The purchase of a business can take a number of different forms. There are basically three techniques to take control of a business in France: (i) through a sale of shares, (ii) through a sale of assets or (iii) through a merger/contribution of assets or shares. The legal and tax framework, however, differs significantly depending on how the transaction is structured.

The most common form of acquisition, especially for larger businesses, is the purchase of shares. Transfers of assets are generally preferred for the sale of smaller businesses. Mergers and contributions are more frequently used for internal reorganization purposes or in the case of strategic combinations of companies or businesses or joint ventures.

For large businesses, auction processes are often seen in France but are less common for small businesses. The bid process is conducted in accordance with a bid process letter prepared by the advisers of the seller and usually provide for the submission by the buyer of (i) a non-binding letter of interest at an early stage of the transaction process; such letter of interest usually provides for a description of the buyer (controlling parties and strategy), the acquisition structure (including details on the financing) and the indicative purchase price and (ii) a binding offer after completion of the due diligence exercise, including the final purchase price, adjustments mechanisms, conditions precedent, representations and warranties and specific indemnities set out in the definitive purchase agreement usually attached as an annex to the binding offer.

A merger consists of the automatic transfer of all the assets and liabilities, by operation of law, of the absorbed company to the absorbing company. The liabilities are automatically assumed, as the case may be, under the terms and conditions specified in the merger contract. For a transaction to be characterized as a merger, the shareholders of the entity which contributes the assets must in principle receive shares from the entity receiving the assets, but a limited cash payment is permitted in certain circumstances (in some cases, simplified regime may apply with no issuance of shares). As to EU companies, the Mobility Directive 2019/2121, which amended the Directive 2017/1132 regarding cross-border mergers and was implemented within French law with effect as from 1 July 2023 by the ordinance 2023-393, provides for specific rules and procedures governing mergers between French and other EU member state companies.

Companies setting up operations in France can choose from a range of corporate vehicles. The most common of those forms are: corporations (sociétés anonymes - SA); simplified corporations (sociétés par actions simplifiées - SAS); and limited liability companies (sociétés à responsabilitié limitée - SARL).

Limited liability companies can take the form of any of the most common types of private companies as listed above. The shareholders' liability for the debts and obligations of the company is limited to the amount of their capital contributions.

The SA is the most sophisticated type of French company and is most suitable for larger businesses, including companies listed on the stock exchange. The SA is required to have a minimum of two shareholders and a share capital of EUR 37,000. SAs are managed either by a CEO (being a French natural person) with a board of directors or an executive committee with a supervisory board. The functioning of SAs is heavily regulated by law and corporate governance rules are strictly defined in the French commercial code.

The simplified corporation SAS is suitable for holding companies and businesses requiring flexibility in organizing the corporate governance rules. The SAS is managed and represented by at least one president (French or foreign individual or corporate entity) and the by-laws can provide for general manager(s) to be empowered with the same powers as the president. A collective corporate governance body (similar to a board of directors) can also be created to control the management of the SAS. More generally, arrangements related to governance, rights attached to the shares and transfer of shares can be freely organized by the by-laws. No minimum share capital is required to incorporate a SAS, which must have at least one shareholder. An SAS cannot be listed on a stock exchange.

The SARL is a closed form of a company commonly used for small structures or 'family' businesses. No minimum share capital is required to incorporate an SARL and the share capital of an SARL is split up into partnership shares (parts sociales). An SARL must have at least one shareholder and cannot be listed on a stock exchange. Shares are freely transferable between the shareholders, but approval of a majority of the shareholders holding at least half of the shares is required in the event of a transfer of shares to a third party (unless the by-laws require a larger majority). An SARL is run by one or several managers, the number of which is set out in the by-laws. A manager may be a French or foreign national and must be a natural person, not an entity.

An SA must have at least two shareholders, without any other restriction on shareholder numbers.

An SAS must have at least one shareholder, without any other restriction on shareholder numbers.

An SARL must have at least one and no more than 100 shareholders.

In the context of a purchase of shares, the buyer steps into the shoes of the seller and acquires the company with all of its assets and liabilities. It is therefore critical that appropriate representations, warranties and indemnities are included in any sale agreement.

In the sale of a business as a going concern (fonds de commerce), certain assets and contracts are deemed part of the transferred business (which essentially involves clientele, other intangible assets, tangible assets, employment contracts, insurance contracts and commercial leases). Any other assets or contracts to be transferred (e.g., real estate and other contracts) must be specifically identified, or else will be deemed assets to remain with the seller. All liabilities will be deemed to remain with the seller except:

• Certain liabilities which are the subject of specific regulation (e.g., in relation to employees transferred with the business, social contributions or environment); and
• Liabilities as otherwise provided in the business transfer agreement.

The sale of a business as a going concern will be subject to transfer tax.

The sale of a business as a going concern must comply with mandatory formalities and must be formalized in a business transfer agreement (for tax registration purposes, the business transfer agreement or a short form version must be executed in the French language and with a purchase price in Euros). A notice of the transfer of the business must be published in a local legal gazette and in the BODACC (the national official bulletin for civil and commercial announcements) within 15 days from the date of the transfer. Creditors of the seller have 10 days from the notice (the opposition period) to object to the payment of the transfer price to the seller.

If the business is carried out or situated in a specific protected area (périmètre de sauvegarde du commerce et de l'artisanat de proximité) (i.e., a geographic area delimited by decision of the local municipality to protect local craftsmanship, commercial activities and diversity), the municipality has a right of preemption to acquire the business. Notice of the contemplated business transfer must be given in advance by the seller to the municipality. The municipality has two months from the date of receipt of the notification to exercise its preemption right to acquire the business. Failure to comply with this notification requirement may result in the transfer of the business being challenged by any interested third party and declared invalid by a court decision.

Finally, the seller of a business remains jointly liable with the buyer vis-à-vis third contracting parties unless it obtains the express written authorization of its co-contracting party releasing them from this joint and several liability following the transfer.