Contracts, Licences and Permits When Buying a Business in France: What Transfers and What Does Not

What transfers with a French business - and what does not

A French business (fonds de commerce) runs on contracts: suppliers, distribution, equipment leasing, insurance, maintenance, the lease itself. Buyers routinely assume those contracts come with the business. Under French law, they do not. The sale of the fonds does not carry the seller's contracts to the buyer - each one transfers only if the other contracting party agrees, the buyer accepts, and the transfer is put in writing. A short list of contracts is the exception and passes by force of law: employment contracts, damage insurance, publishing contracts, and, by a different route, the commercial lease.

Licences and permits follow a different logic again: administrative authorisations tied to the activity are part of the fonds and pass with it, those granted for the holder's personal qualities do not, and a terrace on the public pavement never does.

This guide maps the whole field: the default rule and its case law, the statutory exceptions one by one, why debts and claims stay behind, which licences transfer and which must be re-applied for, and how to draft the deed so nothing the business depends on is left in the seller's hands.

The default rule: contracts do not transfer with the business

Save the statutory exceptions covered below, the sale of a fonds de commerce does not of itself carry the contracts the seller concluded for its operation (Cass. com. 28 June 2017 n° 15-17.394). For each contract, three things are needed:

• the counterparty's agreement to the transfer (C. civ. Art. 1216, al. 1) - a supplier, lessor of equipment or service provider cannot be handed a new debtor without saying yes;
• the buyer's acceptance of the contract - the buyer cannot be saddled with a contract it never agreed to take over (Cass. com. 24 June 1997; Cass. com. 4 May 2010 n° 09-13.118);
• a written cession - the transfer must be recorded in writing, on pain of nullity (C. civ. Art. 1216, al. 3).

Where the counterparty consented to the transfer in advance, a transferability clause in the original contract, the cession still takes effect against it only once notified to it, or once it has taken note of it (C. civ. Art. 1216, al. 2). Advance consent removes the need to ask; it does not remove the need to notify.

What the courts do with silence. The case law punishes assumption on every side of the triangle:

• A seller had leased an alarm system and left it installed on departure; the inventory of assets sold, initialled by the buyer, mentioned it. That was not enough: the buyer could not be ordered to pay the rentals without a finding that buyer and equipment owner had in fact agreed to continue the contract between them (Cass. com. 24 June 1997).
• A drinks wholesaler had promised a supplier minimum purchases over eight years against a subsidy, then sold the fonds. The buyer could not invoke the original contract, it did not prove it had been assigned to it, so it could neither demand the contract's termination at the operator's fault nor claim back the subsidy (the sale of a fonds does not automatically assign the contracts concluded for it, absent an express provision in the deed). After seller and buyer jointly informed the counterparty of the sale, the parties' dealings were governed by a fresh verbal contract - an open-ended one that did not carry over the penalty clauses of the original (Cass. com. 3 October 2006).
• An exclusive distribution agreement was held not proven to have passed where the buyer's acceptance was equivocal: the French version of the deed took over the seller's supplier commitments only in general terms, the German version listed the transferred contracts in an annex that did not mention the distribution agreement, and the buyer, though it had bought from the grantor for months, never met the contract's targets (Cass. com. 23 October 2012 n° 11-24.033).
• A buyer of a drinks business who dropped the transporter that had supplied the fonds for years owed notice only for its own relationship: the years the transporter had served the seller did not count towards the notice period, since the buyer had shown no intention of continuing that relationship (Cass. com. 15 September 2015 n° 14-17.964).

Franchise and brand contracts stay personal. Where the seller trades under a franchisor's or grantor's name, the trade name and sign do not pass with the fonds: their use depends on the franchise or concession contract, which itself does not transfer automatically. The buyer of a car dealership could not claim the dealership agreement had been assigned with the fonds - as a professional of the trade it could not ignore that the manufacturer's name was not the seller's to sell, nor was the dealership contract (CA Versailles 6 June 1997). Buying a branded business without securing the brand contract means buying premises and stock, not the business you saw trading.

Contracts that transfer by law - no consent needed

Four families of contracts escape the default rule and pass to the buyer by force of law.

Employment contracts. All employment contracts in force at the sale continue automatically with the buyer (C. trav. Art. L 1224-1). Neither the seller, nor the buyer, nor the employees can opt out of it. The workforce, its seniority and its accrued rights are part of what you buy - this series' guide to employees in a business sale covers the mechanics and the costs.

Damage insurance. Insurance covering the business's assets continues by force of law for the buyer's benefit, and the buyer must perform all the obligations the insured owed the insurer under the policy (C. assur. Art. L 121-10, al. 1). The policy cannot exclude this transfer (C. assur. Art. L 111-2). Three practical points:

• the seller remains liable to the insurer for premiums already fallen due, but is released, including for future premiums, once it has informed the insurer of the sale by registered letter or registered electronic mail, or by any other durable medium or method provided by Article L 113-14 of the Insurance Code (C. assur. Art. L 121-10, al. 3, as amended by law n° 2019-733 of 14 July 2019);
• the continuation is not a lock-in: both the buyer and the insurer may terminate the policy (C. assur. Art. L 121-10, al. 2);
• motor vehicles are the exception - the insurance of a vehicle is suspended by law from midnight the day after its sale; the contract may then be terminated by either party or reinstated, and failing both it terminates automatically six months after the sale (C. assur. Art. L 121-11). The same rule applies to ships and pleasure craft.

Publishing contracts. When a publisher sells its fonds, the publishing contracts pass with it without the authors' consent being required (CPI Art. L 132-16, al. 1). The authors are not without recourse: where the sale is of a nature to gravely compromise an author's material or moral interests, the author may obtain compensation, including by seeking the termination of the publishing contract (CPI Art. L 132-16, al. 2).

The commercial lease. Where the premises are essential to the operation, the sale of the fonds necessarily carries the lease, and the tenant's right to assign the lease to the buyer of its business is public order (C. com. Art. L 145-16). The lease follows its own regime of valid organising clauses, formalities and sanctions - it has this series' dedicated guide, and this article does not repeat it.

Will this contract transfer with the business?

Pick the contract you are looking at - the check gives the rule and the step it requires.

Debts and claims do not transfer either

The same instinct that assumes contracts pass assumes the buyer collects what customers owe and answers for what the seller owed. Both are wrong by default: save a contrary clause, the seller's claims and debts are excluded from the sale of the fonds - the case law is constant on both sides of the ledger.

What the seller keeps. Having sold the fonds, the seller keeps standing to sue over unfair competition suffered while the business was in its hands, and keeps the right to collect invoices issued before the sale (Cass. com. 25 January 2000; Cass. com. 4 March 2008 n° 07-11.642). The buyer who wants the receivables must buy them expressly.

Transferring claims. If the deed does transfer claims, the debtor cannot object, unless the claim was stipulated non-assignable, but the transfer binds the debtor only once notified to it or acknowledged by it, absent its prior consent (C. civ. Art. 1324). Until one of those formalities is done, the debtor validly pays the seller.

Transferring debts. A debt passes only with the creditor's agreement (C. civ. Art. 1327, al. 1). Where the creditor consented in advance without being party to the deed, the transfer takes effect against it once notified or acknowledged (C. civ. Art. 1327-1) - and the seller is released for the future only if the creditor expressly consents; otherwise seller and buyer are liable in solidum, save a contrary clause (C. civ. Art. 1327-2). The parties may also agree that the buyer bears a fraction of the year's business-premises levy (CFE) - a valid arrangement between them, but one that binds only them: towards the tax administration the seller remains the sole legal debtor. In the same spirit, the buyer can agree to take over the loan with which the seller financed its own purchase of the fonds, or the personal guarantees the seller gave its bank.

The statutory exception on taxes. One debt reaches the buyer by law despite everything above: under Article 1684 of the Tax Code, the buyer of a fonds is jointly liable with the seller for certain of the seller's direct taxes, up to the price and for a limited period - the reason the price is blocked with an escrow agent after completion. The mechanics, the 90-and-30-day clocks and the release conditions are in this series' guide to paying the price.

Licences and permits: which transfer with the business

The dividing line is personal or not. Administrative authorisations and licences issued for the activity the trader carries on are part of the fonds de commerce and pass with it. Those issued to the trader for personal qualities do not - the classic examples are customs brokers, brokers at commodity exchanges and entertainment companies. And whatever the category, the administration's acceptance of the buyer is often decisive for the operation to continue: the parties should secure the authority's agreement before the sale, not discover its position after.

Licence IV. In the sale of a drinks business, the licence IV, without which the fonds cannot operate, is presumed included in the sale unless a clause excludes it (Cass. com. 26 April 1984). The presumption held even at a public auction whose terms of sale did not mention the licence: not excluding it expressly meant it was in (Cass. com. 4 May 1982). The presumption has a limit: where the licence is not an essential element and can be detached from the fonds, a licence IV attached to a fast-food business, the seller may keep it for itself, the buyer being able to acquire a new licence and have it transferred to the establishment (CA Grenoble 21 December 2006).

Terraces and the public domain. A temporary authorisation to occupy the public domain (AOT), the terrace on the pavement, the stand on the square, is granted personally to its holder: it is neither assignable nor transferred to the buyer for its remaining term when the fonds is sold. The buyer must apply for a new authorisation from the competent authority - and can do it in advance, obtaining before the sale an authorisation that takes effect once the authority receives proof that the sale has completed (CGPPP Art. L 2124-33). For a restaurant or bar whose economics run on the terrace, the deal should be conditioned on that new authorisation, and its rhythm planned around the authority's timeline.

Your licence or permit - does it transfer?

Pick what the business runs on - the check tells you whether it comes with the fonds.

Writing the transfer into the deed

The "own personal affair" clause. Deeds of sale commonly put on the buyer the obligation to make its own personal affair of continuing or terminating the seller's ongoing contracts, and to see that the seller is not troubled over their performance. The clause is worth more than it looks: it counts as the buyer's express acceptance of the transfer of the ongoing contracts (Cass. com. 18 September 2007 n° 05-20.708). It does not free the seller towards the third parties - but if they come after the seller, it gives the seller a recourse against the buyer. Note what the clause does not do: it supplies the buyer's acceptance, not the counterparties' consent, so the notifications and consents still have to be run contract by contract.

The annexed list. The cleaner route is the one the parties control: draw up the list of transferred contracts, refer to it in the deed and annex it. The bilingual-deed case shows the cost of doing it half-way - a general take-over clause in one language, an annex in the other that omitted the key contract, and the transfer failed for equivocal acceptance. One list, one language of reference, every contract the business needs on it.

The closing sequence, contracts section. Inventory every contract, licence and authorisation during due diligence; sort them - transfers by law, transfers with consent, personal and non-transferable; obtain the consents and the authority's acceptance, or condition the sale on them with deadlines; write the cessions (Article 1216 requires it on pain of nullity); notify every advance-consented transfer and every transferred claim; and at completion, hand over the file, contracts, consents, notifications, with the keys. The businesses that change hands cleanly are the ones where this list was run before the price was fixed, because every contract that cannot follow the fonds is a number: the cost of a new licence, a re-negotiated supply deal, a terrace that may not be renewed.

Frequently Asked Questions

This article is for general information only and states French law as published in the sources available at the date shown above. It does not constitute legal advice. Whether a given contract or licence transfers depends on its terms and your situation. Always seek qualified legal advice before committing.