Final Sale Agreement for a Business in 2026: SPA, W&I, Closing

Updated 12 May 2026. The final sale agreement — the Share Purchase Agreement (SPA) for a share deal, or the fonds de commerce sale deed for a business asset deal — closes a 12 to 18-month M&A process structured in six stages: preparation, NDA, LOI, due diligence, SPA and closing. On a Paris-based SME valued at €5 to €30 million, the total fees (M&A advisor, lawyers, due diligence) account for 5 to 10% of the sale price, and the warranty and indemnity package (W&I, garantie d'actif et de passif — GAP) ties up 20 to 30% of the price for 18 to 36 months — and up to 4 years on latent tax liabilities. At Cabinet Hayot Expertise in Paris, we advise both sellers and buyers on the most sensitive trade-offs: structuring as a share deal vs an asset deal, scoping the W&I, calibrating the earn-out, and managing the capital gains tax under Article 150-0 D ter of the French Tax Code (CGI).

Share deal — Articles 726 and 150-0 D ter CGI#

A share deal transfers the shares or units of a company without breaking the corporate personality: the business continues, only the shareholder changes. The company keeps its commercial contracts, its leases, its administrative authorisations, its liabilities and its assets. From the buyer's perspective, registration duties are set out in Article 726 CGI: 0.1% of the price for shares in listed or unlisted SAS and SA, 3% for SARL units after a €23,000 allowance pro-rata to the number of units transferred, and 5% for shares in a property-dominant company. On the seller's side, the capital gain falls under the personal capital gains regime: 30% flat tax (PFU) by default (12.8% income tax + 17.2% social levies), with a global option for the progressive scale and the duration-of-holding allowance on shares acquired before 2018.

Asset deal — Articles L141-1 of the Commercial Code and 719 CGI#

The fonds de commerce sale transfers a set of intangible items (clientele, sign, trade name, lease rights, licences) and tangible items (equipment, furniture, stock sometimes sold separately), without transferring the legal entity or the financial liabilities. Formalities are codified in Articles L141-1 to L141-22 of the Commercial Code: mandatory mentions in the deed (price, origin of ownership, turnover and earnings of the past three financial years, status of privileges and pledges, lease conditions), publication in a legal gazette within 15 days, and registration in the BODACC. Registration duties follow the progressive scale of Article 719 CGI: 0% up to €23,000, 3% between €23,000 and €200,000, 5% above.

Buyer's tax joint liability and employee information#

Two constraints specific to the asset deal weigh on the timeline. The tax joint liability between seller and buyer, provided in Article 1684 CGI, lasts 90 days from the declaration of sale: the buyer can be called upon to pay the seller's corporate tax, VAT and turnover-based taxes. This is one of the justifications for placing the price in escrow. In addition, in companies with fewer than 250 employees, the Hamon law (Article L141-23 of the Commercial Code) requires informing employees no later than 2 months before the sale to allow them to submit a takeover offer. Share deal or asset deal: the decision is made at the preparation stage, because it reshapes taxation, timeline and W&I scope.

Data room and information memorandum#

Three to six months before the first contact, the seller prepares a virtual data room structured by chapters (corporate, financial, tax, social, legal, commercial, IT, real estate, environmental). It feeds two deliverables produced by the M&A advisor: an anonymous teaser of 2 to 4 pages circulated under NDA to qualify candidates' interest, then an Information Memorandum (IM) of 40 to 80 pages provided to serious buyers. The quality of the IM drives valuation: documented normalised EBITDA, adjustments for off-market management compensation, identification of non-recurring items, three to five-year business plan.

Choosing an M&A advisor in Paris#

On SME transactions of €5 to €50 million, the Paris market is split between independent M&A boutiques (Cambon Partners, Sodica, Edmond de Rothschild Corporate Finance, Lazard Mid-Market) and M&A departments of audit firms (Big Four advisory). The success fee runs from 3% to 5% of the sale price, degressive by tranches above €20 million, plus a monthly retainer of €5 to €15K during the engagement period (typically 12 to 18 months). The mandate is exclusive and gives the advisor control over the process: candidate selection, organisation of competitive processes, negotiation of the LOI and the SPA.

NDA and first exchanges#

The Non-Disclosure Agreement (NDA) precedes any communication of non-public information. It covers confidential items (financial, commercial, technological, HR), the engagement duration (3 to 5 years), non-solicitation clauses on employees and clients, and the scope of authorised persons (in-house team, advisors). Once the NDA is signed, the candidate receives the IM, can submit written questions, then meets management at a management presentation. This phase typically lasts one to two months and ends with the selection of two to four shortlisted candidates.

Article 1124 Civil Code — unilateral promise or simple letter of intent#

The Letter of Intent (LOI) formalises the indicative offer of the selected candidate. Its legal nature varies with its drafting: a simple non-binding manifestation of intent (pure letter of intent), or a unilateral promise falling under Article 1124 of the Civil Code, which binds the promisor to sell or buy at the stipulated conditions if the beneficiary exercises the option. The line is thin: case law treats the commitment as binding as soon as there is agreement on the item and the price within the meaning of Article 1583 of the Civil Code. M&A practice systematically inserts a non-binding clause ("subject to contract", "subject to due diligence and SPA").

Indicative price, conditions precedent, timeline#

The LOI specifies an indicative price or a range (for instance €12 to €14 million), a payment method (cash at closing, earn-out, escrow), a timeline (signing scheduled at T+90 days, closing at T+150 days), and the list of conditions precedent: financing secured, regulatory authorisations, audit confirming the financial statements presented, absence of material adverse change (MAC clause). The LOI also sets the scope of the upcoming due diligence: data room, access timeline, teams involved.

30–90 day exclusivity and binding clauses#

The exclusivity clause prevents the seller, for 30 to 90 days, from negotiating with a third party or running a competing process. It is almost always coupled with a good faith clause and a break fee if the seller backs out without legitimate reason — the fee covers expenses incurred (advisor, lawyer, DD), sometimes 0.5 to 1% of the indicative price. To place these upstream steps in context, see also our article on the sale protocol in a business transfer.

Financial DD — normalised EBITDA, cash, working capital#

Financial due diligence drives the final price adjustment. Over 4 to 8 weeks, the buyer's teams restate EBITDA by eliminating non-recurring items (asset sales, exceptional indemnities, off-market management compensation, one-off costs) and rebuild a normalised EBITDA. Net cash at closing is governed by a locked box mechanism (reference to a frozen balance sheet) or completion accounts (closing snapshot). The normative working capital requirement is calculated on a 12 to 24-month rolling basis to identify seasonal peaks and set a working capital target at closing. Any deviation from the target gives rise to a euro-for-euro adjustment.

Tax, social, legal DD#

Tax DD verifies the absence of latent reassessment risk: corporate tax, VAT, CVAE, withholding tax, transfer pricing if there are foreign subsidiaries, tax consolidation, validated R&D and innovation tax credits. On Paris-based SMEs, transfer pricing and R&D tax credit concentrate the risks. Social DD reviews employment contracts, applicable collective bargaining agreements, unpaid overtime, gender pay parity, employee savings schemes, ongoing labour disputes, and post-audit URSSAF liabilities (3-year limitation). Legal DD inspects the bylaws, the shareholders' agreement, related-party agreements, leases, key commercial contracts (change of control clauses), litigation, intellectual property, and GDPR compliance.

Output and risk identification#

At the end of DD, the buyer receives a Red Flag Report or Issues Memo listing major risks with figures (probable tax reassessment of €200K, labour dispute exposing €80K, environmental liability to be provisioned at €150K). These risks feed three negotiation levers: base price adjustment ("price chip"), specific first-euro indemnity in the W&I (specific indemnity clauses), or request for a dedicated escrow. A botched DD is paid for post-closing through W&I disputes that may exceed the contractual cap.

Price, payment terms, earn-out#

The Share Purchase Agreement structures the price across three potential components. The base purchase price paid at closing, generally by irrevocable wire transfer. The deferred consideration (earn-out) indexed on the future performance of the company over 1 to 3 years: revenue, EBITDA, commercial or technical milestones, product launch. The earn-out must be verifiably calculable — its formula must specify the restatements, the applicable accounting standards, the audit procedure in case of disagreement. Finally, the escrow locks up 10 to 20% of the price on a third-party account (notary, bank) to secure W&I performance.

Warranty and indemnity (W&I) — critical clauses#

The W&I combines representations and warranties (R&W: seller's declarations on the state of the assets and the exhaustiveness of the liabilities at a reference date) and an indemnification mechanism in case of inaccuracy. Four parameters calibrate the exposure. The cap limits total indemnification, typically 20 to 30% of the sale price on general R&W and 100% on fundamental R&W (title, capacity, ownership). The basket and de minimis rule out small disputes: unit threshold of €5K to €20K, cumulative threshold of 0.5 to 1% of the price. Duration depends on the nature of the liability: 18 to 36 months on general R&W, 4 years on tax liabilities (aligned with the limitation period of Article L169 of the French Tax Procedure Book), 5 to 10 years on environmental matters. Security takes the form of an escrow, a bank guarantee on first demand, or a retention on earn-out.

Non-compete, non-solicitation, conditions precedent#

The non-compete clause prevents the seller from resuming a competing activity for 2 to 5 years within a defined geographic perimeter (Île-de-France, France, EU). It must include financial consideration under penalty of nullity — the Cass. Soc. 10 July 2002 ruling generalised this requirement, including for seller-director clauses, although later case law nuances it in purely commercial matters. Practice calibrates the consideration between 10% and 30% of the lost annual compensation. The non-solicitation clause targets key employees and clients. Typical conditions precedent (ARS authorisation for healthcare, French Competition Authority clearance if notification thresholds are met, landlord's consent on lease transfer, bank financing release) must be satisfied before closing.

Satisfaction of conditions precedent#

Between signing (SPA signature) and closing (effective share transfer and payment), 1 to 6 months elapse depending on the complexity of the deal. This period is used to satisfy conditions precedent: obtaining regulatory approvals, finalising financing, clearing any pre-emption rights, putting bank guarantees in place. The SPA frames this interim period with management covenants: ban on dividend distributions, capex cap, prudent management, information duty to the buyer.

Final signature, payment, share transfer register#

At closing, the parties sign the share transfer order (SAS / SA share transfer) or the deed of share transfer (SARL, notarised if SCI is involved), the escrow is set up, the base price is wired, and the share transfer register is updated. For an SARL, a deed of transfer registered with the tax office is mandatory (form 2759 and Article 726 CGI registration duties paid within one month).

Registry formalities, legal gazette, transition period#

Within the month following closing, the commercial court registry processes the update: change of managing director or president, possible amendments to the bylaws, update of the Ultimate Beneficial Owners register (UBO) — an obligation arising from the anti-money laundering directive, controlled from 2024 onwards by INPI. Publication in a legal gazette finalises enforceability against third parties. The transition period (3 to 12 months) ties the seller to the company in an operational assistance role, often paid through a service contract or a temporary corporate office.

Capital gains — flat tax vs progressive scale#

On the sale of shares held by an individual, the capital gain falls by default under the 30% flat tax (PFU) (12.8% income tax and 17.2% social levies). The global option for the progressive scale can be relevant when the taxpayer has a low marginal tax rate in the year of sale or benefits from the duration-of-holding allowance (shares acquired before 1 January 2018): 50% between 2 and 8 years, 65% above 8 years, or enhanced 50/65/85% allowance for eligible SMEs. The exceptional contribution on high incomes (CEHR) is added for income exceeding €250,000 (single) or €500,000 (couple): 3% and 4% per tranche. Our article on dividend taxation details the trade-off between flat tax and progressive scale in the broader compensation-dividend-sale context.

Retiring director allowance — Article 150-0 D ter CGI#

Article 150-0 D ter CGI grants the retiring selling director a fixed €500,000 allowance on the capital gain subject to income tax (the allowance does not cover the 17.2% social levies or the CEHR). Cumulative conditions: continuous exercise of management functions in the company sold for 5 years before the sale, holding of at least 25% of voting rights (family threshold), cessation of functions and pension claim within 2 years before or after the sale, and total sale of the shares (or reducing the threshold below 1%). The mechanism, initially capped at 31 December 2024, was extended until 31 December 2031 by the 2024 Finance Act — subject to confirmation by the 2026 Finance Act or any corrective text. The trade-off between flat tax + €500K allowance vs progressive scale + holding allowance is calculated case by case: on a €2 million gain, the 150-0 D ter allowance typically saves €64,000 in income tax (€500,000 × 12.8%).

Fonds de commerce gain and Article 151 septies CGI#

When the fonds de commerce is held by a sole trader or operated through a tax-transparent partnership, the gain falls under the professional capital gains regime. Article 151 septies CGI fully exempts the gain provided the activity has been carried out for at least 5 years and turnover thresholds are met: full exemption below €250,000 excluding VAT (sales / accommodation) or €90,000 excluding VAT (services and BNC), partial between these thresholds and €350,000 (or €126,000). Article 151 septies B CGI further opens a 10% allowance per year of holding beyond the fifth year on the long-term gain on operating real estate. On transactions exceeding these thresholds, Article 238 quindecies CGI provides for an exemption based on the value of the business: 100% below €500,000, degressive between €500,000 and €1 million.

M&A advisor and success fee#

On a Paris-based SME valued at €10 million, a 4% M&A success fee represents €400,000, on top of which a €10 to €15K monthly retainer over 12 to 15 months adds €120 to €225K. On a €30 million deal, the degressive fee drops to 3% on the upper tranche, i.e. roughly €800K. For transactions below €5 million, the Paris market increasingly offers matchmaking platforms (rachat-d-entreprise.com, Fusacq) or small-business transmission firms with flat success fees of €30 to €80K.

M&A lawyer and due diligence#

A senior M&A lawyer in Paris bills between €600 and €1,200 excluding VAT per hour. On an SME transaction, the total lawyer budget covers drafting and negotiation of the LOI, SPA, W&I and ancillary deeds: €30 to €60K for a straightforward deal, €80 to €120K for a deal with a complex earn-out or cross-border structuring. Financial DD entrusted to an audit firm or transaction services team costs €25 to €80K depending on size and complexity, tax DD €20 to €50K, and legal DD is generally bundled with the M&A lawyer's engagement.

Total fees: 5–10% of the price for SMEs#

On a €10 million sale price, total fees (M&A advisor €400K, lawyer €50K, financial DD €50K, tax DD €30K, notary and formalities €20K) reach €550K, or 5.5% of the price. On smaller deals (€3 to €5 million), flat fees crush the proportion to 8-10%, which increasingly justifies arbitrating for simpler sale structures (asset deal, lighter audit, scaled-down W&I). For an Owner Buy-Out — partial exit through a holding refinancing — see our dedicated article on the tax-optimisation holding and OBO. For an intra-family transmission, see our article on the family business transfer.

The trade-off to arbitrate — share deal or asset deal#

On the Paris files we advise, the first structuring decision is rarely the price: it is the share deal vs asset deal qualification. Share deal: more favourable seller taxation (30% flat tax and 150-0 D ter), low registration duties (0.1% SAS), contractual and tax continuity assured, but full transfer of the liability base and extended W&I. Asset deal: financial liabilities not transferred, but 3-5% registration duties, professional capital gain with potential 151 septies exemptions, 90-day tax joint liability and mandatory employee information. The arbitration depends on the nature of the latent liabilities, eligibility for 151 septies exemptions, and the buyer's position (who often prefers a clean asset base to limit surprises).

The underestimated risk — too-short W&I and latent tax liability#

The most frequent post-closing W&I dispute concerns the latent tax liability (R&D tax credit reassessment, transfer pricing, VAT, tax consolidation) which surfaces 18 to 36 months after closing, beyond the general R&W but within the 4-year limitation period of the Tax Procedure Book. A W&I capped at 36 months — instead of the 4 years needed — leaves the buyer without recourse on the last assessable financial year. Our systematic recommendation: alignment of the W&I duration to 4 years on the tax and social perimeter, escrow sized accordingly (10-15% of the price dedicated to tax liability), and first-euro specific indemnity clauses for risks identified in DD. To secure these trade-offs, reach our Paris 8 accounting team or our outsourced CFO service.