Paying the Price When Buying a Business in France: Escrow, Oppositions, and Why the Money Waits

Paying the price when you buy a business in France: why the money waits

In a French business sale, the buyer's money does not go to the seller at signing - not even when the price is payable in cash. The law makes the price unavailable so the seller's creditors, alerted by the sale's publication, can oppose its payment and claim their share; the buyer who pays early risks paying twice. In practice the price sits with an escrow agent (séquestre) named in the deed, whose task is to pay the opposing and registered creditors and hand the seller the remainder. Around that freeze the Commercial Code organises a full procedure: the creditors' opposition and its strict formalism, the seller's tools to release what the oppositions do not cover, a timetable for distributing the price - and, for buyers facing registered creditors, the purge of inscriptions and the tenth overbid.

This guide follows the price from signing to distribution: the legal unavailability and its sanctions, who can oppose and how, the release routes (mainlevée and cantonnement), the distribution timetable, and the purge-and-overbid mechanics. The seller's own securities, the vendor's privilege and the action to rescind for non-payment, have this series' next guide; the tax side of the blocked price (the buyer's joint tax liability) is covered in the tax cluster.

The price is unavailable by law - and paying early means paying twice

The principle. Against the transfer of the fonds, the buyer owes the price, in cash or over time, under the ordinary law of contract. But the price, even a cash price, must not be handed over at the sale's conclusion: the law makes it unavailable so the seller's creditors can form opposition (C. com. Art. L 141-17). Strictly speaking, nothing physically stops the buyer paying the seller; the payment is simply perilous, because:

• payment made into the seller's hands before the opposition period expires is ineffective against the creditors - including those who never opposed;
• so is payment made despite existing oppositions (C. com. Art. L 141-14);
• the seller's undertaking to "make its personal affair" of any oppositions changes nothing.

The buyer who pays early is therefore exposed to paying the price a second time to satisfy the creditors - and the early payment is a fault that can make the buyer liable to opposing creditors for everything they could have taken in the distribution, not only the sums they opposed for.

The professionals are on notice too. A notary who transfers ownership and enjoyment of the fonds on the day of signing without waiting for the buyer's cheque to clear breaches the duty of prudence and answers professionally to the seller.

The escrow in practice. The standard answer is the deed's own: the price is deposited with a third party amicably designated in the deed of sale. That séquestre's mission is to pay the opposing creditors and the registered creditors, and to remit the balance to the seller. The statutory unavailability runs up to twenty-five days, fifteen for the Bodacc insertion, ten for the oppositions, but the buyer has every interest in leaving the price blocked for as long as it remains jointly liable with the seller for certain of the seller's taxes: the joint-liability clocks are covered in this series' tax guide, and they, not the opposition period, usually dictate the escrow's real duration.

One rule that does not apply. The statutory late-payment regime between businesses (C. com. Art. L 441-10 and following) does not govern a fonds sale: a seller cannot claim the triple-legal-interest penalty on, say, an unpaid stock balance.

Creditors' opposition: freezing the price

Who can oppose. Any creditor of the seller, "the previous owner", can form opposition (C. com. Art. L 141-14), whatever the nature of the claim, civil or commercial, subject to a term or a condition, and even if it falls due after the sale, provided it exists at the sale's publication. The exclusions follow from the text: creditors of the seller's own predecessor cannot oppose; the buyer, who is no creditor of the seller, cannot oppose - and cannot use a consigned price to make it unavailable itself; the landlord opposes only for rents fallen due, never for current or future rents, whatever the lease says; and holders of uncertain claims cannot oppose. Registered (secured) creditors may oppose like unsecured ones, though it serves them little: the buyer already knows them from their inscriptions, and not opposing costs them none of their pursuit right. A creditor who agreed to the buyer paying the seller directly loses the right to oppose - even where that payment predated the opposition window.

Form and content - sanctioned by nullity. The opposition must be made by bailiff's act or registered letter with acknowledgment, at the domicile elected by the buyer - even if the buyer's real domicile differs. A fax opposition is without effect. On pain of nullity, the opposition must state the amount and causes of the claim (an undetermined claim must be valued) and elect domicile in the court's district - and the nullity applies even where the omissions harmed no one. The tax administration follows the same forms: its collection officers are instructed to oppose under Article L 141-14 whether or not the tax claim is due, its third-party-seizure route being unavailable for undue claims and of little effect here anyway.

The deadline. Ten days from the publication of the sale in the Bodacc; a registered-letter opposition is dated at its dispatch. The period runs only from a regular publication: a late opposition is void - but remains admissible where the published notice failed to state the opposition period.

What an opposition does. It is a protective measure, not a seizure of the price:

• it prolongs the price's unavailability so the creditor can assert its rights in a later distribution;
• it transfers nothing and creates no privilege or preference - an opposing creditor is not paid first, and remains free to pursue an attribution-seizure in the escrow agent's hands, its effect deferred until the claim becomes available;
• it does not interrupt the prescription of the creditor's claim - it is not a seizure;
• it fixes the seller's claim: the seller can no longer assign its price claim, set it off against a debt to the buyer, or agree a price reduction with the buyer - a reduction would be ineffective against opposing creditors, for whom only the published price counts.

Beyond the opposition: fraud. Creditors who never opposed, or opposed irregularly, can still have the sale declared ineffective against them where it was made in fraud of their rights (C. civ. Art. 1341-2): the action paulienne, open notably where the seller sold the fonds at a derisory price, or with no price paid, to put its assets beyond the creditors' reach.

An opposition blocks the price - what now?

Pick your situation - the check gives the procedure and its conditions.

Releasing the price: mainlevée, cantonnement and the distribution

Lifting an irregular opposition. The seller can seek, in référé before the president of the commercial court, the mainlevée of an opposition (C. com. Art. L 141-16) on two cumulative conditions: no main proceedings are pending on the opposing creditor's claim - the request fails even where the main action was started after the seller's référé summons, to avoid contradicting the coming judgment on the merits - and the opposition was made without title and without cause, or is void in form. The president's power is a special jurisdiction: the ordinary référé limits do not apply, a serious dispute does not exclude it, and the lift can issue without the buyer being joined. The burden then shifts: the creditor must justify a cause for immobilising the price.

Collecting the surplus (cantonnement). Where the regular oppositions total less than the price (or its due portion), the seller may, once the ten-day window has closed, ask the president in référé for leave to receive the difference (C. com. Art. L 141-15). Conditions: consignment, with a designated third party or the Caisse des dépôts et consignations, of a sum sufficient to pay the oppositions; and the buyer's declaration, on its own responsibility, that no oppositions exist beyond those in the writ. The president has jurisdiction only in the absence of main proceedings - and the buyer's refusal to appear paralyses the seller's request. Granted, the authorisation discharges the buyer towards the opposing creditors whose existence it guaranteed (not those it omitted), and carries the oppositions over onto the consigned sum, on which the opposants take a privilege excluding all others.

The distribution timetable. In an amicable sale, the third party holding the price at the elected domicile must distribute it within 105 days of the deed - extended by 60 days where the seller has not made its tax filings; failing which the most diligent party can obtain in référé either deposit of the price at the Caisse des dépôts or the appointment of a distributing escrow agent (C. com. Art. L 143-21). The distribution then follows the Code of Civil Procedure: creditors are invited by registered letter to declare, within one month, a breakdown of principal, interest and accessories with their securities and supporting documents - no declaration, no place in the distribution; a draft allocation is notified to debtor and creditors, final if uncontested within fifteen days of receipt, payment following within fifteen days; a contest triggers a conciliation attempt within the month and, failing agreement, consignment and the commercial court's allocation. The distributor's fee comes off the fund, borne by the creditors pro rata.

When the price is less than the debts: purge and the tenth overbid

The problem. Registered creditors, the holders of a vendor's privilege or a pledge inscribed on the fonds, enjoy a pursuit right: they can follow the fonds into whoever's hands it passes and force its sale, and failing to oppose costs them nothing of it. A buyer can therefore acquire a fonds and still face the seller's secured creditors.

The purge. The law's protection is the purge of inscriptions: the buyer notifies every registered creditor an offer to pay the claims secured by inscription up to the price of the fonds - the price, not the claims' amount. The procedure pays when the price is below the total inscribed debt. Its features:

• it applies to amicable sales, not forced auction sales - nor to the isolated sale of one element of the fonds, unless that sale carries the clientele (as where a licence IV was sold after fire destroyed the bar, the clientele staying attached to the site and sign);
• it is optional: absent fraud or abuse, the buyer is free not to purge even knowing the inscriptions - it can let the secured creditors force the sale, or have conditioned its purchase on the creditors accepting its price and renouncing pursuit;
• no statutory deadline governs the notifications, in practice they follow the opposition period, except where a registered creditor has served a demand to pay on seller and buyer: the buyer then has fifteen days to notify or loses the right to purge;
• the notification's content is prescribed: the parties' identities, the fonds, the price excluding equipment and goods, the charges and the buyer's justified costs; a three-column table of prior sales and pledges, the registered creditors, and the inscribed amounts, with the declaration that the buyer stands ready to pay the inscribed debts up to its price, due or not; election of domicile - and, where only some elements are encumbered, a ventilated price per element. No notification, no purge: the buyer can no longer resist the creditors' demand for a public auction.

Agreement - or overbid. If every registered creditor accepts the offers, a notarial act records it and the price is divided among them and the seller. But creditors who find the price too low may refuse and require the fonds' sale at public auction, on condition of an overbid of one tenth of the principal price, equipment and goods excluded, plus security for price and charges or proof of sufficient solvency (C. com. Art. L 143-13). The overbidding creditor must, on pain of forfeiture, serve the requisition on buyer and seller within fifteen days of the purge notification, with a summons before the commercial court, which rules on the overbid's admissibility and orders the auction.

The overbid's consequences. From that service, the buyer in possession becomes by law the fonds' administrator-sequestrator, restricted to acts of administration - the court or interim judge can appoint another administrator on anyone's demand. The overbidder can withdraw only with every other registered creditor's agreement; failing that, with no bid at the auction, the overbidder is declared the fonds' purchaser. Whoever wins the auction takes the equipment and goods at an expert-fixed price and must, beyond the auction price, reimburse the dispossessed buyer its contract costs, notification, inscription and publicity costs - a non-exhaustive list: the case law has added deed costs, early-repayment penalties on the acquisition loans with their interest, a beer-contract termination indemnity, a negotiation commission, licence-transfer costs, and rent arrears and the deposit the buyer had paid to keep the indispensable lease alive.

One mechanism gone. Before 8 August 2015, the seller's creditors could also force an auction by overbidding one sixth of the price - a protection against price concealment, rarely used, abolished by the law of 6 August 2015. The only overbid today is the registered creditors' tenth, within the purge.

The blocked price: what it means for you

Pick your seat at the table - the check gives your risks and your moves.

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. Deadlines and procedures depend on your deal and your facts. Always seek qualified legal advice before acting.