Buying a fonds de commerce (business goodwill), selling it, giving it as security to a bank: these three operations are at the heart of commercial life, and they require mastery of a concept that the legislature has never taken the trouble to define. The Commercial Code, in its Title IV devoted to the fonds de commerce, organises its sale, pledge, and management lease (location-gerance) without ever setting out a definition. It is case law, for over a century, that has constructed its boundaries – and two major reforms, in 2019 and 2021, have renewed the regime.
This guide sets out the fonds de commerce as it operates in 2026: what it contains, what it excludes, how it is sold, and how it is pledged. The approach is that of a practising lawyer. Less the textbook definition than the concrete traps: what the repeal of the former Article L. 141-1 changes for the seller, what the 2021 reform modifies for the secured creditor, and why the non-competition clause remains a minefield.
What is a fonds de commerce?
A concept without a statutory definition
The absence of a statutory definition is not an oversight: it is a tradition. Neither the Commercial Code nor the Civil Code defines the fonds de commerce. The Reform Commission once sketched a formulation: “The fonds de commerce consists of the movable property allocated to the pursuit of commercial activities. It necessarily includes a customer base (clientele).” This was never codified.
Case law filled the void. Since a foundational decision of the Chambre des requetes of 15 February 1937, it defines the fonds as a collection of tangible and intangible movable property, gathered for the operation of a commercial activity and characterised by the existence of a customer base. This definition, refined over the decades, remains the reference today.
The customer base: cornerstone of the fonds
The only truly indispensable element is the customer base (clientele). Without a real, distinct, and autonomous customer base, there is no fonds de commerce. Case law has stated this unambiguously since 1937: “from the moment a transfer, a pledge, a management lease relates to a customer base, there is a transfer, pledge, management lease of a fonds de commerce”; and conversely, if there is no customer base transferred, there is no fonds.
Three characteristics are required. The customer base must be real – a potential customer base does not suffice. It must be distinct (propre) – it belongs to the trader, not to the property owner or a distribution network. It must be autonomous – which excludes, for example, the manager of a petrol station whose customer base is pre-constituted by the oil company.
Intangible elements of the fonds
Around the customer base orbit the other intangible elements. The lease right (droit au bail) is in practice the most valuable: it gives the operator the right to occupy commercial premises and, at lease term, the right of renewal. Its value can, in certain locations, exceed that of all other elements combined. The trade name, the sign (enseigne), intellectual property rights (trade marks, patents, software), and transferable administrative authorisations (liquor licences, certain operating permits) also form part of the fonds where they are allocated to its operation.
Tangible elements, and what is not in the fonds
Tangible elements are simpler to identify. Equipment and plant, furniture, goods and stock form part of the fonds. Their treatment in a sale must be expressly specified in the deed – are they included in the global price or separately valued?
What is not in the fonds merits clear statement. Immovable property rights are excluded: a trader who owns their premises does not sell the building by selling the fonds. Receivables and debts arising from the business do not form part of it – they remain in the seller’s estate, save for a contrary provision. Contracts are not automatically transferred to the buyer: either a specific statutory provision is needed – such as Article L. 1224-1 of the Labour Code for employment contracts, or the specific rules of the commercial lease – or the express agreement of all three parties (seller, buyer, contractual counterparty).
| Included in the fonds | Excluded (in principle) |
|---|---|
| Customer base and footfall | Immovable property rights (ownership of premises) |
| Lease right (droit au bail) | Debts and receivables |
| Trade name, sign | Contracts (save statutory exceptions) |
| Intellectual property (marks, patents, software) | |
| Transferable administrative authorisations | |
| Equipment, furniture, stock |
Legal nature: an intangible movable
The fonds de commerce is an intangible movable. Case law has said so since the late 19th century: because the fonds comprises only movable elements and because any universality is movable in nature, it falls under the regime of movables. This has important practical consequences. The pledge of the fonds resembles a mortgage but is a movable security subject to specific rules – registration at the registry of the Commercial Court, not the land registry.
The fonds is not a separate estate with legal personality. Debts and receivables arising from the business remain in the operator’s estate – they do not form part of the fonds. The sale of the fonds does not transfer them.
The Cour de cassation stated this without ambiguity: “in the case of a sale of fonds de commerce, the buyer does not take over the debts or receivables of the seller, unless the deed of sale expressly so provides” (Cass. com., 7 July 2009, No. 05-21.322). This is one of the structural advantages of purchasing a fonds over purchasing shares: in a share acquisition, the target company’s liabilities follow it; in a fonds purchase, the buyer takes over only what the deed says they take over.
The same logic applies to contracts. A distribution agreement, a supply contract, a maintenance contract: none is automatically transferred. Each must be individually negotiated. The statutory exceptions are precise and limited: employment contracts (Article L. 1224-1 of the Labour Code imposes their automatic transfer where a separate economic entity is transferred) and the commercial lease (Article L. 145-16 of the Commercial Code prohibits clauses preventing assignment of the lease with the fonds).
How is a fonds de commerce operated?
Direct operation by the owner
The ordinary mode is personal operation. The owner must carry on the activity effectively, be registered with the Trade and Companies Register, and not be subject to a management disqualification order. It is this effective operation that generates and maintains the customer base – and therefore keeps the fonds alive. A neglected fonds loses its customer base; a fonds without a customer base ceases to exist.
Management lease (location-gerance): operating without buying
The management lease (location-gerance), or free management, is the contract by which the owner of a fonds grants its operation to a manager (gerant) who operates it at their own risk, in return for a fee. The manager does not buy the fonds – they rent it and assume commercial responsibility.
The management lease is subject to precise formalities. The contract must be published in a legal gazette within fifteen days of its effective date, and the manager must register with the Trade and Companies Register. Until publication, the owner-lessor is jointly liable with the manager for debts arising from operation of the fonds. Joint liability ceases upon publication. This risk is often underestimated: an owner who delays or omits publication remains exposed to the manager’s debts, including those arising before they had knowledge.
A precaution also applies regarding the commercial lease. Certain leases contain a clause making the management lease subject to the landlord’s prior consent. The lease must be checked before concluding the management lease contract. Failure to obtain consent, where required, may trigger termination of the lease – and therefore the loss of the lease right, an essential element of the fonds. For more on the commercial lease statute and tenant’s rights, see the Commercial lease guide.
Sale of a fonds de commerce
Conditions of validity and disclosure obligation
The sale of a fonds de commerce is subject to the general conditions of contract validity (capacity, free and informed consent, lawful object). On one point, the specific regime has profoundly evolved. Until 2019, Article L. 141-1 of the Commercial Code imposed on the seller a precise list of mandatory particulars in the deed of sale: origin of the fonds, turnover and results for the past three years, state of pledges and preferential claims, date and term of the lease, landlord’s details. The Ordinance No. 2019-1234 of 27 November 2019, enacted under the Soilihi Act, abolished these mandatory particulars to simplify transactions.
This abolition does not exempt the seller from all disclosure obligation. It simply means the obligation no longer rests on a specific statute but on general law. Article 1112-1 of the Civil Code imposes on any party who knows information that they know to be determinative of the other’s consent an obligation to communicate it. Deliberately concealing a major pending employment tribunal claim, the imminent loss of an authorisation essential to the business, or a planning project directly threatening the fonds: each of these constitutes fraud by concealment (dol par reticence) and exposes the seller to annulment or damages. Transparency remains the rule. It has simply changed its legal basis – from specific to general.
Mandatory employee notification
Since the Hamon Act of 31 July 2014, the owner of a business with fewer than 250 employees must notify them of the plan to sell the fonds. Notification must occur at least two months before completion of the sale. It enables employees to submit a bid – but it is not a pre-emption right: the seller remains entirely free to choose their buyer. Non-compliance is sanctioned by a civil fine.
Procedure: publication, escrow, and creditor opposition
Once the deed of sale is signed, publication formalities apply. The sale must be published in a legal gazette and in the Bulletin officiel des annonces civiles et commerciales (BODACC). Publication opens a period of ten days during which the seller’s creditors may file opposition to payment of the price. Opposition blocks release of the price: it compels the buyer and the escrow holder not to release the funds until the opposing creditors have been paid or the opposition lifted.
The sale price is escrowed with a notary or a lawyer until all oppositions are purged. This period may extend over several weeks if creditors – tax, social security, former suppliers – file opposition. A buyer who pays the seller directly before the oppositions are purged exposes themselves to having to pay a second time.
The seller’s protections: preferential claim and resolution action
Where the price is not paid in full in cash – which is common where the seller extends vendor credit – the law reserves two protections. The seller’s preferential claim (privilege du vendeur), under Article L. 141-5 paragraph 2 of the Commercial Code, gives them a right of priority over the resale price of the fonds in the event of the buyer’s default. It must be registered at the registry within the prescribed time. A precise allocation of the price between intangible elements, equipment, and stock is therefore indispensable.
The resolution action (action resolutoire), under Article L. 141-6, allows the seller to seek rescission of the sale – i.e. return of the fonds – in the event of non-payment of the price.
The non-competition clause
The seller is legally bound not to compete with the buyer. This obligation – a component of the warranty against eviction by the seller’s own act – exists even without an express clause. In practice, deeds of sale systematically include a non-re-establishment clause (clause de non-retablissement) specifying the scope of the prohibition.
To be valid, the clause must be limited on three axes. It must specify the activity prohibited – only activities genuinely competing with the sold fonds. It must fix a reasonable duration. It must delimit a relevant geographical perimeter. A clause unlimited in any of these three domains is void.
Pledge of the fonds de commerce (nantissement)
A security without dispossession
The pledge of the fonds de commerce (nantissement) is the security enabling a trader to offer their fonds as collateral for a bank loan without ceasing to operate it. The analogy with a mortgage is convenient: the mortgage encumbers the property without depriving the owner; the pledge encumbers the fonds without depriving the operator.
The pledge may be conventional – resulting from an agreement between debtor and creditor, typically a bank, within the framework of a business loan – or judicial, ordered on a conservatory basis by the enforcement judge where the creditor demonstrates an apparently well-founded claim and circumstances threatening recovery.
Scope: what is pledged
The scope distinguishes mandatory from optional elements. Necessarily included: customer base and footfall, sign and trade name, and lease right. These constitute the hard core of the fonds. Other elements may be included by express agreement: equipment and plant, patents, marks and licences, stock.
Constitution and registration
The conventional pledge must be evidenced by a written instrument. It is only enforceable against third parties from its registration at the registry of the Commercial Court of the place where the fonds is operated. Registration must occur within one month of the date of the instrument.
Rights of the pledged creditor – and their practical limits
The pledged creditor has a right of priority over the sale price or realisation proceeds of the fonds, in the order of registrations. This is the essence of their protection: in the event of the debtor’s default, they will be paid before unsecured creditors, up to the amount of the realisation proceeds.
The limits are real and often underestimated. The pledged creditor has no right of retention: unlike a possessory pledgee, they cannot physically hold the fonds. In the event of insolvency proceedings, the pledged creditor must file their claim within the statutory time limits, on pain of being time-barred and losing their priority right.
For these reasons, astute creditors often combine the pledge of the fonds with other securities: personal guarantee from the director, pledge of shares, mortgage over real property. The pledge of the fonds alone does not generally secure substantial financing. For a deeper analysis of the general regime of movable securities, see the Security interests guide.