Sale of a business: no automatic transfer of receivables to the buyer

In a recent case, the judges recalled that in the absence of an express clause, the sale of a business does not imply the transmission to the buyer of the liabilities of the obligations the seller was bound to prior to the transfer, nor of the receivables he held.

Challenging dismissal for gross misconduct

The case in point concerns an employee who, contesting the dismissal for gross misconduct notified to him in 2012 by registered letter with acknowledgement of receipt by his company, appealed to the industrial tribunal and then lodged an appeal against the judgment rejecting his claims.

Three years later, the company sold its business to another company. The latter, declaring that it had taken over the rights of the transferring employer, voluntarily intervened before the Court of Appeal to claim damages from the dismissed employee for the loss suffered as a result of his misconduct. The Court of Appeal agreed, ordering the employee to pay compensation for the damage caused by the gross negligence at the root of his dismissal.

Arguing that the company was not concerned by this dispute since the deed of sale of the business did not provide for the transfer of receivables, the employee appealed to the French Supreme Court.

A claim deemed inadmissible by the Cour de cassation (French Supreme Court)

The Cour de cassation ruled that the license challenge was inadmissible on the grounds that there was no clause expressly stipulating the assignment of obligations that the seller could be held to by virtue of commitments initially entered into or claims held prior to the assignment. The required clause to the contrary must be express and concise, the effectiveness of a general clause being ruled out by the Commercial Chamber. Consequently, the claim held by the selling company against its former employee, namely damages, could not be transferred to the company that acquired the business.

In a ruling handed down on October 25, 2023, the judges reiterate that, except in the case of an express clause or legal exception, the transfer of a business does not entail the transfer of obligations incumbent on the seller prior to the transaction.

This decision shows the importance attached to the drafting of the deed of transfer. Several elements must be mentioned, including :

  • the intangible and tangible assets of the business acquired,
  • the identity of the parties,
  • the date and nature of the act,
  • sales price and payment terms,
  • the origin of the business,
  • sales and operating results,
  • characteristics of the commercial lease,
  • a statement of pledges on the business.

While the omission of this information does not invalidate the transfer contract, its presence promotes transparency between the parties.