Legal audit lawyer in Paris: put your SME in order before the sale, the shareholder or the bank.

The legal audit before a sale is carried out on the side of the company and its shareholders, before a buyer arrives. It lists what the buyer will find in the data room: up-to-date articles of association, registers, approval of the accounts, agreements with the director, key contracts, leases, security interests and disputes. Each anomaly identified can be regularised, documented or disclosed before discussions begin. This preparation matters because Article 1112-1 of the French Civil Code (Code civil) requires the communication of information whose importance is decisive for the other party's consent. Under Article 1137, intentional concealment of such information constitutes fraudulent misrepresentation (dol). A seller who knows of a difficulty and says nothing therefore faces a claim for annulment or damages. The audit aims less to embellish the company than to settle, document by document, what will be disclosed, guaranteed or corrected before signing. It also prepares the answers to the buyer's questions, which shortens the verification phase and limits late renegotiation of the price.

That argument is not enough to rule out fraudulent misrepresentation (dol). In a transfer of shares, a court of appeal had rejected annulment on the ground that the transferee, a former manager, should have made enquiries about the company's debts, current contracts and bank loan. The Court of Cassation overturned that decision, which it found had been made on "grounds that the transferee should have enquired, before the transfer, about the company's financial situation, which are insufficient to exclude the existence of fraudulent concealment, which always makes the resulting error excusable" (Cass. com., 18 September 2024, No. 23-10.183) (our translation). Article 1139 of the Civil Code provides that an error induced by fraudulent misrepresentation is always excusable. For the director preparing the sale of their SME, the practical consequence is clear: decisive information on liabilities, commitments and financing must be disclosed, and it is prudent to do so in writing in order to be able to prove it. The audit lists this information and checks that it appears in the documents given to the buyer, rather than relying on the buyer's own vigilance.

No. The duty of disclosure has a limited scope, as the Court of Cassation reminds us. It holds that "the pre-contractual duty of information covers only information that has a direct and necessary link with the content of the contract or the capacity of the parties, and whose importance is decisive for the other party's consent" (Cass. com., 14 May 2025, No. 23-17.948) (our translation). In that case, the claimant who relied on a failure to inform lost, for lack of establishing the decisive nature of the information in question. The decision therefore went against them and shows that the burden of proof rests on the person complaining. Article 1112-1 of the Civil Code also excludes from this duty the estimate of the value of the performance. The legal audit serves here to sort: on one side the decisive items to communicate and document, on the other the secondary ones. This distinction avoids two excesses, a data room silent on a sensitive point and a data room overloaded with documents without hierarchy, where the useful information gets lost.

It all depends on the company form and the articles of association. In a SARL, Article L. 223-14 of the Commercial Code makes the transfer of shares to persons outside the company subject to the consent of a majority of the shareholders representing at least half of the shares, unless the articles of association require a higher majority. The proposed transfer must be notified to the company and to each shareholder. The Paris Court of Appeal annulled a share transfer for lack of any notification, holding that "breach of the prescribed formalities results in the annulment of the transfer made" (CA Paris, pôle 5 ch. 9, 19 January 2023, No. 22/03006) (our translation). An annulled transfer is deemed never to have existed. In an SAS, Article L. 227-14 allows the articles of association to make any transfer of shares subject to the company's prior approval. Before a shareholder joins, the audit therefore re-reads the articles of association, any shareholders' agreement, earlier approval minutes and the keeping of the register of share transfers. An irregular chain of title undermines each person's status as shareholder and may call the planned transaction into question.

Yes, where they did not follow the procedure provided for the company form. In a SARL, Article L. 223-19 of the Commercial Code requires a report on agreements entered into with a manager or a shareholder, on which the general meeting votes. In an SAS, Article L. 227-10 provides for a report on agreements with the chairman, a company officer or a shareholder holding more than 10% of the voting rights. In both cases, an unapproved agreement takes effect, but the harmful consequences may remain the responsibility of the person concerned. For a public limited company (société anonyme) with a supervisory board, the Court of Cassation held that "failure to comply with the related-party agreements procedure constitutes, in itself, a breach of the statutory provisions applicable in this area and a fault within the meaning of Article L. 225-251" (Cass. com., 17 September 2025, No. 23-20.052) (our translation). The audit lists the leases granted by the director, their remuneration, current accounts and guarantees, then checks how they were handled under the provision applicable to the company's form.

The bank will in principle ask for the latest accounts, and it can consult those filed with the register. In a SARL, Article L. 223-26 of the Commercial Code requires the annual accounts to be submitted for the shareholders' approval within six months of the financial year-end, unless extended by the court. Failing that, the public prosecution or any interested person may apply to the president of the court for an urgent order to have the meeting convened. Article L. 232-22 then sets filing with the court registry within one month of approval, or within two months in the case of electronic filing. The audit checks consistency between the minutes, the filed accounts and the allocation of the result. It also identifies missing collective decisions, absent signatures and financial years left unapproved. These anomalies can often be regularised by ratification decisions, but it is better to deal with them before the credit institution or the investor notices them itself in its own review of the file.

Yes, because a missing or inaccurate declaration exposes the company to a court injunction and weakens its presentation to a bank or a buyer. Article L. 561-48 of the Monetary and Financial Code allows the president of the court, of their own motion or at the request of the public prosecutor (procureur de la République) or any interested person, to order a company, if necessary subject to a penalty, to declare its beneficial owners or to correct inaccurate or incomplete information. The provision also allows for the company to be struck off the register of its own motion in the event of non-compliance. The Court of Cassation has clarified that the entities subject to such an injunction "have, pursuant to Articles 496, paragraph 2, and 497 of the Code of Civil Procedure, the option of asking the president of the court that made it to withdraw the order" (Cass. com., 18 September 2024, No. 22-20.771) (our translation). The audit compares the declaration in force with the actual breakdown of share capital and voting rights, taking into account agreements, pledges over shares and indirect holdings.

In part, but the protection is subject to precise conditions. For guarantees entered into since 1 January 2022, earlier commitments remaining subject to the former law under Article 37 of the Order of 15 September 2021, Article 2297 of the Civil Code requires a guarantor who is an individual to write the statement of the commitment and its amount in their own hand, on pain of nullity. Article 2299 places on the professional creditor an obligation to warn where the principal debtor's commitment is unsuited to its financial capacity. Article 2300 reduces a manifestly disproportionate guarantee to the amount the guarantor could secure. A guarantor who relies on disproportion must still prove it. In a case governed by the former Consumer Code, the Versailles Court of Appeal recalled that "it is for the guarantor who relies on it to show the manifest disproportion of the commitment at the time it was entered into" (CA Versailles, ch. com. 3-2, 29 April 2025, No. 24/04166) (our translation). It upheld the order against the director-guarantor to pay more than €436,000, a result that went against them. The asset statement signed when the loan was granted must therefore be accurate and kept.

In principle no, for a facility of indefinite duration other than an occasional one. Article L. 313-12 of the Monetary and Financial Code requires written notification and a notice period of at least sixty days, on pain of nullity of the termination. The provision reserves two exceptions: seriously reprehensible conduct by the beneficiary, or an irremediably compromised situation. The Court of Cassation specifies that notification of termination at the expiry of a notice period "does not turn it into a fixed-term facility" (Cass. com., 20 September 2023, No. 22-15.878) (our translation). It also holds that "a business that suffers the reduction or interruption of a bank facility may, even after the notice period has expired, ask the bank for the reasons" (Cass. com., 30 November 2022, No. 21-17.703) (our translation). The audit carried out before a financing application therefore records the exact nature of each facility, the covenants, the early repayment clauses and the security granted, so that the director knows what the bank can do and within what time.

Because the law requires it in certain companies and failure to do so can be penalised. In its wording in force since 28 May 2026, Article L. 23-10-1 of the Commercial Code covers companies that are not required to set up a social and economic committee (CSE) exercising the powers provided for in the second paragraph of Article L. 2312-1 of the French Labour Code (Code du travail), that is, those of companies with at least fifty employees. Where the owner of a holding of more than 50% of the shares of a SARL, or of shares giving access to a majority of the capital of a company limited by shares, wishes to sell it, the employees are informed no later than one month before the sale. They can thus submit a purchase offer. The sale may take place before that period ends if each employee has stated their decision not to submit an offer. Where a liability action is brought, the court may, at the request of the public prosecution, impose a civil fine capped at 0.5% of the sale amount. The audit checks the headcount, the situation regarding the social and economic committee and the timetable of the transaction, in order to build this information into the sale's reverse timetable.

They can be, and this outcome often goes against them. The Court of Cassation approved a court of appeal which, after noting that the transfer covered all of the shares, had inferred that the deed was a commercial act. It held that the court of appeal, "having correctly stated that the transfer of control was assessed by reference to the transferee alone" (our translation), did not have to examine whether the two shares transferred by minority shareholders affected that control. It adds that the sellers' obligations "were performed jointly and severally, in the absence of a clause in that deed expressly excluding joint and several liability" (Cass. com., 30 August 2023, No. 22-10.466) (our translation). In that case, the minority sellers therefore remained bound to return part of the deposit on the same footing as the others. Before a joint sale, the audit identifies each shareholder's position and checks whether the sale and purchase agreement should expressly apportion the obligations of repayment and warranty between the sellers, rather than leaving joint and several liability to apply.

The price first follows the articles of association and the agreements between shareholders. The expert valuation under Article 1843-4 of the Civil Code comes into play only in the event of a dispute and in two situations: where the law refers to that provision to set the price of a transfer or buy-back, or where the articles of association provide for the transfer or buy-back of rights without their value being determined or determinable. The expert, appointed by the parties or, failing that, by the president of the court, then applies the valuation rules laid down in the articles of association or in any agreement binding the parties. The valuation date can change the result significantly. For the withdrawal of a partner from a civil-law company (société civile), the Court of Cassation holds, citing Articles 1843-4 and 1869 of the Civil Code and in the absence of contrary provisions in the articles of association, that "the value of the corporate rights of the withdrawing partner must be determined at the date closest to that of the reimbursement of the value of those rights" (Cass. com., 9 November 2022, No. 20-20.830) (our translation). In that case, the expert who had taken the date of their report as the reference had made a gross error, and the appeal to the Court of Cassation by the withdrawing partner was dismissed. This outcome is not a general rule for every exit of a partner from a commercial company. Before a shareholder joins or leaves, the audit therefore re-reads the valuation, exit and buy-back clauses, to check that they provide a workable method and date, and to identify the cases in which statutory expert valuation could be requested.

Yes, because the judge interprets the clause according to its terms and the parties' common intention. In a dispute over a liability warranty, the Paris Court of Appeal noted that, under the agreement, "the transferee must submit its claim within thirty days of the occurrence of the event which, in its view, triggers the warranty. However, this provision contains no forfeiture clause" (CA Paris, pôle 5 ch. 9, 6 May 2026, No. 25/13057) (our translation). The court overturned the judgment, declared the action admissible and ordered the guarantor to pay more than €35,000. For the seller, the outcome is unfavourable: they believed the thirty-day notification period was backed by forfeiture, whereas the court held that failure to comply with it "can give rise only to damages" (our translation), the warranty remaining confined within its own period of thirty-eight months. The audit carried out before the sale also prepares this text. It ties each risk identified to a specific representation, a cap, a deductible or an exclusion, and checks that the notification periods produce the intended effect. A warranty drafted from a readable audit limits later discussions about its scope.