Resumption of company securities

WHAT MIGHT BE THE MOTIVATIONS FOR TAKING OVER A BUSINESS?

A smaller financial contribution to take control

It is not necessary to acquire 100% of the capital to take control of a business to be sold. For a limited liability company, it is sufficient to have more than 50% of the shares to decide on management policy and the allocation of profits. If a person holds 75% of the shares, he or she has control.
Depending on the financial capacity of the person, it is possible to increase the shareholding over time.

THE TAKEOVER OF SHARES MEANS A “BLOCK SALE”.

In contrast to the purchase of a business, the buyer of a business to be sold cannot choose what he takes over. The owner of a business to be sold then has rights in proportion to his share in the company’s capital to receive profits or to meet past or present debts.

AT WHAT PRICE?

The value of the business to be sold is more difficult to determine than a fund because it is based on the evaluation of the assets and liabilities of the business.

It is customary to call on a consulting firm to carry out this valuation. The consultancy firm will be able to calculate the value of the business to be sold according to different methods adapted to the business in question.

ARE THERE ANY LEGAL GUARANTEES?

The legal guarantees are weak. Indeed, the takeover of shares does not give any particular rights over the business owned by the company. If there are no specific commitments, the buyer can hardly take action against the seller of a business to be transferred.
The purchaser can take action against the seller if he proves that :

• The company is deprived of its assets
• The seller has acted in such a way as to vitiate the buyer’s consent

THE GUARANTEE OF LIABILITIES HAS BECOME MANDATORY

As the legal guarantees are weak, it is necessary to provide for a contractual guarantee: the liabilities guarantee.

This guarantee protects against any liabilities of the business to be sold that are not recognised in the balance sheet and that arose prior to the sale. It is necessary to state explicitly and precisely the events whose cause is prior to the transfer of the business which allow this guarantee to be triggered. These events may be a tax or social security adjustment or liability claims, for example.

There are two types of clauses: the pure liabilities guarantee and the price revision clause.

The pure liability guarantee
The seller of the business undertakes to pay off creditors revealed after the transfer or to reimburse debts revealed after the transfer so that the company can pay off its liabilities.

The price revision clause
This clause is generally used when the payment of the price is staggered over time. The seller of the company undertakes to reimburse the buyer directly for the difference in value of the shares linked to the liabilities disclosed, which amounts to a reduction in the price.

FORMALITIES FOR THE TRANSFER OF A COMPANY: STEP BY STEP

The transfer of shares is recorded in a single document. However, it is necessary to draw up several documents before signing. During the negotiation period, both parties have an obligation of loyalty and if one of the parties improperly breaks off the negotiations, it is liable.

During the audit period, it is advisable to sign a memorandum of understanding which sets out the terms of the purchase and the guarantees (explained above). If the shares are paid for with joint funds, the spouse must give his or her agreement and mention it in the deed.
If not, the spouse can request the nullity of the deed within 2 years from the knowledge of the deed.
Another procedure is necessary depending on the type of company, the approval of the other partners must be obtained, in principle a majority of the partners representing half of the shares.

The transfer is recorded in a private deed or a notarial deed.

Publicity of the transfer
In order for the deed to be enforceable, it is necessary to carry out certain legal publicity. Firstly, the deed must be signed by the company in the presence of a bailiff. Secondly, two copies of the deed must be filed with the clerk of the commercial court and the Trade and Companies Register.

Registration fees
Registration must be carried out within one month of the transaction.

Family transfer
In the case of a family transfer, the owner contributes the business to a new company created for his needs.
The shares of the business to be transferred will be more easily distributed at the time of the succession.
If one of the heirs intends to take over the shares of the company, he will have to buy back some or all of the shares of the heirs.