Duration of receivership and sale of business assets in France: the complete guide by a lawyer

During a sale of business, the price is almost never paid immediately to the seller. It is usually stuck on a Escrow account for several weeks or even several months, in order to protect the purchaser and creditors.

For an SME manager, understand the Duration of sequestration, the opposition deadlines, fiscal solidarity, the role of the receiver (lawyer, notary, bank) and the conditions for recovering funds is crucial to anticipate its cash flow and secure the operation.

I. Reminders: sale of business assets, receivership and legal framework

1. What is the sale of a business and the act of transfer of business assets?

The sale of a goodwill relates to a set of intangible (customers, brand, lease right, lease right, commercial name, licenses, etc.) and physical (equipment, tools, sometimes stock, depending on the stipulations), sold to a purchaser as part of a Deed of transfer of business.

This act of transfer of business must comply with a specific formalism (mandatory information, advertising, registration, fiscal and social formalities), otherwise there is a risk of nullity, litigation or the liability of the parties being put at risk.

One of the central practical points of this act is the method of payment of the price : cash payment, installment payment, liability guarantee, receivership clause, etc.

2. What is an receivership in a transfer of business assets?

The Escrow is the situation in which a sum (the transfer price) or sometimes documents is entrusted to a third party, neutral and disinterested, responsible for keeping the funds for a certain period of time and for releasing them under certain conditions.

In a transfer of business, it is most often:

• Of a solicitor (via his CARPA account),
• Of a notary,
• more rarely, of a bank or another specially designated third party.

This third party is called conventional receivership the selling price of the goodwill. He must keep the amounts, manage any objections, then distribute and pay the sequestered funds to the people who are entitled to it.

3. Why sequester the selling price of a goodwill?

The selling price of a business is sequestered for several essential reasons:

• protect the purchaser against fiscal solidarity with the seller (income taxes, sometimes VAT, old tax debts),
• allow seller's creditors to exercise their right to object on the sale price for a specified period of time,
• Organize the repartition between different creditors (tax authorities, social organizations, suppliers) before paying the balance to the seller.

In other words, receivership serves to ensure that the price will not be collected by the seller and “dissipated” before creditors have been able to come forward and the tax situation is regularized.

II. Escrow period: what are the legal deadlines for the sale of a business?

1. What is the legal deadline for an receivership? How long does an receivership last in practice?

There does not exist a single legal sequestration period, but several deadlines that are linked to:

• Deadline for opposing creditors on the transfer price,
• fiscal solidarity deadline between seller and purchaser,
• practical time required for the receiver to gather documents, pay creditors, and then release the balance.

In practice, for a traditional transfer, practitioners often notice:

• one minimum “theoretical” duration approximately 3 to 3.5 months in the most favorable scenarios;
• one current duration of receivership of the selling price of a business around 105 days from the date of the act of transfer;
• one longer duration up to 5 to 5.5 months when the seller's fiscal and social situation is complex, or in the event of multiple objections.

For a manager, it is therefore prudent to consider that the money of sale of business will only be really available after several months, unless there is a very specific contractual arrangement.

2. What is the receivership period for the sale of a business?

On a practical level, many authors and practitioners retain a frequently cited reference:

• thereabouts 105 days price freeze, combining:
  • the date of the act,
  • the publication of legal announcements in a newspaper and in the BODACC,
  • the 10-day opposition period,
  • the time for receiving and processing oppositions,
  • taking fiscal solidarity into account (90 days depending on the applicable texts),
  • distribution by the receiver.

This number is not a mathematical absolute, but a order of magnitude useful to explain to the transferor and the purchaser so that they do not anticipate an immediate payment.

In some cases, with a seller who is fully up to date with his obligations and a reactive tax administration, the receivership may be reduced, but it is rare that it is less than 2 or 3 months.

3. What is the legal deadline for a receivership in terms of the opposition period for the sale price of a business?

The Opposition deadline of creditors is one of the key points to understand the duration of receivership:

• after the signing of the act of transfer of business, advertising must be carried out in a legal advertising newspaper and at the BODACC;
• As of the last of these publications, the seller's creditors have a 10-day objection period to oppose the payment of the price to the seller;
• during this period of 10 days, it is excluded to pay the price to the seller, under penalty of endangering the purchaser and engaging the liability of the receiver.

This 10-day period is therefore a minimum plinth : before it expires, no release of funds should take place. In practice, it is combined with the fiscal solidarity period, resulting in the blocking of several months.

III. Receiver and fiscal solidarity: impact on the duration and recovery of funds

1. Fiscal solidarity and solidarity period between seller and purchaser

When it comes to the sale of business assets, the purchaser may be jointly and severally liable with the seller the payment of certain taxes (in particular the tax on profits earned before the sale).

The texts provide for a fiscal solidarity deadline Of the order of 90 days, which begins to run as of the declaration of the profits relating to the transferred fund (or the formalities for publishing the transfer, depending on the applicable regimes).

During this period:

• the tax authorities may claim taxes due in respect of the previous operation,
• the purchaser must protect himself, as he could be called upon to pay in place of the seller,
• the receiver keeps the funds as long as it does not have visibility on the administration's position.

2. Tax clearance and sale of business assets

The Tax exemption (or a certificate from the administration indicating that no sum is due, or that the situation has been regularized) plays a central role in shortening the period of receivership as much as possible.

Concretely, the seller must:

• have your accounts stopped (with your accountant),
• file the profit declarations relating to the transferred fund in a timely manner,
• pay the amounts due,
• ask the administration for a certificate or a clear position on the absence of residual debt.

The more the seller is rigorous and proactive, the easier it is for the receiver and the purchaser to release all or part of the funds before the expiry of the theoretical maximum term.

IV. Is receivership mandatory in a transfer of business assets?

1. Legal sequestration or customary sequestration?

To date, there is no mandatory text in all cases a mandatory receivership the selling price of a business.

On the other hand:

• the combination of the period of time for creditors to object,
• fiscal solidarity,
• and the potential liability of the purchaser and his advisor

In practice, renders sequestration Almost unavoidable for any serious transfer.

Many practitioners consider that it would be extremely unwise to pay all the price directly to the seller without receivership, unless there is a very specific hypothesis, which is perfectly secure from a fiscal, social and financial point of view.

2. Private receivership account and lawyer's receivership account

The selling price is generally paid on a Escrow account opened by the receiver (lawyer, notary, etc.).

• The lawyer's receivership account (CARPA account) is very common. It is dedicated to the receipt of funds belonging to clients and controlled by the Order, which reinforces security.
• The Notarial Escrow Account is also possible, especially when the sale of business assets is integrated into a larger real estate transaction.
• One private receivership account (or a specific account opened by a bank for this purpose) may be considered, but it must be strictly contractually configured to avoid any risk of asset confusion.

To deepen the overall functioning of the mechanism, you can usefully refer to the article:
https://www.victorisavocat.com/en/blog/le-compte-sequestre-guide-complet-du-mecanisme-juridique-et-pratique

V. How do I get the money back from the equestrian account after selling a business?

1. Recovering the money from the equestrian account: practical steps

La recovering money from the equestrian account follows several steps:

1. Signature of the act of transfer of business and payment of the price into the receivership account.
2. Production of legal advertisements (newspaper of legal announcements, BODACC).
3. Count down the 10-day deadline forObjection by creditors.
4. Possible receipt of objections (tax authorities, private creditors, social organizations).
5. Management of oppositions by the receiver (verification, requests for supporting documents, possible negotiations).
6. Taking into account the fiscal solidarity and, if possible, obtaining a Tax exemption.
7. Distribution of sequestered funds: priority payment to legitimate creditors, then payment of the balance to the seller.

Depending on the number of objections, the seriousness of the accounting, and the responsiveness of the administration, recovery may be more or less rapid.

2. Recovering the money from the sale of business assets: realistic deadlines

For a seller, it is useful to distinguish between:

• the legal minimum period (end of the opposition period + basic conditions),
• the realistic timeframe (processing time, obtaining certificates, management of possible disputes).

Thus, even if some texts refer to 105 days or 90 days, it is reasonable to consider that the recovery of money from the sale of business assets will in practice take place between 3 and 5 months after the act, except in cases that are very simple and perfectly prepared.

VI. Educational framework: simplified calendar of the duration of sequestration

Here is a typical (indicative) calendar to illustrate the duration of the receivership of the selling price of a business.

This table is deliberately schematic, but it allows us to visualize that the Duration of sequestration goes well beyond the 10-day objection period alone.

VII. Model clauses relating to receivership in the act of transfer of business

1. Usual clauses on the duration of receivership

In a Deed of transfer of business, we often find a clause describing:

• the designation of the receiver (lawyer, notary, etc.),
• the account to which the prize must be paid,
• the conditions for the conservation of the funds,
• the criteria allowing the receiver to make payments (end of the opposition periods, receipt of certificates, agreement of the parties, etc.),
• the distribution of receivership costs.

Example of style formulation (to be adapted):

“The sale price, in the amount of [...] euros, will be paid by the Purchaser in the hands of Master [...], Lawyer at the Bar of [...], appointed as an amicable receivership, into the receivership account opened for this purpose. The receiver will keep the funds until the expiry of the opposition and fiscal solidarity deadlines, as well as until receipt of certificates and supporting documents allowing it to distribute said funds between the Seller and any opposing creditors. The receiver will then proceed to pay the creditors duly founded in their rights, then to pay the balance to the Seller.”

2. Clauses relating to the possibility of partially releasing the price

To reconcile the cash flow needs of the seller and the protection of the purchaser, some acts provide for the possibility, in well-supervised cases, of free up part of the price (for example 30% or 50%) before the end of all deadlines, under strict conditions (certificate from a chartered accountant, absence of opposition, additional guarantees, etc.).

These mechanisms should be handled carefully and negotiated on a case-by-case basis, as they may expose the purchaser and receiver should future debts arise.

VIII. FAQ — Escrow period, sale of business assets and practical questions

1. What is the receivership period for the sale of a business?

In practice, the receivership period for the sale of a business is approximately 105 days from the date of the act of transfer, subject to the deadlines for opposition (10 days) and fiscal solidarity (90 days) and the processing time by the receiver.

In some simple and well-prepared situations, it can be slightly reduced; in complex cases, it can reach 5 to 5.5 months.

2. What is the legal deadline for an receivership?

There is no single deadline applicable to all receiverships, but a set of legal deadlines that govern the minimum blocking period:

• period of 10 days for the opposition of creditors after publication of the transfer,
• period of 90 days of fiscal solidarity after certain formalities.

The receiver must take into account these deadlines and the circumstances of the case when deciding when to release the funds.

3. What is the objection period for the sale price of a business?

The seller's creditors have a 10-day delay to object to the payment of the selling price of the goodwill, starting from last publication (newspaper of legal announcements or BODACC, depending on the text).

During this period, the purchaser and the receiver must not remit the price to the seller, at the risk of defeating the creditors' right to object.

4. Is receivership mandatory in a transfer of business assets?

Escrow is not legally mandatory in all cases, but it is highly recommended in almost all goodwill sales.

It protects the purchaser against fiscal solidarity and opposition, and assures creditors that the price will not be dissipated before they have been able to assert their rights.

5. How long does an receivership last?

An receivership can, in theory, be limited to the time strictly necessary to serve legal deadlines and deal with objections.

In practice, for a sale of business, it often lasts between 3 and 5 months, unless otherwise specified, what should be anticipated in the negotiation and in your cash flow plan.

6. How do I get the money back from the equestrian account?

For recover the money from the equestrian account, you need to:

• wait for the expiry of the 10-day period for creditors to object,
• ensure that the tax authorities and other creditors have been satisfied,
• present to the receiver the necessary supporting documents (tax clearance, certificates, etc.),
• then let the receiver distribute and pay the balance of the sale price.

The seller must be proactive (up-to-date accounts, declarations filed, rapid responses to requests for documents).

7. How do I recover the money from the sale of a business?

La recovery of money from the sale of a business is done with the receiver, who:

• pays legitimate creditors first
• then pays the rest to the seller when the deadlines and conditions are met.

It is therefore essential for the seller to communicate regularly with his receivership lawyer to monitor progress and avoid unnecessary obstacles.

8. What is a private equestrian account?

One private receivership account is a special bank account dedicated to the receipt and temporary retention of funds as part of an receivership (for example, selling price of a goodwill).

This account must be separate from the personal or operating accounts of the receiver to ensure the isolation of funds and avoid any confusion of assets.

9. What is the role of tax clearance in the sale of business assets?

The Tax exemption reassures the purchaser and the receiver that the administration will not claim additional amounts for past operations.

In some cases, it makes it possible to accelerate the release of sequestered funds, in whole or in part, before the expiration of all theoretical deadlines.

10. What does the term “sequestered funds” mean?

The expression sequestered funds refers to the amounts resulting from the sale price of a business that are locked in an receivership account for a fixed period of time.

These funds cannot be used by the seller until the receiver has received the authorization or documentation necessary to release them.

11. What is the link between business transfer and receivership?

The transfer of business assets is not limited to the signing of the act:

• legally, the ownership of the fund is transferred to the purchaser,
• financially, the price remains locked in an equestrian account,
• it is only after the deadlines have been purged and the claims processed that the financial transfer is actually completed.

The receivership is therefore a central link between the legal transfer and the effective provision of the prize.

IX. A regulated subject: the importance of being accompanied

La Duration of sequestration, the opposition deadlines, fiscal solidarity, and the mechanisms for the receivership account and distribution of funds fall under a highly regulated subject, at the interface of commercial law, tax law and banking law.

A poorly secured arrangement can expose the purchaser to unexpected payment calls, deprive the seller of part of his price, or engage the responsibility of the parties involved. It is therefore essential to be accompanied by a lawyer regularly involved in sales of business assets, able to anticipate risks, negotiate appropriate receivership clauses and guide you step by step in recovering the price.

Article written by Guillaume Leclerc, lawyer in commercial contracts and commercial litigation in Paris.