CHAPTER THREE SALE OF A BUSINESS SECTION ONE GENERAL PROVISIONS
Article 122. Civil Code Applicable
Without prejudice to the provisions of this chapter, the provisions of Article 2266-2367 of the Civil Code shall apply to the sale of a business.
Article 123. Scope of Application of this Chapter
1/ The provisions of this chapter regarding the sale of a business shall apply:
- to any sale or assignment, even under a disguised form;
- to any sale by auction at the request of joint owners;
- to any distribution accompanied by compensation, where such sale, assignment or distribution relates to a business or its goodwill or to a branch or representative office assigned without the principal business being assigned or the goodwill of such branch or representative office.
2/ The provisions of this chapter shall not apply to the sale of individual parts of a business other than the goodwill, unless such sale entails or conceals the sale of the business or of the goodwill of a business.
SECTION TWO FORMALITIES
Article 124. Sale to be in Writing
The sale of a business shall be null and void unless evidenced in writing.
Article 125. Particulars in the Contract of Sale
The contract of sale shall specify:
1/ The turnover and profits made during the last three financial years or since the business was created or acquired by the seller, where such creation or acquisition took place less than three years before the sale;
2/ Where the business is carried on in premises let out for hire, the date on which the contract of lease was made and is to expire and the name and address of the lessor;
3/ The mortgage on the business, if any.
Article 126. Cancellation of the Contract
1/ The court may cancel the contract of sale on the application of the buyer where it is of the opinion that the buyer was injured by the failure to comply with any of the requirements provided in Article125.
2/ The court may cancel the contract of sale or reduce the price of the sale on the application of the buyer where it is of opinion that the buyer was injured by any inaccurate statement made under Article 125.
3/ Proceedings under Sub-Article (1) and (2) of this Article shall be instituted within a year starting from the date on which the contract was made.
SECTION THREE DUTIES OF THE SELLER
Article 127. Duty to Hand Over
1/ The seller shall hand over the business to the buyer.
2/ Unless otherwise agreed, the sale of a business implies the sale of all the constituent parts of such business.
3/ The seller shall enable the buyer to take over the goodwill by handing to him all necessary documents and information.
4/ The relevant provisions of the Civil Code and of special laws shall apply to the assignment of intellectual property rights.
Article 128. Books and accounts
1/ On the day of the sale, the seller and the buyer shall check all accounts and prepare an inventory of all accounting documents and books.
2/ The seller shall retain his books and accounting documents and the correspondence sent or received by him, but he shall, notwithstanding any provision to the contrary, keep them available for inspection by the buyer for a period of two years.
Article 129. Commercial Correspondence
The seller shall hand to the buyer all correspondence relating to the business which he may receive after the sale of the business.
Article 130. Seller Prohibited from Competing
1/ During five years from the sale, the seller shall refrain from doing any act of competition likely to injure the buyer. In particular, he may not carry on, in the vicinity of the business he sold, a trade similar to the trade carried on by the buyer.
2/ The contract of sale may specify the area and type of trade covered by such prohibition which shall in no case exceed five years.
Article 131. Rights of Subsequent Buyer
A prohibition under Article 130 of this Code shall be deemed to be an element of the business and may be enforced by the buyer and his heirs and by any subsequent buyer.
SECTION FOUR DUTIES OF THE BUYER
Article 132. Duty to Pay the Price
The buyer shall pay the price in the manner provided in the contract or, where no special provision is made, in
cash. Notwithstanding any agreement to the contrary, the provisions of Article 134 of this Code shall apply.
Article 133. Publication of the Sale
The buyer shall ensure that notice of sale is published in accordance with the provisions of Article 136-142 of this Code.
Article 134. Prohibition from Disposing of Proceeds of Sale
1/ After the sale, the price of the sale shall not be paid to the seller until the period of time for making applications to set aside expires or, where any such application has been made, until the rights of the creditors have been settled by agreement or by the court and such creditors have been paid.
2/ Unless what has been prescribed under Sub-Article
(1) of this Article is complied with, no payment or assignment of the claim shall affect the rights of the seller’s creditors.
3/ The contract of sale may provide that the buyer shall deposit the price of the sale with a third party. Any such deposit shall discharge the buyer from his
liabilities to the seller but the buyer shall remain liable to the seller’s creditors.
Article 135. Guarantee of the Seller
Until he is fully paid, the seller shall be secured by a legal mortgage and shall have the right to cancel the contract as provided in Article 145 to147 of this Code.
SECTION FIVE
PUBLICATION OF THE SALE AND RIGHTS OF THE SELLER’S CREDITORS
Article 136. Publication of the Sale
1/ Where a business is sold, the buyer shall ensure that a notice to this effect is published in a newspaper with wide circulation in the place where the head office of the business is situate.
2/ Where the business sold comprises branches or representative offices situate in different places, the notice under Sub-Article (1) of this Article shall be published in a newspaper with wide circulation in the places where each branch or agency is situate.
Article 137. Particulars to be Published
The notice under Article 136 shall show:
1/ the names and addresses of the seller and buyer; 2/ the type and address of the business;
3/ the type and address of any branch or representative office which may have been sold with the business;
4/ the date and nature of the contract of sale; 5/ the price of the sale;
6/ the address chosen for service of court summon at the place where the head office of the business is situated.
Article 138. Time within which to Publish Notices
1/ Notices under Article 136 shall be published within thirty consecutive days from the date on which the sale took place.
2/ Late notice shall be valid, but the buyer may be liable for any damage caused to the seller or to the seller’s creditors by reason of the delay.
Article 139. Application to Set Aside
1/ Within thirty consecutive days from the publication of the last notice, any creditor of the seller may, even where his claim is not due, move the court to set aside the proceeds of the sale and shall notify the buyer at his address for service.
2/ The application shall show the name and address of the creditor and the amount money he claims and basis of the claim.
3/ Where notice under Article 136 has not been published or did not contain all the particulars required under Article 137, an application to set aside may be made at any time.
4/ Until the application is decided on, the buyer or third party with whom the proceeds of the sale have been deposited may not dispose thereof and the provisions of Article 134 shall apply.
Article 140. Application Rejected
The seller may move the court to reject an application which is incomplete, or which is late or made without good cause.
Article 141. Distribution of the Proceeds of the Sale
1/ The proceeds of the sale shall be distributed by agreement or by order of the court between the creditors having a claim secured by the business and the creditors having made an application to set aside.
2/ The surplus, if any, shall be handed to the seller.
Article 142. Overbid by Creditors
1/ Where the price is insufficient to meet the claims of creditors having a claim secured by the business and creditors having made an application under Sub- Article (1) of Article 141 the creditors may move the court to order that the business be sold by auction.
2/ The court shall order the sale by auction and the price of the sale shall be higher by one tenth than the price specified in the contract of sale.
3/ Where no third party presents himself at the sale, the business shall be sold to the creditor making the highest bid.
CHAPTER FOUR MORTGAGE OF A BUSINESS SECTION ONE
GENERAL PROVISIONS
Article 143. Mortgage Possible
1/ A business may be mortgaged.
2/ Mortgage of a business flows from the law or a contract.
3/ Any mortgage, whether legal or contractual, may not be invoked against third parties unless it is registered pursuant to the relevant law.
4/ The provisions of this law shall apply to mortgage established on business without prejudice to special rules embodied in relevant laws concerning the establishment of security rights over movable property.
Article 144. Mortgage under the Law
1/ The following persons shall have their claims secured by a legal mortgage on the business:
- The seller of a business, for so long as the price of the sale has not been fully paid to him;
- The creditors of a bankrupt trader.
2/ The relevant provisions of Book Three of this Code shall apply to a mortgage under Sub-Article (1) (b) of this Article
SECTION TWO
LEGAL MORTGAGE OF THE SELLER ON THE BUSINESS AND ACTION FOR THE CANCELLATION OF THE CONTRACT OF SALE
Article 145. Legal Mortgage
1/ Where a person sells a business and the price of the sale is not fully paid to him, the payment of the price or such part thereof as is still due shall be secured by a legal mortgage on the business sold.
2/ The legal mortgage provided under Sub-Article (1) of this Article shall not apply unless the sale was made in writing and the mortgage has been registered in the manner provided by the relevant law.
3/ Particulars of the registration of legal mortgage shall be prescribed by special law.
Article 146. Action for the Cancellation of the Contract
The seller who is not fully paid has the right to cancel the contract of sale. The cancellation of the contract shall not affect third parties unless the mortgage has been registered as provided by the relevant law and the possibility of bringing an action for cancellation has been entered in the register in which the mortgage was registered.
Article 147. Bringing of Action for Cancellation
1/ The seller who cancels the contract on the ground that he has not been fully paid pursuant to Article 146 of this law shall, whatever the part of the price still due, take back the whole business in its condition on the day of cancellation, but not including new parts acquired after the contract of sale was made.
2/ The increase or reduction in the value of the price of the parts sold shall be taken into account in settling the rights of the seller and buyer.
SECTION THREE CONTRACTUAL MORTGAGE ON BUSINESS
Article 148. Conditions of Contractual Mortgage
1/ Any person who owns a business may mortgage such business notwithstanding that he does not operate it himself.
2/ The mortgage shall not be binding as between the parties unless it is made in writing nor can it be invoked against third parties unless registered in accordance with the relevant law.
3/ Particulars of the registration of contractual mortgage shall be prescribed by special law.
SECTION FOUR
RIGHTS OF SECURED CREDITORS ON THE BUSINESS
Article 149. Selling, Assignment and Letting out for Hire a Business
1/ Notwithstanding any provision to the contrary, the debtor may sell or otherwise assign his business or let it out for hire.
2/ It may be provided in the contract that the debtor shall pay forthwith the debt secured by the business in the event of the business being sold or otherwise assigned or let out for hire. Such contractual provision shall be of no effect unless it is entered in the register at the time of the registration of the contract.
Article 150. Reduction of the Guarantee
Where the debtor reduces or is likely to reduce the value of the business in particular by changing the site of the business, by failing to pay the rent of the premises in which the trade is carried on or by reducing the stocks, any secured creditor may demand that new sureties be produced and, where not produced, may move the court to order that his claim be paid forthwith.
Article 151. Relocation of the Business
1/ A debtor who wishes to relocate his business shall inform the creditors secured by the business. The debt shall become due immediately where such notice is not given or relocation is effected earlier than one month from the relocation date indicated in such notice.
2/ Creditors may exercise their rights under Article 150 of this law where they are of opinion that the relocation would reduce the value of the business.
3/ Where creditors agree to the relocation and the business relocated remains within the same regional state, the creditors shall apply for the entry in the register to be varied accordingly. Where the business is relocated to another regional state, the creditors shall ensure that a new entry is made in the register kept in the Region in whose jurisdiction the new head office is situate.
4/ Where an entry is varied or new entry is made under Sub-Article (3) of this Article such varied or new
entry shall have effect as from the day of the original entry.
Article 152. Right to Follow the Business
1/ A secured creditor may claim the business from a third party, as the mortgage follows the business into whatever hands it may fall.
2/ The third party to whom the business is transferred may avoid attachment of the business by paying fully all secured creditors.
Article 153. Scope of Mortgage
1/ The mortgage charges the business in its condition at the time of attachment, whatever the importance or value of its parts at that time.
2/ The mortgage shall apply to such parts only of the business as are expressly specified in the entry made in the register.
Article 154. Preferred Rights
1/ Secured creditors shall have a preferred right on the proceeds of the sale of a business.
2/ As between secured creditors, rights shall rank in accordance with the date on which such rights have been registered. Mortgage registered on the same day shall rank concurrently.
3/ The legal mortgage of the seller shall rank before contractual mortgages.
Article 155. Mortgages on Business of a Debtor Subject to Proceedings under Book Three
The relevant provision of Book Three of this Code shall apply where registered mortgages concern the business of a person subject to the proceedings in the Book Three.
CHAPTER FIVE HIRE OF A BUSINESS
Article 156. Civil Code Applicable
1/ A business may be let out for hire.
2/ Without prejudice to Article 157-167 of this Code, the provisions of Article 2896-2974 of the Civil Code shall apply where a business is let out for hire.
Article 157. Publication of the Contract of Lease
1/ A contract of lease shall not affect the rights of third parties unless it is in writing and it is published, on the application of either party, in a newspaper having wide circulation at the place where the head office of the business is situate.
2/ Notices published under Sub-Article (1) of this Article shall show:5
- The names and addresses of the lessor and lessee;
- The date and nature of the contract;
- The objects and address of the business; and
- The period of time for which the contract is entered into.
Article 158. Correction to the Commercial Registration
1/ The owner of the business let out for hire shall cause his name to be struck off the commercial register. His name shall not be so struck off the register if he happens to have other businesses not covered by the lease. In such a case, appropriate changes shall be made to the entry in the register as concerns the business that has been let out for hire.
2/ The lessee shall cause his name to be entered in the commercial register in accordance with the provisions of Title Four of this Book.
Article 159. Liability of the Lessor
Until the provisions of Article 157 and 158 of this law have been complied with, the owner of the business shall be jointly and severally liable with the lessee for any debt incurred by the lessee in operating the business.
Article 160. Particulars on business papers of the lessee
The contract of lease may be cancelled where the lessee fails to add the word “lessee” on all his business papers.
Article 161. Duties of Lessee
The contract of lease may be cancelled where the lessee fails to pay the agreed rent or does not operate the business with the care due from a good trader taking into account the objects of such business.
Article 162. Deposit of Guarantee
1/ In addition to the rent, the contract of lease may provide that the lessee shall produce sureties to
guarantee the fulfillment of his obligations towards the lessor or third parties.
2/ Notwithstanding any agreement to the contrary, the sureties shall be fully returned to the lessee where the lessee has fulfilled his obligation to the lessor and no application is made by the creditors within the period of time specified in Article 164 Sub-Article (3) of this Code.
Article 163. Lessee Personally to Carry out his Duties
The lessee may not assign the contract of lease without the written consent of the lessor, as a contract of lease is made on the basis of the personal qualification of the lessee.
Article 164. Termination of Contract of Lease to be Published
1/ Where the contract of lease terminates, notices to this effect shall be published as provided in Article 157 Sub-Article (1) of this Code.
2/ Notices published under Sub-Article (1) shall show:
- The names and addresses of the lessor and lessee;
- The type and address of the business;
- The date of termination of the contract of lease;
- The amount of the guarantee deposited under Article 162, if any.
3/ The owner of the business shall be liable to third parties where the sureties under Article 162 are returned to the lessee earlier than thirty consecutive days from the publication of the last notice.
Article 165. Debts of Lessee Shall become Due
Any claim which a creditor may have against the lessee shall become due on the termination of the contract of lease.
Article 166. Prohibition of Trade by the Lessor
1/ During the currency of the contract of lease, the owner of the business may not compete with the lessee by creating, buying or otherwise acquiring a business having similar objects.
2/ Where the owner disregards the prohibition provided in Sub-Article (1) of this Article, he shall be liable for damages and his business may be closed.
Article 167. Prohibition of Trade by the Lessee
1/ The parties may agree that, upon the termination of the contract of lease, the lessee shall not compete with the owner of the business by carrying on a trade similar to the trade carried on by the owner.
2/ Any such prohibition shall not be effective for more than five years.
CHAPTER SIX CONTRIBUTION OF A BUSINESS TO A BUSINESS
ORGANIZATION
Article 168. Contribution to be Published
Where a business is contributed to a business organization being formed, notices to this effect shall be published as provided in Article 151 Sub-Article (1) of this Code.
Article 169. Particulars to be Published
Notices published under Article 168 shall show: 1/ The names and addresses of the contributor;
2/ The objects and address of the business contributed;
3/ The firm-name, nature and head office of the business organization to which the contribution is made;
4/ The date of the memorandum of association of the business organization.
Article 170. Objection to Contribution
1/ During thirty consecutive days from the last publication made under Article 168 any creditor of the contributor may, even where his claim is not due, send a notice to the head office of the business organization to which the contribution was made to the effect that he objects to the contribution.
2/ Where no publication was made or the publication is invalid, a creditor may make his objection at any time.
Article 171. Steps Taken by Partners
1/ Within one month from an application under Article 170 being made any partner may move the court to dissolve the business organization under formation or to cancel the contribution made to the business organization in operation.
2/ Where an application under Sub-Article (1) is not made and the contribution is not cancelled, the business organization shall be jointly and severally liable with the contributor.
BOOK TWO BUSINESS ORGANIZATIONS
TITLE ONE GENERAL PROVISIONS
Article 172. Definition
1/ A business organization is an association established through a memorandum of association by persons who bring together contributions for the purpose of undertaking an economic activity in cooperation and of participating in the profit made.
2/ Notwithstanding the provisions of Sub-Article (1) of this Article, a joint venture is formed by an agreement concluded among members that is not disclosed to third parties.
3/ Notwithstanding Sub-Article (1) of this Article, for the purpose of this Code, one person private limited company is a business organization.
Article 173. Memorandum of Association
1/ A memorandum of association is an instrument drawn up to establish a business organization.
2/ The Ministry of Trade and Industry or another government agency vested with power by law may prepare a model memorandum of association.
3/ Freedom of contract of the parties shall be respected notwithstanding the provision under Sub-Article (2) of this Article In particular, any law or practice that requires parties to limit themselves to the terms of the model issued by a government agency shall be of no effect.
Article 174. Types of Business Organizations
The following are types of business organizations: 1/ General partnership;
2/ Limited partnership;
3/ Limited liability partnership;
4/ Joint venture;
5/ Share company;
6/ Private limited company;
7/ One person private limited company.
Article 175. Acquiring Legal Personality
All business organizations other than joint venture shall acquire legal personality upon registration in the commercial register.
Article 176. Name of a Business Organization
A business organization shall have a name. Such name may neither be contrary to the interests of another trader or business organization nor contravene the law and public morality.
Article 17. Condition of Formation of a Business Organization
The formation of a business organization, except joint venture, shall be of no effect unless established through a memorandum of association.
Article 178. Void Agreement
Any provision giving all the profits to only one or some of the members of a business organization shall be of no effect.
Article 179. Agency
[
1/ Any business organization, except a joint venture, shall acquire rights and incur liabilities by its agents in accordance with the provisions relating to agency.
2/ A business organization shall act in legal proceedings by its agents.
3/ Any summons to be served on a business organization shall be served at the head-office or the pertinent branch.
Article 180. Transferable Securities
With the exception of a share company, a business organization may not issue transferable securities.
Article 181. Grounds for Dissolution of a Business Organization
A business organization shall be dissolved where:
1/ the purpose for which the business organization was formed has been achieved or cannot be achieved;
2/ the term for which the business organization was formed expires, unless the members agree to continue the business organization;
3/ members agree to dissolve the business organization; 4/ notwithstanding a contrary agreement between members of the business organization, a court decides
to dissolve the business organization for good cause on the request of a member;
5/ a court declares the business organization bankrupt;
6/ There shall be good cause for the purpose of Sub- Article (4) of this Article, in particular, if there is a serious disagreement between members and the disagreement obstructs the attainment of the purpose of the organisation;
7/ Notwithstanding the provisions of Sub-Article (6) of this Article, disagreement between members shall not constitute a good enough cause to dissolve a business organisation where the organisation can attain its business purpose if some members are expelled by paying them their share.
Article 182. Cancellation from Commercial Register
1/ Where a business organization is dissolved and wound-up, the liquidators shall apply for the cancellation of the business organizations from the commercial register. The business organization shall cease to have legal personality starting from the day following the date of the cancellation.
2/ The cancellation of business organization from commercial register shall be published in a newspaper having wider circulation in the area where the business organization had its head office.
TITLE TWO GENERAL PARTNERSHIP
CHAPTER ONE GENERAL PROVISIONS
Article 183. Definition
A general partnership is a business organization consisting of partners who are each jointly and severally liable with the partnership itself for the obligations of the
partnership. Any agreement to the contrary may not be invoked against third parties.
Article 184. Name of the Partnership
1/ The name of the partnership shall consist of the names of all or at least two of the partners. The names of the partners shall be followed by the words “General partnership”. The name of the partnership may not contain names of persons who are not partners.
2/ Where a partner whose name is mentioned in the name of the partnership ceases to be a partner, the name of the partnership shall be changed accordingly.
3/ Where a person who is not a partner knowingly fails to object when his name is used in the partnership name, he shall be liable for the obligations of the partnership as a full partner.