Asset Purchase Agreement French Translation

The spin-off of a company (splits) is a transaction in which all the assets and liabilities of the company are transferred to two or more new companies. The old company ceases to exist and its shareholders receive the shares issued by the new companies. Favourable treatment of mergers/tests for direct tax may also apply to the demerger, as the transfer of assets between members at or above the market value of the asset within a taxable group is an indirect subsidy that is only partially offset at the level of consolidated results (in accordance with the Corbfi case law). However, these indirect subsidies (to the extent that they were initially neutralized) must be neutralized in the GJ`s taxable results, while either the subsidy company or the indirect subsidy company leaves the tax group or the tax consolidation group no longer exists. In some cases, this may have effective tax effects. In order to encourage investment in industrial production, companies can deduct from their taxable income an amount equivalent to 40% of the initial costs of eligible assets (excluding financial expenses) that are used for their business if these assets are manufactured or acquired between April 15, 2015 and April 14, 2017. This measure also benefits companies that lease qualified assets under a lease or lease agreement with a call option concluded during this period. Thus, instead of deducting 100 per cent, companies can deduct 140 per cent of the value of assets acquired, manufactured or leased. The measure has been extended to fibre-optic equipment, HGVs and robots purchased or manufactured between January 1, 2016 and April 14, 2017. While asset acquisition may be considered a more flexible financing option, the purchase of shares may be more attractive, particularly with respect to the level of the registration tax and the right to transfer tax losses from the target entity. Some tax considerations, which are relevant to each method, are explained later in this report.

When a French target company is acquired with commercial losses, these losses can be used against its own future commercial profits, unless it experiences a “real change in activity” or changes its tax regime. The concept of “real change of activity” was recently clarified by French tax legislation. It now includes the addition, shutdown or transfer of an activity that results in an increase or decrease in turnover of more than 50 per cent (compared to the previous GJ) or the average number of employees and the gross amount of assets. The Charasse amendment rule applies when a member of the consolidated tax group acquires a company outside the consolidated group of shareholders, who directly or indirectly control the two companies (“control” is defined in the French code of commerce) and the target company becomes a member of the same consolidated tax group.