Private mergers and acquisitions in France: overview

Q&A guide to private acquisitions law in France.

The Q&A gives a high level overview of key issues including corporate entities and acquisition methods, preliminary agreements, main documents, warranties and indemnities, acquisition financing, signing and closing, tax, employees, pensions, competition and environmental issues.

To compare answers across multiple jurisdictions, visit the Private Acquisitions Country Q&A tool.

This Q&A is part of the global guide to private acquisitions law. For a full list of jurisdictional Q&As visit


Corporate entities and acquisition methods

1. What are the main corporate entities commonly involved in private acquisitions?

The main corporate entities commonly involved in private acquisitions are the:

  • Joint stock company (société anonyme). This is used in both private and public M&A transactions and is also the most common form used for public companies.

  • Simplified joint stock company (société par actions simplifiée). This is the most frequent form used in acquisitions, in particular private acquisitions. It offers greater flexibility than other company forms, for example, there is no minimum capital requirement, no statutory auditor under certain thresholds, it allows tailored governance, and so on. However, this form cannot be used for public companies.

  • Private limited liability company (société à responsabilité limitée). This is still the most common company form used for small and medium-sized firms, in particular for family businesses. A few constraints make this form sometimes less attractive for acquisition structures, as the transfer of shares to third parties requires the prior approval of the other shareholders, and the identity of the shareholders is disclosed in publicly available documents.

2. Are there any restrictions under corporate law on the transfer of shares in a private company? Are there any restrictions on acquisitions by foreign buyers?

Restrictions on the transfer of shares

Société anonyme. There are no restrictions, unless otherwise provided in the company's articles (for example prior approval by the board of directors or the shareholders' meeting, of any pre-emptive right granted to other shareholders).

Société par actions simplifiée. There are no restrictions, unless otherwise provided in the company's articles (such as those for a société anonyme, or a lock-up provision preventing shareholders from transferring their shares for a limited period of time not exceeding ten years).

Société à responsabilité limitée. There are no restrictions on transfers among shareholders. However, any transfer to a third party requires prior approval by a decision of the shareholders representing at least 50% of the share capital of the company.

Certain specific legal restrictions

Restrictions relating to the target company's business. When a company is partly controlled by the French state or is active in certain strategic sectors (such as energy, water, transport, telecoms or public health), the prior approval of the Ministry of Economy, or of the Ministry of Defence, or of the Prime Minister may be required.

Employees' information rights. Employees' or workers' councils of a company of which a transfer of a majority shareholding interest is contemplated must be consulted and allowed to make a purchase proposal.

Foreign ownership restrictions

There are no specific foreign ownership restrictions, although a declaration to the French tax administration is required in the following cases:

  • Setting up a French company.

  • Acquisition of all or part of the business of a French company.

  • Any investment granting more than one-third of the share capital or voting rights of a French company.

However, prior authorisation from the Ministry of Economy is required for foreign investments in French companies operating in certain sectors (such as public health, transport, telecoms, energy and water supply, public security or national defence), in the following cases:

  • Acquisition of control of a French company.

  • Acquisition of all or part of the business of a French company.

  • For non-EU/EEA investors only, any investment granting more than one-third of the share capital or voting rights of a French company.

3. What are the most common ways to acquire a private company? What are the main advantages and disadvantages of a share purchase (as opposed to an asset purchase)?

Share purchase is the most usual way to acquire a private company.

Share purchase advantages (and asset purchase disadvantages)

No formal filings are required other than:

  • Recording the transfer in the books of the target company.

  • For the purchaser, filing the transfer with the relevant tax authorities.

  • For shares of a société à responsabilité limitée, filing the transfer with the trade registry.

However, an asset purchase requires more burdensome filings (such as notarial formalities for real estate assets and administrative authorisations).

Prior approval by the seller's shareholders is generally required for the transfer of assets representing a significant portion of the seller's business.

In a share transfer, the buyer takes over all the business of the target. In an asset transfer, all transferred assets and contracts must be expressly listed in the agreement. Consents from the relevant third parties are required for the assignment of contracts and liabilities.

In a business transfer, certain mandatory statements must be included in the agreement (such as details of the owner of the business, turnover and net profits or losses for the past three years, details on commercial leases, and so on). Failure to do so may mean that the sale is cancelled.

A share transfer triggers lower transfer taxes at:

  • 0.1% for shares of a société anonyme or a société par actions simplifiée.

  • 3% for shares of a société à responsabilité limitée.

A business transfer triggers transfer taxes of 3% of the purchase price or the market value of the business (whichever higher) up to EUR200,000, and 5% for the portion exceeding EUR200,000.

Asset purchase advantages

In an asset purchase, the buyer does not take over liabilities (except for liabilities arising from employment relationships), unless otherwise agreed between the parties and subject to the approval of the creditors.

The buyer is also able to tailor the scope of the assets acquired.

4. Are sales of companies by auction common? Briefly outline the procedure and regulations that apply.

Sales of companies by auction are quite common in France. The main rule in an auction process is the equal treatment of all potential buyers. The first step is the execution by interested buyers of a non-disclosure agreement (see Question 5) and the circulation of a so-called "teaser".

The seller provides the potential buyers with an information memorandum that contains the management presentation and key information on the company (business and financials). The candidates send back an indicative offer including a valuation of the company, subject to confirmatory due diligence.

Selected candidates enter into a due diligence phase where they receive access to more in-depth information about the target, as well as site visits and management meetings. After this due diligence, candidates make their firm and definitive offer. The seller chooses the best offer, usually on the basis of a combination of factors, not only on financial terms.

The last step is the drafting and signing of the binding acquisition documentation and the satisfaction of the conditions precedents.


Preliminary agreements

5. What preliminary agreements are commonly made between the buyer and the seller before contract?

Confidentiality agreement

A confidentiality agreement is entered into before disclosing information to a potential buyer, and provides that the buyer will keep the information secret and will only use it for the purpose of evaluating the transaction. Both parties also undertake to keep the negotiations themselves secret.

Confidentiality agreements also generally provide for non-solicitation undertakings, relating to employees and customers.

Letter of intent (memorandum of understanding)

The letter of intent (LOI) or memorandum of understanding (MOU) outlines the terms and conditions pursuant to which a potential buyer intends to complete the acquisition.

While an MOU tends to be slightly larger and more explicit than a LOI, neither of them is usually legally binding, except for a limited number of provisions such as confidentiality, exclusivity and, if applicable, break-up fees.

The LOI/MOU usually covers the:

  • Parties.

  • Scope of acquisition.

  • Target valuation, and price or price formula (subject to confirmatory due diligence).

  • Conditions precedent, authorisations.

  • Involvement of key managers.

  • Acquisition documentation, and representations and warranties.

  • Indicative timetable.

  • Costs and expenses.

Exclusivity undertaking

Exclusivity undertakings are usually contained in the letter of intent, not in a separate agreement. Exclusivity is frequently requested by potential buyers, and negotiated by sellers. This is enforceable, but usually for a limited time period only, which can be extended depending on the length of negotiations.


Asset sales

6. Are any assets or liabilities automatically transferred in an asset sale that cannot be excluded from the purchase?

In a sale of business as a going concern (fonds de commerce), some contracts, such as employment contracts, commercial leases and certain insurance policies, are automatically transferred.

7. Do creditors have to be notified or their consent obtained to the transfer in an asset sale?

In a sale of business as a going concern (fonds de commerce), the transfer of contracts generally requires the co-contractor's prior consent (with some exceptions, see Question 6).

In addition, a business sale is subject to publication formalities to enable creditors to protect their rights. These include, in particular:

  • A right to oppose payment of the purchase price. The purchase price remains at risk for a period of up to 25 days (a ten-day period following publicity formalities to be completed within 15 days from the sale agreement). A buyer who has paid the purchase price before the expiry of the creditor's opposition period may be jointly liable to pay off creditors. In practice, the purchase price is generally put into an escrow account until the expiry of the creditors' objection period.

  • A right to make a higher bid. Creditors who have validly opposed the payment may require the going concern to be put to auction, where they are entitled to make a higher bid for the going concern.


Share sales

8. What common conditions precedent are typically included in a share sale agreement?

Common conditions precedent typically included in a share sale agreement include:

  • Pre-closing re-organisation of the target's business (such as a carve-out of part of the business in which the buyer is not interested, or change in the group structure or company forms).

  • Satisfaction of corporate restrictions on the transfer of the shares.

  • Third-party consents (such as co-contractors with respect to change of control provisions in material contracts).

  • Merger control clearance by European and/or French competition authorities (see Question 34).

  • Foreign investment authorisations (see Question 2).

  • Other specific regulatory approvals.

  • Financing of the acquisition of the shares, although sellers frequently resist such conditions.


Seller's title and liability

9. Are there any terms implied by law as to the seller's title to the shares in a share sale? Is any specific wording necessary and do buyers normally impose a higher standard than is implied by law?

French civil law provides for mandatory guarantees against dispossession and hidden defects, which automatically benefit the buyers. It also provides for a general obligation for the seller to deliver the shares to the buyer.

However, in practice, representations and warranties relating to the seller's title to the shares are included in the acquisition documentation.

10. Can a seller and its advisers be liable for pre-contractual misrepresentation, misleading statements or similar matters?

The concept of misrepresentation, as such, does not exist in French law. However, other concepts may entail liability for the seller if it has acted in bad faith, such as:

  • Wilful deceit (dol).

  • Intentional failure to disclose information (réticence dolosive).

  • Guarantee against hidden defects (difficult to implement with respect to shares).

More generally, French law recognises the duty to negotiate in good faith, for example by disclosing to a potential buyer important facts that a buyer would reasonably consider in making its decision. Therefore, a seller may be held liable if it has acted in bad faith during negotiations, including if it interrupts such negotiations suddenly without reasons.

Liability of the sellers' advisers is limited to situations where they have intentionally given the buyer wrong information.


Main documents

11. What are the main documents in an acquisition and who generally prepares the first draft?

An acquisition normally involves a letter of intent (see Question 5).

In a share deal there will also be a share purchase agreement. It generally covers the:

  • Scope of transfer.

  • Pricing and payment terms.

  • Conditions precedent.

  • Closing process.

  • Representations and warranties.

  • Other specific covenants or guarantees.

  • Indemnification terms.

  • Procedure.

The first draft is generally prepared by the buyer, except in auction sales, where it is generally prepared by the seller and submitted to the buyer to submit a mark-up together with its offer.

In an asset deal there will be a business transfer agreement. It must include certain mandatory provisions, such as:

  • Origin of title to the going concern.

  • Breakdown of the purchase price between:

    • intangible assets;

    • inventory; and

    • equipment.

  • Existing liens and encumbrances.

  • Turnover of operating result (profits/losses) of the going concern for the last three years.

  • Details of leaseholdings.

The first draft is generally prepared by the seller as it is most familiar with the business.


Acquisition agreements

12. What are the main substantive clauses in an acquisition agreement?

The main clauses in a share purchase agreement are:

  • Parties.

  • Recital, describing the context of the transaction.

  • Definitions and interpretation.

  • Transfer of shares.

  • Purchase price (price adjustment, earn-out or locked box mechanism).

  • Payment mechanisms and transfer of ownership.

  • Conditions precedent (see Question 8).

  • Closing process and deliverables.

  • Seller's pre-closing covenants (including management of business between signing and closing).

  • Seller's post-closing covenants (such as non-compete or non-solicitation covenants).

  • Representations and warranties.

  • Buyer's right to indemnification (including limitations, exclusions, disclosures or third party claims).

  • Miscellaneous clauses (including co-operation, termination, confidentiality, announcements, assignment, amendment, costs and notices).

  • Governing law and jurisdiction.

13. Can a share purchase agreement provide for a foreign governing law? If so, are there any provisions of national law that would still automatically apply?

A share purchase agreement with one or both parties being French, or relating to a French target, may provide for a foreign governing law. However, this choice is fairly rare.

Certain mandatory provisions under French law would still apply to the transfer, in particular, legal warranties applying to the shares, formalities relating to the transfer of the shares, prior authorisations, or employees' rights.


Warranties and indemnities

14. Are seller warranties/indemnities typically included in acquisition agreements and what main areas do they cover?

Representations and warranties are usually included in the share purchase agreement. However, they may be contained in a separate agreement. Their scope depends on the negotiations between the seller and the buyer, but they usually cover the following main areas:

  • Seller's capacity.

  • Existence, ownership of shares.

  • Issued share capital.

  • Authorisations.

  • Financial statements.

  • Assets.

  • Real property.

  • Contracts.

  • Employment and social security matters.

  • Tax matters.

  • Intellectual property.

  • Insurance.

  • Environment.

  • Regulatory compliance.

  • Disputes.

  • Administration since the last financial statements or other reference date.

By contrast, asset sale agreements contain usually fewer representation and warranties as the seller gives warranties protecting the buyer against any misrepresentation in the mandatory statements, and liabilities are not transferred with the business.

15. What are the main limitations on warranties?

Main limitations on warranties

These include:

  • Materiality and seller's knowledge qualifiers.

  • Cap on the total indemnity (generally between 10% and 50% of the purchase price).

  • De minimis aggregate claim threshold.

  • Exclusion of small claims.

  • Time limits for bringing claims (see Question 16).

  • No double recovery under different warranties applicable to the same event.

  • Limitations relating to tax effects or insurance coverage.

  • Exclusions of any change in law or accounting principles.

  • Claim notification procedure.

  • Conduct of third party claims procedure.

  • Loss mitigation obligation (this must be expressly provided, as it is otherwise not recognised in French law).


Exceptions to the representations and warranties may be provided in disclosure schedules to the share purchase agreement. The seller may attempt to exclude the whole data room from its warranties, but the buyer generally asks for specific disclosures.

Specific warranties

Acquisition documents may provide for specific warranties with respect to matters identified by the buyer during the due diligence process, which are subject to no limitation or exclusion.

16. What are the remedies for breach of a warranty? What are the time limits for bringing claims under warranties?


The following remedies can be claimed for breach of warranties:

  • Damages.

  • Reduction in the purchase price (most warranties are structured as a purchase price reduction for tax purposes).

  • Cancellation of the agreement in case of breach of legal warranties (wilful deceit or intentional failure to disclose information).

Time limits for bringing claims

Time limits for bringing claims are usually between one and three years, except for tax and employment matters, where the time limit is based on the applicable statute of limitation (generally between three and ten years).


Consideration and acquisition financing

17. What forms of consideration are commonly offered in a share sale?

Forms of consideration

The common forms of consideration are:

  • Cash.

  • Existing or newly-issued shares of the buyer (if the acquisition is structured as a share contribution).

  • A mix of cash and shares.

Factors in choice of consideration

The choice between these three options is generally driven either by tax considerations or financing considerations.

18. If a buyer listed in your jurisdiction raises cash to fund an acquisition by an issue of shares, how is the issue typically structured? What consents and regulatory approvals are likely to be required?


An issue of shares is structured either as a rights offering to the public or as a private placement (if shares are offered to qualified investors or fewer than 150 investors, or if the aggregate principal amount per investor is at least EUR100,000). Each structure follows a different legal framework.

Consents and approvals

Shareholders' consent is required to authorise the board of directors to proceed with a share capital increase. However, if financial authorisations are in place, the board of directors may increase the share capital within the limits authorised without a further shareholders' resolution.


If the offering qualifies as a public offering, the issuer must prepare a prospectus and have it approved by the Financial Markets Authority (Autorité des Marchés Financiers). Such a prospectus must contain all information enabling investors to assess the issuer's assets and liabilities, financial position, profit and losses, and prospects.

If the offering is structured as a private placement, no prospectus is required.

19. Can a company give financial assistance to a potential buyer of shares in that company?


French law prohibits companies (sociétés anonymes, sociétés par actions simplifiées, and sociétés en commandite par actions) from advancing funds, granting loans, granting a guarantee or giving security over their assets for the subscription or purchase of their own shares by a third party.

No "whitewash procedure" is available and therefore shareholders cannot authorise transactions that are void for illicit financial assistance.


This prohibition does not apply to normal transactions made by financial institutions, or to transactions enabling employees to purchase shares in their company.


Signing and closing

20. What documents are commonly produced and executed at signing and closing meetings in a private company share sale?


The documents commonly produced and executed at signing include:

  • Share/asset purchase agreement.

  • Representation and warranties agreement, if not included in the purchase agreement.

  • Disclosure schedules (generally attached to the purchase agreement or the separate warranty agreement, not in a separate disclosure letter).


The documents commonly produced and executed at closing include:

  • Resignation letters of directors.

  • Board minutes and shareholder resolutions of the target (such as approving the transaction, amending the articles, or appointing new directors) and proof that the target has repaid all amounts owed to the seller.

  • If applicable, any consents from third parties and authorities, and/or merger control clearance.

  • If applicable, documents related to the financing of the transaction.

  • Documents relating to the target company's existence and solvency (for example, certification of incorporation, and non-insolvency certificate).

  • Certification of absence of any pledge, security, guarantee on shares or business, or evidence of release of such encumbrances.

  • Letter reiterating representations and warranties, with updated disclosure schedules.

  • Any guarantees on payment obligations pursuant to representations and warranties or post-closing covenants (for example bank guarantee or escrow agreement).

  • Share transfer form or agreement, depending on the corporate form of the target company.

  • Updated target's share transfer register and shareholders accounts.

  • Tax form for the registration of the share transfer with tax authorities.

21. Do different types of document have different legal formalities? What are the formalities for the execution of documents by companies incorporated in your jurisdiction?

Simple contracts (actes sous seing privé) are executed by the parties without any specific formalities. Acquisitions are commonly executed as simple contracts.

Notarial deeds (acte authentique) are executed before a notary. Their validity and contents can only be challenged on the grounds of fraud. Only certain specific types of transactions require a notarial deed, for example, asset sales including the transfer of land or mortgages.

Documents signed by companies require the signature of their legal representative or any person duly authorised for such purpose.

22. What are the formalities for the execution of documents by foreign companies?

The formalities for the execution of documents by a foreign company are not assessed under French law, but in accordance with the laws of incorporation of the foreign company.

23. Are digital signatures binding and enforceable as evidence of execution?

Digital signatures can be binding and enforceable under French law, provided that the electronic signature process used enables identification of the signatory.

24. What formalities are required to transfer title to shares in a private limited company?

For a private limited liability company (société à responsabilité limitée), the transfer of shares must be evidenced in a written agreement, notified to or acknowledged by the company, and filed with the trade registry together with updated articles reflecting the transfer.

For a joint stock company (société anonyme) or a simplified joint stock company (société par actions simplifiée), the transfer of shares can be simply made by way of a share transfer form and registration of the transfer in the company's share transfer registry and shareholders accounts.



25. What transfer taxes are payable on a share sale and an asset sale? What are the applicable rates?

Share sale

A share sale must be registered with the French tax authority.

Transfer taxes amount to:

  • 0.1% of the purchase price (or of fair market value, if higher than purchase price) for joint stock companies (société anonyme) and simplified joint stock companies (société par actions simplifiée).

  • 3% of the purchase price (or of fair market value if higher than purchase price) for private limited liability companies (société à responsabilité limitée) after application of a tax allowance equal to EUR23,000 multiplied by the number of transferred shares and divided by the total number of shares of the company.

  • 5% of the purchase price for transfer of shares in companies with a majority of real estate assets.


Asset sale

Asset deals, if the assets qualify all together as a going concern (fonds de commerce), are subject to transfer taxes, as a percentage of the purchase price, of:

  • 0% up to EUR23,000.

  • 3% between EUR23,000 and EUR200,000.

  • 5% for the portion exceeding EUR200,000.

  • 5.8% plus additional duties for real estate assets.

Both share deals and asset deals should be neutral from a VAT standpoint, provided the assets sold form all together a going concern (VAT implications may arise for sales of isolated assets or real estate assets).

26. What are the main transfer tax exemptions and reliefs in a share sale and an asset sale? Are there any common ways used to mitigate tax liability?

Share sale

Share deals relating to listed companies are not subject to registration duties if they are not acknowledged in a written deed in France or abroad.

Share deals relating to foreign legal entities holding a French subsidiary are exempted from transfer taxes in France, unless either:

  • Acknowledged in a written deed executed in France.

  • The French subsidiary qualifies as a French real estate company.

Transfer taxes do not apply to:

  • Intragroup share transfers (except for real estate companies), if the involved entities either:

    • qualify as related entities under the French Commercial Code; or

    • are members of a tax consolidated group.

  • Acquisition of shares falling within the scope of the French favourable tax regime applicable to mergers.

  • Share buy-backs dedicated to employee savings plans.

  • Acquisition of shares in companies facing insolvency proceedings and placed under a safeguard or rehabilitation proceeding.


Asset sale

Transfers of tangible assets are not subject to transfer taxes unless the assets are transferred along with the business and re-qualified as a business transfer. However, if the transfer is acknowledged in a notarised deed, a fixed fee of EUR125 applies.

Intellectual property rights are subject to a special regime that reduces their taxation in an asset sale. The only restriction is that they must be operated by the seller.

The location of the commercial establishment can also reduce the taxation, for example in priority urban zones (zones urbaines prioritaires).

Transfer of new buildings occurring within five years of the completion date, and of building land (terrains à bâtir), are subject to VAT at a 20% rate and to transfer taxes at a 0.71498% rate (excluding notaries' fees).

However, if the transfer is outside of the scope of VAT, it is subject to transfer taxes at a rate between 5.09% and 5.81%, depending on the region (département) where the real estate assets are located (excluding notaries' fees).

27. What corporate taxes are payable on a share sale and an asset sale? What are the applicable rates?

Capital gains are subject to corporate income tax (CIT) at the standard rate of 33.33%. However, companies with a turnover exceeding EUR7.63 million are subject to a social surcharge of 3.3%, levied on the part of the CIT exceeding EUR763,000, resulting in an effective rate of 34.43%.

In addition, companies with a turnover exceeding EUR250 million must pay an exceptional contribution equal to 10.7% of their CIT liability in the relevant fiscal year, resulting in an effective rate of 38%.

Capital gains arising from the disposal of shares may benefit from a participation exemption regime if the capital gains arise from the sale of controlling interests (more than 5%) held for more than two years. Under this regime, the capital gain arising from such operations is fully tax exempt, except for 12% of the gross capital gain having to be added-back to the taxable result.

28. What are the main corporate tax exemptions and reliefs in a share sale and an asset sale? Are there any common ways used to mitigate tax liability?

Capital gains arising from the share sale of non-real estate companies may benefit from a participation exemption regime if the capital gains arise from the sale of controlling interests (more than 5%) held for more than two years. Under this regime, the capital gain arising from the sale is then fully tax exempt, except for 12% of the gross capital gain having to be added-back to the taxable result.

29. Are other taxes potentially payable on a share sale and an asset sale?

Asset deals related to tangible and intangible fixed assets are subject to VAT at the standard 20% rate, unless the transfer is included within an ongoing business transfer that generally benefits from a VAT exemption.

30. Are companies in the same group able to surrender losses to each other for tax purposes? For example, can interest expenses incurred by a bid vehicle incorporated in your country be set off against profits of the target before tax?

Share sale

From a corporate income tax standpoint, share deals do not affect the ability of the target company to carry forward net operating losses (NOLs), which remain available in normal circumstances.

The acquisition of the target company's shares does not affect the amount of the available losses carried forward by the target company. As a general principle, losses carried forward only become unavailable if the target company changes its activity.

The addition of a business activity can result in a change in activity when, during the fiscal year during which it occurs or the following fiscal year in comparison with the fiscal year preceding the change, there is an increase of more than 50% of either:

  • The company's turnover.

  • The average number of staff and the gross amount of fixed assets.

A surrender or transfer, even partial, of a business activity can also result iin a change in activity if there is a decrease of more than 50% of the previous requirements.

However, if a target company that owns losses is merged into another company, the losses can be transferred to the merging company only if the French tax authorities give their consent. The activity of the merged company must be maintained for at least three years. The transfer of the tax losses is not allowed if the merged company is a holding company. Attention must also be paid to the consequences of the merger on the right of the merging entity to carry forward its own stand-alone tax losses past the merger.

Specific rules apply in a tax-consolidated group to allow, subject to specific conditions, the group-level deduction of taxable income interest expenses that would be deemed to be non-tax-deductible at the level of the group member companies because of these thin capitalisation rules. The implementation of an intra-group cash-pooling agreement managed by a group member company may limit the impact of the thin capitalisation rules. Thin capitalisation rules are not fully applicable to cash-pooling companies.

In addition, under the Charasse amendment, anti-debt-push-down regulations provide for a partial recapture of the financial expenses borne by a tax-consolidated group in case of transactions deemed to qualify as "self-purchases".

The Charasse amendment applies when both:

  • The shares of a company have been purchased by another company from parties who also directly or indirectly control (de jure or de facto) the acquiring company at the time of the acquisition.

  • Both the acquired company and the acquiring company become members of the same tax-consolidated group after the transaction (including by way of merger).

Under this rule, interest expenses are non-deductible within the tax-consolidated group up to an amount equal to the financial expenses multiplied by the proportion of the average group debt represented by the acquisition price less the contribution in cash.

This reinstatement applies to the acquisition accounting period and the eight following years.

The Charasse amendment no longer applies to cases involving a change in control of the acquiring company. In addition, the Charasse amendment is no longer triggered when a subsidiary held by a company directly acquired by the investor is immediately sold to a French holding company that elects to set up a tax-consolidated group.

Mergers, spin-offs or split-offs may benefit from tax-neutrality and are generally made within a group at book value.

The deductibility of financial expenses linked to the acquisition of shares qualifying on as controlling interest is limited. Financial expenses are only deductible if the purchaser can demonstrate that it (or a company incorporated in France and belonging to the same economic group) actually makes the decisions relating to the shares and that it exercises a control or influence over the acquired company.

If the company fails to provide such evidence, a fraction of the expenses is required to be added-back to its taxable income for the acquisition accounting period and the eight following years. However, the limitation does not apply when:

  • The value of shares held by a company is less than EUR1 million.

  • The acquisition has not been financed by a loan.

  • The debt ratio of its group is higher or equal to the purchaser own debt ratio.


Asset sale

In assets deals, only assets are transferred. Any NOLs remain with the target company.

In addition, share deals (structured as straight sales) do not in principle allow any step-up in basis value and do not affect the target company's amortisation plan of its assets (in terms of duration and depreciation value). However, asset deals mechanically imply a step-up in the assets' amortisation basis, which then corresponds to the purchase price paid allocated to each asset.

Nevertheless, in both cases, no goodwill can be amortised. In an acquisition mainly from related parties at a price higher than the fair market value, the further amortisation can be challenged by the tax authorities, whereas the amortisation basis would not be.



31. Are there obligations to inform or consult employees or their representatives or obtain employee consent to a share sale or asset sale?

Employee's information obligations are the same for both asset and share sales.

General information and consultation obligation

Information and consultation obligations for employees depend on the number of full time equivalent employees (FTE employees):

  • In companies with fewer than 50 FTE employees, no information and consultation process is required.

  • In companies with at least 50 FTE employees, or with fewer than 50 FTE employees but having voluntarily put in place a works council, the works council must be informed and consulted before any asset or share sale.

If no works council has been established due to lack of candidates but staff delegates are in place, these must be informed and consulted instead.

The information and consultation process must be completed before any decision to proceed is taken, and therefore, before any binding agreement is signed.

The works council must be convened with an agenda determined at least three business days before the meeting, with sufficient details on the contemplated transaction and its legal, social, economic and financial implications.

The timing of the information and consultation process depends on the bodies involved:

  • The information and consultation process may take between 15 days and one month if the works council has been sufficiently informed on the process to give an enlightened opinion on the asset and/or share sale project.

  • The information and consultation process may take up to two months if the works council appoints an expert at its own cost to advise it on the process.

  • The information and consultation process may take up to three months if the health and safety committee is also consulted on the project.

  • The information and consultation process may take up to four months, if a health and safety co-ordination body is set up (because more than one health and safety committee is to be consulted).

The works council gives its opinions on the proposed transaction. However, the transaction can be completed irrespective of the positive or negative opinion of the works council.

Any breach of this information and consultation obligation would constitute a criminal offence of obstructing the proper functioning of the works council, sanctioned by a maximum fine of EUR7,500 to be paid by the legal representative, and EUR37,500 by the company.

Specific information of the employees for medium sized companies

In a sale of a majority stake or assets constituting a business as a going concern, the seller or the employer, as the case may be, must inform the employees and, when relevant, the works council of the contemplated sale. The employees must be informed that they are able to make an offer to repurchase the shares or the business, as follows:

  • In companies with fewer than 50 employees and no works council, all employees must be informed that they can make an offer to repurchase the shares or business within a two-month period. The transaction cannot complete before the expiry of this two-month period, unless all employees confirm that they do not intend to make any offer.

  • In companies with fewer than 250 employees, a turnover below EUR50 million and/or a balance below EUR43 million which do not have employees' representatives, all employees must be informed that they can make an offer to repurchase the shares or business within a two-month period. The transaction cannot complete before the expiry of this two-month period, unless all employees confirm that they do not intend to make any offer.

  • In companies with fewer than 250 employees, a turnover below EUR50 million and/or a balance below EUR43 million which have a works council, all employees must be informed that they can make an offer to repurchase the shares or business no later than when the works council is provided with the required documentation for the information and consultation process. The transaction cannot complete before the end of the information and consultation process.

Any breach of this prior information obligation is sanctioned by a fine of up to 2% of the purchase price.

32. What protection do employees have against dismissal in the context of a share or asset sale? Are employees automatically transferred to the buyer in a business sale?

Asset sale

The French Labour Code provides that all employment agreements in force between and employer and employees continue if there is a change in the legal situation of the employer through, in particular:

  • Inheritance.

  • Transfer.

  • Merger.

  • Transformation of the business.

  • Incorporation of a company.

An asset sale resulting in the transfer of a business representing an autonomous economic entity entails the automatic transfer by operation of law of all employment agreements to the buyer, with all advantages agreed with the seller before the sale.

Dismissals immediately before the automatic transfer of the employment agreements, especially when based on economic grounds, are generally considered as fraudulent by French courts, and can trigger liability for both seller and buyer. The buyer may also be asked to reinstate employees made redundant on economic grounds before the business transfer.

Additional formalities must be observed for employees' representatives attached to a business which is sold, as they are considered "protected employees":

  • For certain protected employees (works council members, staff delegates or health and safety committee members), the works council must be informed and consulted.

  • For all protected employees (labour court judge, staff delegates, works council members, health and safety committee members), prior authorisation is required from the labour inspectorate.

Share sale

Unlike a business sale, the purchase of minority or majority stakes in a company does not entail a transfer of an economic entity and a change of employer. Therefore, it does not entail an automatic transfer of employment agreements, which can be either terminated or continued by the buyer.



33. Do employees commonly participate in private pension schemes established by their employer? If an employee is transferred as part of a business acquisition, is the transferee obliged to honour existing pension rights or provide equivalent rights?

Employees do not commonly participate in private pension schemes established by their employer, as French law already provides for mandatory complementary pension schemes for the employees and social security contributions are paid to certain bodies (AGIRC and ARRCO).

Private pension schemes are generally additional regimes provided in general for a limited category of staff implemented by a collective bargaining agreement, but can also be implemented by a unilateral decision of the employer.

Asset sale with business transfer

In this framework, the agreement implementing a private pension scheme is automatically challenged. If the private pension scheme is implemented by a unilateral decision, it must be voluntarily challenged by the transferee. If it has not been voluntarily challenged by the transferee, it remains applicable and must be honoured.

Once challenged, the private pension scheme implemented by agreement remains applicable for 15 months. During this time, the transferee must try to reach a new agreement on a private pension scheme.

If no substitution agreement is reached within 15 months, the additional pension regime is no longer applicable, but the transferee must fulfil with the:

  • Acquired pension rights by the employees who retired and liquidate their private pension.

  • Potential rights acquired by contributions paid up to the date of transfer.

Share sale

In the framework of a share sale, any agreement or unilateral decision of the employer that has implemented an additional pension regime is challenged. Therefore, any additional pension regime voluntarily implemented by the seller remains applicable and the buyer must comply with it. If the buyer does not want to comply with such a regime after the sale, it should voluntarily challenge the agreements or unilateral decision, and renegotiate it within:

  • 15 months for a voluntarily challenged agreement.

  • A reasonable number of months in case of a voluntarily challenged unilateral decision.

If no substitution agreement is reached within 15 months or the reasonable renegotiation period, the additional pension regime is no longer applicable but the transferee must comply with:

  • Acquired pension rights by the employees who retired and liquidate their private pension.

  • Potential rights acquired by contributions paid up to the date of transfer.


Competition/anti-trust issues

34. Outline the regulatory competition law framework that can apply to private acquisitions.

The competition law framework applying to private acquisitions is provided by the provisions of the French Commercial Code and the EC Merger Control Regulation (ECMR).

French anti-trust law requires a prior notification to and approval by the French competition authority (autorité de la concurrence) when there is a concentration that meets the relevant French turnover thresholds and the concentration does not fall within the scope of the ECMR.

Triggering events/thresholds

The term "concentration" as defined in the French Commercial Code corresponds to the definition in the ECMR. It is deemed to arise where a change of control on a lasting basis results from either:

  • The merger of two or more previously independent undertakings or parts of undertakings.

  • The acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of shares or assets, by contract or by any other means, of direct or indirect control of the whole or part of one or more undertakings.

A concentration must also meet the following two thresholds:

  • The combined worldwide turnover of all of the undertakings involved in the transaction exceeds EUR150 million.

  • At least two undertakings involved in the transaction have turnovers in France exceeding EUR50 million.

These thresholds may be reduced in certain sectors (retail businesses) or locations (French overseas territories).

A transaction that has an EU dimension falls under the exclusive jurisdiction of the European Commission and therefore need not be notified to the French competition authority.

Notification and regulatory authorities

In an acquisition, the acquirer must notify the transaction to the French competition authority before completion.

The transaction can be notified as soon as there is a sufficiently advanced intent to enter into an agreement between the parties, such as signing of a letter of intent or a public announcement.

Substantive test

The competition authority examines whether the concentration is likely to have a negative effect on competition, in particular by creating or strengthening a dominant position, as a result of which competition would be significantly lessened in the relevant market.

The authority also assesses whether, on the other hand, the concentration makes a sufficient contribution to economic progress to offset the adverse impacts on competition.



35. Who is liable for clean-up of contaminated land? In what circumstances can a buyer inherit and a seller retain liability in an asset sale and a share sale?

The French Environment Code provides for an order of priority for clean-up liability as follows:

  • If the contamination relates to a "classified facility" for the protection of the environment (ICPE) or a basic nuclear facility, the last operator of the facility or any person having engaged in the rehabilitation of the ICPE is liable.

  • If the contamination is due to another cause, the person having produced the waste which contributed to the contamination is liable.

  • If no person is primarily responsible, the owner of the contaminated land is liable.


Asset sale

The buyer inherits pre-acquisition environmental liabilities if he takes over a facility as operator.

If the buyer's activity differs from the seller's, the latter remains liable for pre-acquisition environmental liability.


Share sale

In a share sale, no change of operator occurs. Therefore, the target company retains its environmental liability.

In both share and asset deals, the acquisition agreement generally provides for specific representations and warranties in respect of land contamination.


Online resources

Description. Légifrance is the official website of the French government providing legislative and regulatory texts and French courts' decisions. It also gives access to standards issued by European institutions, treaties and international agreements which bind France. The website proposes different translations (Arabic, German, English, Spanish, Italian and Chinese) which are unofficial translations for information purposes only.

Contributor profiles

Christoph Maurer, Partner, Head of Office

Pinsent Masons France LLP

T +33 1 53 53 09 65
F +33 1 53 53 02 81

Professional qualifications. Avocat à la Cour, France; Solicitor, England and Wales; Rechtsanwalt, Germany.

Areas of practice. Corporate, M&A, private equity, venture capital, joint ventures and anti-trust.

Languages. German, English, French.

Philippe Malikian, Counsel

Pinsent Masons France LLP

T +33 1 53 53 02 29
F +33 1 53 53 02 81

Professional qualifications. Avocat à la Cour, France.

Areas of practice Corporate, public and private M&A, venture capital, restructuring.

Languages. French, English.

Julien Espeillac, Senior Associate

Pinsent Masons France LLP

T +33 1 53 53 09 73
F +33 1 53 53 02 81

Professional qualifications. Avocat à la Cour, France.

Areas of practice. Corporate, M&A, private equity, venture capital.

Languages. French, English.

Contribution from other teams:

Tax aspects: Franck Lagorce, partner, and Steven Guthknecht, senior associate

Employment aspects: Jean-François Rage, partner, and Jean-Sébastien Lipski, associate

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