Closing a Business in France? Have more 1000+ Employees in the EU? What Community-Scale Employers Need to Know

MGG Legal explains what community-scale employers must do before closing an establishment in France.

Community-scale employer must search for a buyer before closing a business in France

Since 1st July 2013, community-scale employers – that is companies having at least 1,000 employees in the EU – have been obliged by French law to proactively search for a potential buyer prior to permanently closing a business activity in France (Law No. 504 of 14 June 2013).

Under these regulations the process, status and conditions of the search, the terms and conditions of the sale and the chosen buyer’s offer must be submitted to the local Works Council for opinion.

However, as of April 1st 2014, this obligation will be reinforced (pending the decision of the Constitutional Court expected in the coming weeks) through the courts and through financial penalties.

In the case that an employer does not look for a buyer or turns down an offer, then the local Works Council will have the right to challenge the employer’s decision before the commercial tribunal.

If a tribunal finds that the employer has not complied with its obligation to look for a buyer or has refused a “serious” offer – then it may impose a fine of up to €28,900 per employee dismissed (not exceeding 2 % of the annual turnover).

In addition, the employer could have to reimburse subsidies paid by the state, in order to foster employment and business, during the two-year period prior to the judgment.

These new provisions will apply if the closure of the establishment would trigger the dismissal of at least two employees.

As the concept of establishment is unclear, these provisions will be difficult to apply especially where there are no assets to sell.

For more information visit MGG LEGAL