Ulrich Martin and Pierre Otto: "EPP empowers entrepreneurs to navigate complex transactions with confidence"

LEADERS LEAGUE: What forms of asset deals are common in France and Germany?

Ulrich Martin: The French and German legal systems take different approaches to asset deals. Unlike German law, French law draws a distinction between the isolated sale of assets and the transfer of a fonds de commerce (business as a going concern).

What’s the difference between an isolated asset sale and a fonds de commerce transfer in French law?

Pierre Otto: Under French law, an isolated asset sale involves the transfer of one or more assets related to a commercial activity. These may include real estate (e.g., land, buildings), tangible personal property (e.g., machinery, inventory), intangible assets (e.g., patents, trademarks, software), or contractual rights (e.g., agreements, receivables). Articles 1327 et seq. of the French Civil Code also allow for the transfer of debt, provided certain requirements are abided.

However, if the sale effectively includes the transfer of clientele – meaning the seller’s customer base – the transaction is legally considered a fonds de commerce transfer. This classification triggers a specific legal regime, including employee notification obligations under the so-called Hamon Law, registration duties, creditor opposition rights as well as automatic transfer of employment contracts linked to the business.

How can you tell if clientele is required to be transferred along with the assets?

PO: Clientele (Kundschaft in German) refers to the group of people who regularly buy from – or use the services of – a merchant. Generally, all tangible and intangible movable elements tied to a commercial activity may be considered carriers of clientele. The nature of those assets can vary by business type. In industrial sectors, equipment and tools may be the main assets attracting clientele. In retail, it’s more often the trademark. In online commerce, the domain name often serves this purpose. Regardless of how many business components are sold, if clientele is effectively transferred, the entire fonds de commerce is considered sold.

How does German law treat asset sales and how does it differ from the way they are treated under French law?

UM: German law does not have a direct equivalent to the French concept of fonds de commerce. Asset deals in Germany typically involve detailed contractual arrangements specifying the assets or business segments being transferred. Additionally, German law provides for the automatic transfer of employment contracts when business operations are sold, under the concept of Betriebsübergang (business transfer).

“Unlike German law, French law draws a distinction between the isolated sale of assets and the transfer of a fonds de commerce (business as a going concern)"

What law applies to an international asset deal?

UM: In principle, the parties are free to choose the law governing an asset sale agreement, except for certain categories like real estate, which are governed by mandatory local law. In French private international law, the applicable law for a business sale depends on the location where the business interacts with its clientele. Regardless of the law chosen, public policy rules still apply. For instance, French registration duties are generally due on (i) agreements executed in France (even for foreign assets) and (ii) the transfer of certain assets located in France – such as real estate, fonds de commerce, clientele, lease rights, and trademarks registered with the INPI – regardless of where the agreement is signed or the nationality of the contracting parties.

Why should an entrepreneur consider buying assets abroad?

PO: An asset deal takes on an international character as soon as either the assets or the parties are located in different countries. Such deals can be relevant at any stage of a company’s life cycle: prior to incorporation, during expansion or diversification, or even during financial restructuring or liquidation. In today’s environment, cross-border asset deals between France and Germany can open up new possibilities for entrepreneurs facing limited options domestically.

Within EPP’s Franco-German focus, it’s evident that French and German industries remain highly complementary. A French entrepreneur, for instance, could use the acquisition of German assets or a business to diversify in France or enter the German market – and vice versa.

What are the best practices to observe when conducting international asset deals?

PO: Negotiating in both parties’ native languages and drafting bilingual contracts has proven highly effective when it comes to avoiding misunderstandings. What’s more, involving the business owners themselves in negotiations helps ensure that commercial priorities are well grasped. The legal professionals can then refine the legal language and formalize the details as required. It’s also essential to assess whether foreign investment control regulations apply. In France, Articles L. 151-3 et seq. of the Monetary and Financial Code govern acquisitions of all or part of a business operating in sensitive sectors (such as defense, security, energy) by foreign entities. Finally, careful structuring is crucial, particularly due to the risk of creating a so-called permanent establishment in the target country, which would trigger local tax and accounting obligations.

In German law, a Betriebsstätte (permanent establishment) is deemed to exist when a foreign business has a fixed place of operations in Germany.

What makes EPP especially well-placed to help those engaging in international asset deals?

UM: Thanks to our deep expertise in both French and German legal systems, EPP Rechtsanwälte Avocats is able to empower entrepreneurs to navigate complex asset transactions with confidence.

“In today’s climate, buying and selling assets between France and Germany can offer a breath of fresh air for entrepreneurs"

in both countries”Whether launching a new venture or adapting to market pressures, international asset deals can serve as powerful tools for transformation, and EPP is the trusted legal partner to make them happen.

Interview with Ulrich Martin, German attorney-at-law, and Pierre Otto, French attorney-at-law, EPP RECHTSANWÄLTE AVOCATS