What are the legal provisions relating to the transfer of goodwill?
The transfer of goodwill is a legal formality involving a certain number of interlocutors. Indeed, the process involves various stakeholders and legal advisors. While this is not a decision to be taken lightly, it is an option that should only be considered as a last resort.
The transfer of a business involves the evaluation, planning, execution and monitoring of the transfer of the goodwill. The transfer of the goodwill is a delicate process, and it is therefore important to understand the legal provisions relating thereto. In this article, we specifically address the legal provisions relating to the transfer of goodwill.
What is a sale of goodwill?
Consistent case law stipulates that goodwill is an abstract concept that specifies both material elements (goods, equipment) and immaterial elements (lease rights, licenses, trade names, etc.).
According to the law, there are two conditions that establish the legitimacy of a business. The business must first have a client portfolio. Second, it must be commercial in nature.
In short, when a business manager decides to sell his business, he must necessarily proceed with a transfer of business assets. However, it is important to know what to do before selling business. This process involves various formalities and many steps.
Prior declarations and right of first refusal
Article 58 of Law No. 2005-882 of August 2, 2005 provides for a right of first refusal in favor of SMEs. The municipality can thus exercise its right of first refusal to take over the business within two months of the announcement of the sale.
The prior declaration of transfer of business assets is a mandatory procedure involving the completion of the Cerfa form n° 13644*02. The transferor will be asked to provide certain important information in this form, such as: the identity of the parties, the conditions of the proposed transfer, etc.
The conditions precedent to the transfer operation
The transfer of goodwill must be subject to a certain number of conditions to be legally valid. First, it must comply with the conditions of validity provided for by the Civil Code, in its article 1128.
According to the provisions of this article, the validity of the transfer of goodwill depends on the consent of the parties and their legal capacity. In addition, the contents of the transfer must be legal and definitive.
Secondly, the parties will have to agree on the elements included or excluded from the transferred goodwill. The transfer of goodwill, in terms of rights, except restrictive clauses, implies the transfer of any contract in progress and the rights to the lease.
The need for a legal notice publication
Removed from the legal obligations relating to the sale of a business in 2015, the issuance of a legal announcement has been in force again since 2016. However, the PACTE Law No. 2019-486 ratified in May 2019 has significantly modernized the publication of legal notices. The legal notice journal becomes the “medium authorized to receive legal notices” (SHAL).
This announcement must contain mandatory information as required by the Commercial Code. The legal announcement must contain data on the nature of the deed, information relating to the transferee and the transferor, the cost of the transfer and the date of entry into force.
