FRANCE Law and Practice Contributed by: Elodie Mulon, Jennifer Tervil, Romane Lemaitre and Emmanuelle Bonboire-Barthélémy, Chauveau Mulon & Associés
(b) a clause excluding professional assets from a participation in acquisition regime ( participation aux acquêts ). • Statutory clauses: in addition to the marriage con - tract, company law allows interference in govern - ance to be anticipated and limited though specific clauses: (a) the spouse in a community property regime may sign a waiver of partnership status or a spousal agreement, preventing the spouse from automatically becoming a shareholder; and (b) statutory pre-emption or approval clauses can be included to control the identity of sharehold - ers and prevent any unwanted interference in the management or shareholding of the com - pany. The Dutreil Pact (Articles 787 B and 787 C of the CGI) is the primary strategy for family business transfers in France. It allows a 75% reduction on the value of securities transferred free of charge (through donation or inheritance), subject to strict conditions: • a collective commitment to retain the securities for at least two years; • an individual commitment by each beneficiary to retain the securities for an additional four years; and • at least one of the signatories must hold a man - agement position for the duration of the collective commitment and for the three years following the transfer. 4.2 Succession Planning The Dutreil Pact This mechanism is applicable to companies engaged in operational activities or holding companies. It requires rigorous planning and comprehensive docu - mentation, including annual certificates to be provided to the tax authorities. Additional transfer and governance mechanisms exist to ensure an optimised transfer and prevent conflicts. Shared Donation (Donation Partage) Shared donation is often used in conjunction with the Dutreil Pact. It allows:
• values to be fixed at the time of transfer, thus avoiding future conflicts; • a fair distribution of securities and other assets among the heirs; and • the tax benefits of the Dutreil Pact to be applied when securities are transferred under this scheme. Family Buy-Out (FBO) An FBO is a hybrid strategy that combines donation and transfer for consideration: • the director gives part of their securities to the buyer (often one of their children); • the buyer pays a cash adjustment to their co-heirs via a family holding company created for this pur - pose; and • the holding company can finance this cash pay - ment through debt (LBO), allowing for a gradual transfer financed by the company’s future results. Statutory Arrangements Specific statutory clauses make it possible to secure governance, including: • approval, temporary inalienability or exclusion clauses; and • clauses strengthening the powers of the designat - ed manager or establishing family majority control. Posthumous Mandate (Mandat à Effet Posthume) This mandate allows a representative to be appointed to manage the securities or the company after the founder’s death, for a period of two to five years. It prevents disorganised management by the heirs and secures the transition. This mechanism is particularly The market value, which forms the basis for calculat - ing transfer duties, is defined by Articles 666 and 761 of the CGI and Article L. 17 of the Tax Procedures Book (LPF). According to these provisions, the actual market value corresponds to the price that could be obtained through the interplay of supply and demand on a real market on the date of the taxable event, ie, generally on the date of death. relevant for sole proprietorships. 4.3 Transfer of Partial Interest
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