In a French share deal, the share purchase agreement is the main document. It often incorporates representations and warranties, indemnities and disclosures. The first draft is usually prepared by the buyer, although it is common for the seller to prepare the first draft on auction sales.

The key substantive clauses in a share purchase agreement are:
• Recitals. They set out the background to the transaction. In the event of a conflict between the recitals and the substantive terms of the agreement, a court will seek to assess the parties’ intention and may rule that the substantive terms prevail.
• Parties. Note that the target company is not typically a party to the share purchase agreement.
• Definitions.
• Transfer of shares.
• Price.
• Payment and transfer of ownership.
• Conditions precedent (it usually includes in France: the approval of EU and French competition authorities, shareholders’ approval, advance clearance from tax authorities (for example if the seller receives securities and wishes to roll-over its capital gain), reorganisation of target’s business, any industry specific consents, any relevant third party consents (for example change of control provisions in contracts), employees’ information or consultation, which must be dealt with before signing a binding agreement (and should not, therefore, be treated as a condition precedent), etc.)
• How the business is to be run if there is a gap between signing and closing.
• Conditions (co-operation, termination and waiver of conditions precedent).
• Closing mechanics. For example, for a company limited by shares (société par actions), shares are transferred by execution and delivery of a stock transfer form (ordre de mouvement) and subsequent updating of the company’s share register. This is regarded as the core closing step.
• Transferor’s obligations (including management of business until closing).
• Non-compete obligations.
• Warranties (usually cover the corporate structure of the company, including the company’s assets and liabilities, main contracts, employees, social security payments, tax position, intellectual property rights, compliance with main regulations (for example, environment),
• Limitations on warranties.
• Third party actions.
• Buyer’s rights.
• Guarantees in respect of the representations and warranties.
• Boilerplate clauses, including confidentiality and public announcements, assignment and fees and registration. A registration duty at the rate of 3% (capped at EUR 5,000 per transaction) is payable on the transfer of shares in a joint stock company (société anonyme), a limited partnership with shares (société en commandite par actions) or a simplified joint stock company (société par actions simplifée). Transfers of shares in real estate holding companies or companies that have another corporate form are taxed at a higher rate.
• Notices.
• Governing law and jurisdiction.
• Date.
• Execution clauses.

Moreover, such agreement may include implied terms by law. Indeed, general French civil law provides for guarantees, which automatically benefit buyers and to which sellers are bound. These guarantees include a guarantee against dispossession (garantie d’éviction) and a guarantee against hidden defects (garantie des vices cachés). The practical benefits for buyers resulting from these “legal guarantees” are limited. Therefore, buyers usually improve on the legal guarantee standard by imposing a higher contractual standard tailored to information known about the target or to specific risks. Contractual warranties may also cover defective economic assessments of the transaction.

Benoît LAFOURCADE

Co-Founder, Partner & Solicitor -
International Corporate Law & Litigation

Benoît, Delcade’s co-founder, is a Paris Bar lawyer and UK Solicitor (London).

Advisor for various embassies, working closely with the firm's team, Benoît offers his services to French and foreign companies requiring cross-cutting strategic and legal support in business law.

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