Buying a winemaking estate in France: things to remember

Corporate law

On July 11, 2012 By Benoît LAFOURCADE

France is the world’s second largest agricultural exporter, of which winemaking is an integral component. Indeed, France has the world’s second-largest total vineyard area, behind Spain, and is in the position of being the world’s largest wine producer losing it once (in 2008) to Italy.

Buying a French winery can be an attractive opportunity for those wishing to produce wine for export, however anyone considering buying a winemaking estate in France must be sure that they fully understand the many special features of such a transaction.

As with any purchase of a business, a French lawyer should first carry out an audit to examine the legal situation and any risks relating to the acquisition.

The purchase often covers not just the estate but also the estates operating company.

The estate itself (e.g. the land and chateau) may be owned by an individual on their own behalf or by a societe civile immobilire (SCI property investment company).

The operating company may be a societe civile d’exploitation agricole de droit commun (SCEA agricultural partnership), a groupement agricole d’exploitation en commun (GAEC association of agricultural producers) fan exploitation agricole responsabilite limitee (EARL limited liability agricultural company).

In the event of sale to third parties, a General Meeting must be called to approve the buyers.

In addition, changes to the share ownership of operating companies are subject to administrative checks carried out by a committee from the relevant French governmental departments (agricultural structures).

The purchase deed must clearly state what is to happen to movable property (as opposed to immovable property).

The courts have on a number of occasions issued judgments concerning items used on winemaking estates. For example, barrels are movable property if they are used to transport wine and are sold along with it. This means that they are only included in the sale of the estate if mentioned in the deed. However, if they are kept in the cellar to hold wine from the vat or the press, they are deemed to be immovable property. Devices, utensils and machines in a warehouse which are used to handle and distil wines and which are also part of an inseparable wall-mounted unit are normally classed as immovable property and included in the sale.

However, a judgment has been issued stating that stocks of eau-de-vie produced by a winemaking estate are not immovable property (Court of Cassation, 1st Civil Division, 1 Dec. 1976): “Whereas”, the ruling reads, “the court dealing with the substance of the case noted that the cognac produced by the estate for sale could not be considered specially required for operation of the estate, as this operation could continue if the stocks did not exist”. Therefore the stocks are only included in the sale if this is specifically provided for in the deed.

The name of the chateau is a special brand that cannot be removed from the land which produces the wine; in theory, the seller of a winemaking estate loses the right to use the estate name as a brand. Any agreement to the contrary would be void as it conflicts with public policy. However, if the property is broken up into independent, self-contained units, each of the new entities resulting from the original “chateau” may be granted the right to use the name of the chateau, providing they follow it with another name to avoid confusion. For example, in the Bordeaux region, the division of the Loville vineyard resulted in the creation of several different estates: Loeville Las Cases, Loeville Poyferre and Leoville Barton.

Benoît Lafourcade
Benoît LAFOURCADE Co-founder & partner

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