs to have a French version (for tax registration purposes) and specific tax forms need to be provided (2672 + 2676).
  

The SPA in French needs to be registered by the purchaser with the local tax authorities (in the absence of a French SPA for certain forms of companies: registration of tax forms 2759), within 30 days following closing.

The other main formalities depend on the form of the companies:

Limited Liability Companies – SA and SAS:

• Share transfer orders need to be signed by the seller. 
• Transfers must be recorded in the target company’s registries and accounts. Blockchain technology is allowed.

Small Limited Liability Company – SARL:

• Articles of Association of the target company need to be updated by shareholders’ resolution and both documents must be filed with the local Trade and Companies Registry. 
• Transfers need to be notified to the company by the management.

Civil Company– SCI:

• Articles of Association of the target company need to be updated by shareholders’ resolution and both documents must be filed with the local Trade and Companies Registry. 
• Tax-registered SPA must be filed with local Trade and Companies Registry for indication of the new shareholders on the company’s corporate extract.
• Transfers need to be notified to the company or indicated in a specific shareholder registry by management.

Whatever the form of the French company, the new ultimate beneficial owners need to be declared within 30 days after closing with the local Trade and Companies Registry.

• The purchase price is usually placed in an escrow account to cover third parties’ and French authorities’ oppositions on the price: the law grants a 10-day opposition right for creditors of the business; however, it normally takes around 5 months to release the purchase price to the seller due to a longer opposition right of the tax authorities. If the purchase price is not placed in an escrow account, the purchaser can be held jointly liable for non-payment of creditor oppositions up to the amount of the purchase price. 
• The business transfer agreement and special tax forms (2672 + 2676) must be registered by the purchaser with the local tax authorities within 15 days following closing.
• Legal publication of the sale is required by the purchaser as well as mandatory filings of the tax-registered transfer agreement with the local Trade and Companies Registry.
• The seller must strike off its transferred business with the local Trade and Companies Registry and carry out various formalities with local tax authorities regarding termination of business. 
• The transferred business needs to be registered in the purchaser’s name with the local Trade and Companies Registry.
• In case of real estate transfers, a notary is required to draw up a specific deed (with specific disclosure obligations).
  

Transfers of shares may result in taxable capital gains for the seller.

Transfer taxes are due by the purchaser (unless otherwise negotiated) and the rates depend on the form of company: 

• SA + SAS: 0.1% of the purchase price (or fair market value if higher).
• SARL + SCI: 3% of the purchase price – with a deductible from the price equal to the ratio of the number of shares purchased divided by the total number of shares of the company, multiplied by €23,000 (or fair market value if higher).
• Real estate companies (regardless of their form): 5% of the purchase price (or fair market value if higher).
• Exemptions exist, e.g. for intragroup transfers.
  

The transfer of a business may result in corporate taxes due by the seller due to the cessation of activity.

Transfer taxes are due by the purchaser (unless otherwise negotiated) and the rates depend on the price of the business:

• Part of price below €23,000: 0% tax rate.
• Part of price between €23,000 and €200,000: 3% of the purchase price (or fair market value if higher).
• Part of price above €200,000: 5% of the purchase price (or fair market value if higher). 
• For the transfer of real estate assets, there are different transfer taxes to be paid to local notaries.