The business owner has found a potential buyer and is preparing to enter into negotiations to finalize the sale of the company. When everything goes smoothly, the negotiation begins with the signing of a confidentiality agreement, followed by the preparation of a presentation dossier, the drafting of a letter of intent, the signing of a memorandum of understanding, and finally the signing of the transfer deed. Capifrance provides all its advice to best prepare for this crucial step in the business sale process.
- The steps to be taken
1.1. The confidentiality agreement
1.2. The presentation dossier
1.3. The letter of intent - Signing the memorandum of understanding
- Signing the transfer deed
- Documents to be signed
- Formalities to be completed after the sale
5.1. Sale of a business
5.2. Transfer of shares
The steps to be taken before signing the memorandum of understanding in a company transfer
Various steps must be taken to put both parties in the best possible conditions before starting negotiations for the company transfer.
First step when selling your company: The confidentiality agreement
Before anything else, the seller must have the potential buyer sign a confidentiality agreement. This document binds the buyer to not disclose to third parties any information about the company they will have access to during the negotiation.
Second step in a company transfer: The presentation dossier
Once the confidentiality agreement is signed, the seller provides the buyer with a presentation dossier, also called an “information memorandum.” This document aims to give the buyer detailed information about the company. By detailed information, we mean:
- A description of the company, its activity, and its financial results
- The characteristics of its customer base
- A presentation of its production means
- An organizational chart
Third step in selling your company: The letter of intent
Once both parties have met several times to confirm their mutual interest in continuing the business sale process, the seller will request a letter of intent from the buyer. In this document, the buyer outlines their understanding of the company’s activities, an estimated sale price, and the method used to determine it, along with an action plan.
Company transfer: Signing the memorandum of understanding
Signing the memorandum of understanding commits both parties to the company transfer. At this stage, the only reservations about signing the transfer deed are those explicitly stated in the memorandum of understanding.
The memorandum of understanding should include the following elements:
- The identification of the parties
- The legal description of the company
- The sale price of the company, payment terms, and the price revision clause (optional)
- Suspensive conditions, such as conducting an audit or obtaining a loan
- Repayment of the current account of shareholders
- The asset and liability guarantee to define the guarantees provided by the seller to the buyer
- The transaction schedule
- The dispute resolution clause
Signing the transfer deed in a company sale
Once all the suspensive conditions in the memorandum of understanding have been met, the two parties proceed to sign the transfer deed of the business or company shares.
For the transfer deed to be valid, certain conditions must be met.
First, the seller must prepare a contradictory closing of accounts a few days before the transfer deed. This closing of accounts will serve as the basis for enforcing the asset and liability guarantee and any potential price adjustment as agreed in the memorandum of understanding.
In the case of a business sale, the transfer deed must include certain mandatory clauses, such as:
- The identification of the parties
- Information about the lease
- The price of tangible and intangible assets
- The turnover of the last three financial years
- The state of pledges and privileges attached to the business
Regarding the transfer of shares or stocks, a written document is only required for the transfer of shares. The transfer of stocks only requires a registration in the share transfer register.
What documents must be signed when selling my company?
Many documents must be signed along with the transfer deed, such as:
- The sales deed
- The sale of inventory (in the case of a business sale)
- The stock transfer orders
- The escrow agreement for the sale price (in the case of a business sale)
- The asset and liability guarantee
- Various declarations and documents (for example, the statutory approval of new shareholders, etc.).
Formalities to be completed after the sale of a company
Once the transfer deed is signed, numerous formalities still need to be completed, depending on whether it is a business sale or not.
Formalities to be completed for the sale of a business
The sale of a business must be published in the Bodacc (Official Bulletin of Civil and Commercial Announcements) within 15 days of signing the transfer deed.
The transfer deed must be registered with the tax authorities within a month of signing. The sale must also be published in a legal announcements journal within the same time frame.
If the transfer deed involves trademarks or patents, the information must be sent to the INPI (National Institute of Industrial Property).
Formalities to be completed in the case of a company share transfer
- The transfer of shares must comply with the following formalities:
- The majority of shareholders representing at least half of the shares must formally approve the transfer
- An extraordinary general meeting must be convened to amend the company’s articles after signing the transfer deed
- The transfer deed and the new articles must be registered with the tax authorities
- The transfer deed and amended articles must be filed with the commercial court registry.
