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Selling your business: key stages and the seller's obligations

By Yasmine EDDAM5 April 2025

Selling your business is often a decisive step in the life of an entrepreneur. It is the culmination of years of effort and the culmination of a professional project, but it is also a complex legal operation that requires meticulous preparation and execution. For the seller, there are two things at stake: getting the best possible price for the fruit of their labour, and, above all, securing the transaction to avoid future disputes that could prove costly and time-consuming. A poorly prepared or executed sale can have damaging consequences long after it has been signed.

This article sheds light on the key stages in the sale of your business, from the initial negotiation through to the formalisation of the agreement, with particular emphasis on your obligations as seller. As for buyers, they will find a look at the essential stages and protection against seller's debts. A good understanding of these duties is the key to a successful and calm transfer.

Negotiation and formation of the agreement

The sale of a business begins with a negotiation phase, during which the seller and potential buyer discuss the terms of the sale. This phase is often framed by the signing of pre-contracts, such as a promise to sell. The validity of the final agreement will depend on compliance with a number of fundamental legal conditions.

Conditions of validity of the sale

As with any sale, a number of conditions must be met for the transfer of the business to be valid:

The capacity of the parties : Both the seller and the buyer must have the legal capacity to enter into a contract. For the buyer, this means in particular not being under a ban on managing or carrying on a commercial activity.
Free and informed consent: The agreement of both parties must be flawless. A mistake about an essential quality of the business (for example, believing that a commercial lease is renewable when it is not), misleading manoeuvres by the seller (fraud) aimed at concealing difficulties or artificially inflating turnover, or coercion of one of the parties (violence) could result in the sale being cancelled. It is therefore vital that the information exchanged is accurate and complete.
The duty to inform : An important legislative development should be noted. For a long time, article L.141-1 of the Commercial Code (now repealed) required the vendor to provide a precise list of information in the deed of sale (origin of the business, turnover and profits for the last three years, statement of liens and pledges, etc.). This formal obligation has been abolished in 2019 to simplify transactions. AttentionHowever, this in no way means that the seller is exempt from any obligation to provide information! Ordinary contract law, via article 1112-1 of the Civil Code, imposes a general obligation to provide pre-contractual information. You must provide the buyer in good faith with information that you know is crucial to his consent and that he cannot legitimately know himself. Deliberately concealing an important factor (a major labour dispute in progress, the imminent loss of an authorisation that is essential to the business, a town planning project that directly threatens the business, etc.) could constitute fraudulent concealment and render you liable, or even result in the sale being cancelled. Transparency is therefore essential.
A lawful object and cause : The business itself and the activity carried on there must comply with the law and public policy. The sale of a business used for an illegal activity would be null and void.

Define precisely what is being sold

Clarity is essential. The deed of sale must list exhaustively the items that are included in the transfer and those that may be excluded.

Elements included : By default, the sale covers all the elements necessary for the business and constituting the goodwill (customer base, business name, sign, leasehold rights if any, transferable licences, etc.). For an in-depth understanding of the composition of goodwill and its fundamental value, you can consult our dedicated article. The fate of the equipment and merchandise must also be specified. Are they sold with the business? Or are they the subject of a separate transaction?
Excluded items : The seller may legitimately wish to keep certain items, such as a brand name that he would use for another activity, or decide to liquidate his stock of goods himself. These exclusions must be clearly stipulated in the deed to avoid any ambiguity.
Fate of contracts : A major point of attention concerns contracts relating to the business. Let's remember the principle: the sale of the business does not entail not automatic transfer of contracts (suppliers, customers, distribution, maintenance, etc.). For the buyer to benefit from this, there must be either a specific legal provision (as for employment contracts or commercial leases), or the express agreement of the seller, the buyer and the third party contracting party. The takeover of contracts must be anticipated and negotiated.

Pricing

The price is obviously an essential element of the sale.

It must be determined in the deed or, at the very least, determinable on the basis of objective criteria defined therein (for example, a price based on a multiple of sales at a given date). An undefined price would render the sale null and void.
If you grant a forward payment (vendor credit), it is still essential to break down the price in the deed of sale between three categories: intangible items, equipment and goods. This breakdown is a condition for your legal guarantee in the event of non-payment, the "vendor's lien", to be correctly recorded and to produce its protective effects. Without this breakdown, your lien could be considered non-existent on all or part of the fund. For a full exploration of guarantee mechanisms and other forms of transfer, such as contributions in partnership, see our detailed guide.
The terms of payment (advance payment, cash payment of the balance, schedule, possible use of specific commercial paper known as "promissory notes") must be precisely established.

Mandatory information for employees

Since the so-called "Hamon" law of 2014, subsequently amended, the owner of a business (subject to certain size conditions, essentially concerning SMEs with fewer than 250 employees) who wishes to sell his business must inform its employees of its intention. This information must be provided no later than two months before the sale is concluded. The aim is to enable employees, if they so wish, to submit an offer to take over the company. This is not a right of pre-emption for employees, as the seller remains free to choose his buyer, but an obligation to provide prior information. There are exceptions, notably in the case of a sale to a close family member or if the company is the subject of insolvency proceedings. Failure to comply with this obligation may result in a civil fine.

Promises to sell

It is very common, before the final deed of sale is signed, for the parties to formalise their agreement in a preliminary contract, often referred to as a "promise" or "compromis" to sell.

Usefulness: This deed makes it possible to "lock in" the agreement on the essential conditions (item, price) while making the final completion of the sale subject to the fulfilment of certain so-called "conditions". suspensive. The most common conditions are that the buyer has obtained a bank loan, that the necessary administrative authorisation has been obtained, that any pre-emption rights (e.g. municipal) have been waived, and that a satisfactory audit has been carried out.
Types : The main types are unilateral undertaking to sellwhich is binding only on the seller (the buyer has a period of time in which to decide whether or not to buy - "exercise the option"), and the synallagmatic promise to sell ("compromise"), which firmly commits both parties. In legal terms, the synallagmatic promise is worth selling as soon as there is agreement on the business and the price, even if completion is deferred by conditions precedent.
Written by : The drafting of these preliminary contracts is delicate and fraught with consequences. Conditions precedent must be clear, realistic and include precise deadlines. A badly drafted clause can block the transaction or render one of the parties liable.

The seller's main obligations after the agreement

Once the sale agreement has been concluded, even if subject to conditions precedent, the seller assumes a number of legal obligations towards the buyer. Proper fulfilment of these obligations is essential if the transaction is to be completed smoothly.

The obligation to deliver: more than just handing over the keys

The seller's first obligation is to "deliver" the business, i.e. to put the buyer in effective possession of all the items sold, as described in the deed.

Material aspect : This obviously involves handing over the keys to the premises, providing the equipment in working order and the agreed stock of goods.
Intangible aspects : The transfer also, and above all, concerns intangible elements. The seller must actively facilitate the transfer of the customer base: provide customer files (in compliance with the RGPD), introduce the buyer to key customers and suppliers, and pass on the know-how needed to continue the business. They must also hand over all documents relating to the intellectual property rights transferred (trademarks, patents, etc.).
Specific accounting requirements : Article L.141-2 of the French Commercial Code imposes a specific obligation on the seller: on the day of the transfer, the seller and the purchaser must sign a document setting out the monthly sales figures achieved since the end of the last financial year. He must also make available to the purchaser, for a period of three years as of the date on which the buyer takes possession of the property, all the mandatory accounting records for the three financial years preceding the sale. This obligation enables the buyer to verify the accuracy of the financial information provided during the negotiation and to have access to an accounting history.

The warranty obligation: protecting the buyer

The seller is obliged to guarantee the buyer against certain "defects" or "disorders" that may affect the business after the sale. There are two main aspects to this legal guarantee:

Guarantee against hidden defects : Under article 1641 of the French Civil Code, this covers defects in the property which were not apparent at the time of sale and which render it unfit for the use for which it was intended, or which reduce its use to such an extent that the buyer would not have purchased it, or would have paid a lower price for it, had he been aware of them. This may involve a serious and hidden defect in an essential machine, a major regulatory non-compliance that prevents normal operation, the existence of undeclared pollution, etc. If such a defect is discovered, the buyer may request either cancellation of the sale (redhibitory action), or a reduction in the price (estimatory action), or even damages if the seller was aware of the defect.
Warranty of eviction : The seller must guarantee the buyer peaceful possession of the business. The seller guarantees against "eviction", i.e. the risk of being deprived of all or part of the business by a third party claiming a prior right to it (for example, a creditor of the seller whose guarantee has not been declared and who seizes the business). This guarantee also covers the seller's "personal act": the seller must not disturb the buyer's enjoyment of the property.

Personal guarantee: not competing with your buyer

This aspect of the warranty against eviction is fundamental and specific to the sale of a business: the non-competition obligation.

An implicit legal obligation : Even if the deed of sale contains no clause on this subject, the vendor is legally obliged not to misappropriate the clientele he has transferred. He may not, by his actions, deprive the sale of its main interest for the buyer. Re-establishing himself in an identical business, right next door to the business sold, in order to capture former customers, would constitute a breach of this legal guarantee.
The usefulness of non-reinstatement clauses : To avoid any ambiguity and strengthen the buyer's protection, it is almost always advisable to include an express non-reinstatement or non-competition clause in the deed of sale. This clause precisely defines the limits of the prohibition imposed on the seller.
Validity subject to conditions : To be valid, such a clause must be proportionate and justified by the protection of the buyer's legitimate interests. It must be limited :
- As for theprohibited activity It should only apply to activities that are genuinely competitive with those of the business being sold.
- As for the time The ban must be of reasonable duration (generally a few years, depending on the nature of the activity). A perpetual ban would be null and void.
- As for thespace It must define a relevant geographical perimeter (for example, a radius of X kilometres around the business, a town, a department, etc.). A clause that was unlimited in any of these three areas would be deemed unfair and therefore null and void.
Scope of the ban : The prohibition is aimed at the seller himself, but can extend to his indirect actions: prohibition on taking a financial interest in a competitor's business, on working there as an employee if this makes it possible to canvass former customers, or on acting via a nominee (spouse, child, etc.).
Penalties : Breach of the non-competition obligation (whether legal or contractual) can be heavily penalised: the buyer may be ordered to pay damages to compensate for the loss suffered (loss of sales), and the competing establishment opened in breach of the undertaking may potentially be closed under penalty.

Selling your business is not something you can improvise. Every stage, from negotiation to after-sales service, involves legal obligations and risks. To help you secure your sale, optimise the terms and conditions and anticipate any difficulties, thethe support of a lawyer who is an expert in the field is a decisive asset. Our firm will be happy to advise you.