30/12/2025
Selling your French business as a foreign owner: legal & tax considerations before exit
When a foreign entrepreneur or company decides to sell a business in France, preparation is crucial, especially to navigate the French legal and tax landscape and maximise net proceeds from the sale. Selling a French business – whether shares of a French company or the underlying business assets – involves not only finding the right buyer but also ensuring compliance with French law and optimising your tax position.
Below are the key legal and tax considerations for foreign owners preparing an exit from a French business.
1. Early preparation and clean-up
Ideally, start preparing months (or a year) before launching a sale process. A well-prepared company is easier to sell and often commands a better price.
Corporate housekeeping
Ensure the company’s bylaws (statuts) are up to date.
Check that all capital increases, share transfers and structural changes have been properly recorded.
Make sure annual accounts have been approved and filed with the French registry on time.
Verify that mandatory registers (shareholder register, beneficial owner register, etc.) are current.
Rectify any anomalies (e.g. undocumented past decisions) by formalising them now. Buyers will perform due diligence and disorganised corporate records can slow or jeopardise a deal.
Financial statements
Have recent financial statements prepared, audited if possible.
If you anticipate international buyers, consider preparing English versions and, where relevant, financials under IFRS in addition to French GAAP to improve readability.
Settle overdue debts or disputes with creditors that might worry buyers.
Operational contracts and “clean” accounts
Review key commercial aspects: long-term customer and supplier contracts, renewal options, and any dependency on a few major clients.
Identify and, where possible, settle or resolve pending disputes or litigation before going to market.
Remove personal expenses or unrelated transactions from the company’s books well before the sale to present a clear and credible operating picture.
2. Vendor due diligence (sell-side audit)
Consider conducting a vendor due diligence (sell-side audit) with accountants or lawyers before approaching buyers. This consists of analysing your own company to identify and quantify potential issues in advance.
A vendor due diligence report:
Allows you to control the narrative and disclose issues together with proposed solutions.
Can increase buyer confidence, especially where there are minor tax, HR or compliance gaps you can explain and mitigate.
Helps to speed up the sale process, particularly in competitive or auction-type transactions.
Vendor due diligence is common in higher-end deals or where multiple bidders are expected but can be useful even in smaller transactions to avoid surprises.
3. Legal considerations: structuring the sale
Decide early whether you will sell shares of your French company or business assets, as this has different legal, tax and practical consequences.
Share deal (selling the company’s shares)
In most cases, foreign owners sell the shares of the French company. This is usually simpler: the buyer acquires the company “as is”.
If you have multiple entities (e.g. holding company, operating company), you may need to reorganise the group to place the desired assets into the entity being sold.
Be cautious when transferring assets (such as real estate) out of the company shortly before a sale – this can trigger transfer taxes, corporate capital gains and potential tax avoidance scrutiny.
Asset deal (selling the business or specific assets)
In an asset deal, the buyer acquires specific assets or a business unit (e.g. a fonds de commerce).
French law requires specific procedures for the sale of a fonds de commerce, including legal notices in official journals and a period during which creditors can oppose the sale.
Employees attached to the business typically transfer automatically to the buyer with protection of their contracts and rights under French employment law.
Asset deals are often more complex if your objective is a “clean exit” and are usually preferred only where a share deal is not feasible (for example, where the company holds liabilities or activities the buyer does not want).
Minority shareholders and stakeholders
Check if minority shareholders have pre-emption rights, tag-along rights or other protections under the shareholders’ agreement or bylaws.
Anticipate how you will manage their position: buy them out, obtain their consent, or comply with contractual procedures before launching the sale.
4. Employee notifications (Hamon Law and good practice)
In smaller companies, France may require employee information before a sale. Under the 2014 Hamon Law (for companies with fewer than 250 employees), employees must in some cases be notified at least two months before a majority stake sale or sale of the business, giving them a theoretical opportunity to make a purchase offer.
Check whether your company falls within the Hamon Law scope (employee headcount, turnover thresholds).
If applicable, plan employee communication carefully to comply with information duties while preserving deal confidentiality.
Consult a French employment lawyer on timing and content of any required notification.
Note that there are exemptions (e.g. certain group reorganisations or insolvency situations) and some aspects were softened after 2015, but non-compliance can still carry risk.
Even where no legal obligation exists, treat employees transparently and respectfully. Key staff should hear about the sale from you rather than through rumours; maintaining morale helps preserve value.
5. Tax considerations for the seller
Tax treatment can materially impact your net proceeds from selling a French business. Foreign owners should assess French tax exposure in parallel with their home country tax regime.
Capital gains tax for non-residents (shares in non-real-estate companies)
As a general rule, when a non-resident sells shares of a French company, France taxes the gain if the seller has held more than 25% of the company’s shares at any time in the last five years, unless a tax treaty provides otherwise.
For non-resident corporate sellers, the applicable tax rate is the French corporate rate (currently 25% in many cases).
Non-resident individuals may be subject to French tax at 12.8% plus social charges under the flat tax regime, depending on their situation and treaty relief.
Many treaties (for example with the US or UK) allocate taxing rights on share gains exclusively to the seller’s state of residence (except for real estate companies). In such cases, no French tax is due on the gain.
EU-resident corporate sellers have in some cases successfully claimed treatment similar to French resident companies (participation exemption, 88% exemption of long-term gains). This area continues to evolve and requires up-to-date advice.
Real estate-rich companies
If your company’s assets consist mainly of French real estate, France generally taxes capital gains on the sale of shares as if it were a sale of the underlying property.
Non-resident individuals may face a 19% tax plus social surcharges (with some relief for EU/EEA residents), while non-resident corporate owners can face the corporate rate (around 25%).
Most tax treaties give France the right to tax gains from real estate holding companies, so treaty protection is often limited in these cases.
Restructurings such as selling the property prior to selling shares must be approached cautiously, as anti-abuse rules may apply if the main purpose is to avoid French tax.
Exit tax for former French residents
If you were previously a French tax resident and left France with significant shareholdings, you may be subject to the French exit tax regime.
Exit tax can crystallise upon actual sale of the shares if tax on latent gains was deferred when you left France.
This is technical and fact-specific; seek specialist advice if you have a French residency history.
Tax optimisation strategies prior to sale
If you anticipate selling in the future, you may consider structuring the holding via a holding company and, in some cases, contributing French shares into that holding under conditions that allow for tax deferral (apport-cession mechanism).
Such strategies are complex and subject to strict conditions (including reinvestment obligations) and anti-abuse rules. They must be planned years in advance, with tailored French tax advice.
6. Transaction process and advisors
As a foreign owner, engaging the right advisors is key to a smooth and efficient sale.
Consider hiring an M&A advisor or investment bank (for larger deals) to source buyers and manage the process.
Retain a French law firm experienced in M&A to draft and negotiate the sale documentation (SPAs, asset purchase agreements) and manage closing formalities.
Engage a French tax advisor to estimate your tax exposure on the sale and to assist with any required filings or tax clearances.
Role of the notary
For a share sale of a French company, a notary is generally not required – the transaction is documented by private share transfer agreements.
For a real estate asset sale, a French notary is mandatory and also acts as the tax collector, withholding and paying any capital gains tax due on behalf of the seller (especially non-residents).
Understand in advance when a notary is required and how their role affects the timing and mechanics of closing.
7. Repatriating sale proceeds
France does not have exchange controls restricting the repatriation of sale proceeds. After closing, you can generally transfer funds out of France freely.
Large transfers may be subject to anti-money laundering checks by banks. Be prepared to provide documentation (such as the sale contract) evidencing the origin of funds.
For significant transactions, consider the currency exchange implications and plan a forex strategy if you will convert euros into another currency.
In some cases, repatriation of large investments may need to be reported to the Banque de France for statistical purposes (for example, repatriation of foreign direct investments above certain thresholds).
8. Post-sale obligations and ongoing exposure
After completion, foreign sellers should verify that all post-sale obligations are properly handled.
Tax filings and documentation
If French capital gains tax is due, ensure that the necessary tax forms are filed on time (typically coordinated by the notary or your French tax representative in asset or real estate deals).
Even if no French tax is due (for example, due to treaty protection), keep full documentation of the transaction in case of future tax authority queries.
Seller’s representations and warranties
In most sale agreements, the seller gives representations and warranties which survive closing for a defined period.
Be aware of these obligations and consider holding part of the proceeds in reserve or in escrow to cover potential indemnity claims.
Business continuity and transition services
If you agreed to provide transition services (consulting, IT support, supply agreements) after the sale, ensure these are formalised in separate contracts with clear terms (duration, scope, pricing).
Where you retain a minority stake or ongoing business relationship, clarify governance and information rights to avoid future misunderstandings.
Conclusion: preparing a successful exit from a French business
Selling a French business as a foreign owner can be a smooth and value-maximising process if you prepare thoroughly and anticipate legal and tax issues. The underlying theme is anticipation:
clean corporate, financial and contractual issues before buyers discover them;
understand your obligations to employees and minority shareholders;
structure the deal to achieve a tax-efficient outcome within the legal framework;
and coordinate experienced advisors across jurisdictions.
With sound preparation, you can improve buyer confidence, support a better valuation and reduce the risk of post-sale disputes or unexpected tax costs. A well-managed exit allows you to repatriate profits and move on to new opportunities, having navigated French legal requirements as efficiently as possible.
Disclaimer
This article is provided for general information only. Tax and legal rules may change, and their application depends on your specific circumstances. You should not rely on this article as legal or tax advice.
Before making any decision, please consult qualified French legal and tax advisors to confirm the latest applicable provisions and obtain tailored advice for your situation.
Read more related articles : https://frela.law/mergers-acquisitions-and-business-sales-french-lawyer-attorney/
