A possibility often ignored by entrepreneurs wishing to open or take over a hotel, café or restaurant, taking over a business in difficulty can be an advantageous option for embarking on the adventure. It is possible to acquire a business at the bar of the commercial court.
Buying a company in difficulty has advantages: in particular the fact that the purchaser only takes over the company's assets (excluding any additional costs associated with the price); creditors are compensated on the sale price. Cash flow will be necessary to relaunch a business that is by definition failing, but often these investment or working capital needs will be less important than the overall envelope for starting a business or the price of buying a healthy company. The choice of the final purchaser is the work of the commercial court.
How do I find a Food Business to take over?
In the hotel and catering industry as elsewhere, it is common to find businesses in difficulty. The site of administrators and judicial representatives lists the various businesses in difficulty with a search engine by keywords: goodwill —> Hotels-Cafes-Restaurants (link here).
An offer to purchase may only be for an isolated asset: for example, kitchen equipment or bar equipment. It is possible to acquire in this way A license IV.
II — Procedure for acquiring a business in difficulty
There are several conditions that must be met in order to acquire a business in difficulty.
The quality of purchaser
The article L. 642-3 of the Commercial Code prohibits certain people from buying:
- The director in fact or in law;
- members of his immediate family;
- members of the management board or directors;
- The procedural bodies (administrator, controller).
The audit of the Dataroom
The first step is to express interest to the judicial administrator or liquidator who will ask for the signing of a confidentiality agreement in exchange for access to the Dateroom digital.
A paper audit of the company's situation can then be carried out using the documents provided. The main elements to check are:
- employment contracts;
- the distribution contract;
- the existence of licenses or approvals;
- the lease agreement;
- evidence of regulatory compliance.
A visit to the company can then usually be organized in the presence of the judicial administrator. An offer to purchase written by the purchaser is submitted to the judicial administrator or to the liquidator before the submission deadline.
Submission of an offer to buy back business
A takeover offer must then be submitted to the judicial administrator or the liquidator specifying the various elements that are subject to a takeover.
The offer must include the following mandatory items (Article L. 642-2 of the Commercial Code):
- the precise description of the goods, rights and contracts included in the offer;
- activity and funding forecasts;
- the price offered, the terms of payment, the quality of the providers of capital and, where applicable, of their guarantors. If the offer proposes recourse to a loan, it must specify the conditions, in particular the duration;
- the date of completion of the transfer;
- the level and prospects of employment justified by the activity in question;
- guarantees taken out in order to ensure the execution of the offer;
- forecasts for the sale of assets during the two years following the sale;
- the duration of each of the commitments made by the author of the offer.
When submitting an offer, the purchaser specifies in detail the elements of the business that he wishes to take over. He chooses the number of employees, the contracts, and the items of equipment taken over.
Once the various offers have been submitted, the judicial administrator or the liquidator sends to the various bidders a summary list of the offers that have been submitted. They can then improve their offer up to 48 hours before the hearing, but only in a more favorable way.
At that moment, the judicial administrator or the liquidator can organize meetings between the company's staff and the takeover candidate to obtain more information on his industrial and commercial project.
The concept of price increases : in the event of a contract providing for guarantees, these charges are included as accessories to the contract and are not included in the offer price.
The judicial decision
The judicial decision is taken by the commercial court in hearing after hearing the projects of the various candidates, the administrator or the liquidator, where applicable, the controller (s) and the staff representatives.
The act of sale of a café, restaurant or café in difficulty
The sale is then materialized by a legal act of sale containing the elements of the acquisition offer.
Judge selection criteria
The judge makes his decision according to criteria specific to companies in difficulty, which are mainly linked to the maintenance of the local economic fabric.
The criteria set out in the Commercial Code (article L.642-5) being:
- ensure the employment attached to the transferred property as long as possible (including: taking over as many employees as possible);
- payment to creditors (include: the price must be able to disinterest as many creditors as possible);
- the best performance guarantees (including: the ability to make the transferred fund viable).
In the context of a Hotel-Café-Restaurant, maintaining employment and the ability to maintain economic activity are key elements.
You want to know more about taking over a food business in court, our lawyers advise you.
