The sale protocol (SPA) in a French business transfer: phases, clauses and the accountant's role

Updated 25 May 2026 — Written by Samuel HAYOT, chartered accountant (expert-comptable), Hayot Expertise Paris.

In a French business transfer, the sale protocol — the Share Purchase Agreement (SPA) for a share sale, or the acte de cession for a business asset sale (cession de fonds de commerce) — is the document that turns an expression of interest into a legally structured transaction. It is the instrument that fixes the price, the warranties, the timetable and the obligations of each party before the final completion deed is signed.

In short: the sale protocol locks in the economic and legal conditions of the transfer — price mechanics, guarantee of assets and liabilities (garantie d'actif et de passif, GAP), earn-out, conditions precedent, and non-compete undertakings. Its precision determines whether the closing will be smooth or contentious, and constitutes the reference framework for everything that follows.

Before examining the individual clauses, it helps to position the protocol within the actual sequence of a transaction. Four stages follow one another, each conditioning the next.

The most strategically important phase for the advisory team is phase 3. This is where gaps between what the parties thought they had agreed and what is actually written become visible — with consequences that are difficult to reverse once closing is triggered.

The LOI is not the protocol. It precedes the due diligence and does not, in general, bind the parties to completing the transaction — except on a small number of specific points: exclusivity, confidentiality, and responsibility for audit costs.

What a LOI must address clearly:

• The indicative valuation range (and the accounting basis on which it is calculated)
• The exclusivity period (typically 4 to 8 weeks)
• The scope of the preliminary audit
• The general conditions for completing the transaction

Our reading: a LOI that is too vague on valuation creates serious misunderstandings at the protocol stage. We recommend formalising the valuation assumptions in the LOI itself rather than deferring everything to the SPA.

The legal form of the acquisition governs the entire structure of the protocol.

In the vast majority of SME transactions, the buyer prefers a business asset sale (no hidden liabilities), while the seller prefers a share sale (more favourable tax treatment on the capital gain — plus-value). This trade-off is resolved upstream, before the LOI is even signed.

For further guidance on valuation and transaction structuring, see our articles on business transfer and valuation and on establishing the value of a business.

1. Price and adjustment mechanics#

The headline price is only the starting point. The protocol must precisely describe:

• The valuation basis (enterprise value vs equity value)
• The adjustment mechanism (locked-box or completion accounts)
• The definition of net debt and normalised working capital (besoin en fonds de roulement normatif)
• The payment schedule: deposit at signing, balance at completion

The underestimated risk: post-closing price adjustment on working capital. If the definition of normalised working capital is imprecise in the protocol, buyer and seller may reach divergent calculations running to several hundreds of thousands of euros. This is one of the most frequent sources of litigation we observe, arising purely from that imprecision.

2. The earn-out: a useful bridge, but a clause that needs careful drafting#

An earn-out defers part of the price by linking it to the future financial performance of the business. It is particularly well-suited when the seller remains operationally involved in the company after completion.

Worked example: a business owner sells his SME for a base price of €800,000. The parties agree an earn-out of €200,000, payable in two annual instalments of €100,000 each, conditional on revenue reaching €1.2m and EBITDA remaining above 15% for each of the financial years 2026 and 2027. The protocol specifies: the EBITDA calculation method, the deadline for delivering the accounts, the dispute procedure, and — critically — the conditions under which the buyer is prohibited from deliberately depressing performance to avoid payment.

This last point is decisive. Without an anti-manipulation clause, the earn-out can be rendered worthless by unilateral management decisions taken by the buyer after closing.

3. The guarantee of assets and liabilities (garantie d'actif et de passif — GAP)#

The GAP is probably the most heavily negotiated clause in a French share sale. It commits the seller to indemnify the buyer if an undisclosed liability or an asset shortfall is discovered after completion.

Key points the protocol must address:

• Scope: which categories are covered (tax, social security, commercial, environmental)?
• De minimis threshold: below which no indemnification is due (for example €5,000)
• Cap: maximum indemnification amount (often 30% to 100% of the price)
• Duration: generally 3 years for tax risk, 5 years for social security risk
• Security mechanism: escrow account or first-demand bank guarantee

Field case: in one SME sale in the manufacturing sector accompanied by the firm, an URSSAF (French social security authority) reassessment covering three prior financial years was notified eighteen months after closing. The GAP had been drafted with insufficient precision on the definition of "disclosed liabilities". It took ten months of negotiation between lawyers to reach a settlement. More precise drafting at the protocol stage would have avoided that cost entirely.

4. Conditions precedent#

A condition precedent is a future uncertain event whose occurrence is required before the sale becomes legally effective (Art. 1583 Code civil for the property transfer). The most common in French transactions:

• Obtaining the buyer's bank financing
• The landlord's consent to assignment of the bail commercial (commercial lease)
• Clearance from a regulatory authority (Autorité de la concurrence, sector-specific authorisations)
• Absence of a material adverse change
• Release of a charge or pledge (nantissement) over the business

Each condition must carry a longstop date and a clear waiver procedure. If the condition is not satisfied by the agreed date, the protocol must specify which party may waive it and within what period.

5. The non-compete clause#

The non-compete clause prevents the seller from carrying on a competing activity for a defined period after completion. It is essential to protect the value being transferred.

To be enforceable under French law, the clause must be:

• Time-limited (in practice 2 to 3 years)
• Geographically limited to a zone consistent with the actual area of the business
• Proportionate to the activity sold
• Accompanied by financial compensation in certain cases (particularly where the seller is also an employee)

6. The transition and management handover clause#

When the seller is the operating manager, the buyer often requires a transition period of 3 to 12 months. The protocol must specify: duration, remuneration, scope of responsibilities retained, and early termination conditions.

The lawyer drafts. The notary authenticates. The chartered accountant (expert-comptable) verifies that the legal text accurately reflects the financial reality. Concrete contributions to the protocol review:

• Price/accounts consistency check: do the reference accounts match those that were used for the valuation?
• Normalised working capital definition: a 5% variance on working capital can represent tens or hundreds of thousands of euros
• GAP review: do the guaranteed categories correspond to the risks identified during due diligence?
• Earn-out structure: are the performance metrics (revenue, EBITDA, net profit) calculable without ambiguity?
• Timetable check: are the closing dates compatible with the real timelines for producing completion accounts?

For further guidance on the wealth and tax structuring that accompanies a business sale, see our article on how to optimise your personal wealth.

• Electronic invoicing and working capital: France's mandatory e-invoicing reform, phased in through the Portail Public de Facturation, is altering cash-flow patterns and may affect the working capital reference position. This should be explicitly addressed in the normalised working capital definition.
• Reinforced URSSAF audits: URSSAF inspections covering the 2021–2024 period remain frequent, particularly following COVID-era exceptional measures. The GAP on social security risk deserves particular attention in transactions completing in 2026.
• Interest rates and earn-out present value: the significant rate movements since 2022 change the present value of long-dated earn-outs. Check whether the earn-out clause includes a discounting or indexation provision.

• Reference accounts are identified and attached as an exhibit to the protocol
• Price mechanism is clearly written and applicable without ambiguity
• Net debt and normalised working capital are precisely defined
• Each condition precedent has a longstop date
• GAP covers tax, social security and commercial risk with a defined de minimis threshold and cap
• Earn-out (if present) is protected against post-closing manipulation
• Non-compete clause meets French validity requirements
• Transition period is properly framed (duration, remuneration, scope)
• Timetable is consistent with actual lead times (audit, financing, administrative formalities)
• Chartered accountant has validated consistency between legal text and financial figures

We review the sale protocol on its economic and accounting dimensions: price/accounts consistency, earn-out drafting, GAP scope, and normalised working capital definition. The objective is to ensure that the legal document and the financial figures tell the same story.

This article is for information purposes only. It does not replace a case-specific review by a chartered accountant (expert-comptable) and a lawyer specialising in corporate and commercial law. The rules and thresholds mentioned reflect the legal position as at 25 May 2026 and may change. Please consult a professional before taking any decision.