Buying an Existing Franchise in Belgium: Shares or Business Assets?

Taking over an existing franchise outlet may seem straightforward: the business is trading, customers know the location and sales figures are available. Yet the structure of the acquisition largely determines what you actually buy and which risks you take on. Anyone considering a franchise acquisition in Belgium should therefore address one question early: are you buying shares in the company that operates the outlet, or acquiring its business assets, known in Belgium as the handelsfonds? Settle that distinction before agreeing a price.

1. Establish exactly what is being sold

In a share purchase, you buy shares in the company that operates the outlet. The company continues to exist and, in principle, retains its assets, debts and contracts. Becoming a shareholder does not automatically make you personally liable for all the company’s debts, but those liabilities do affect the value and financial strength of your investment.

In a business asset purchase, you buy agreed components of the business. These might include stock, fixtures and fittings, the customer base and certain transferable rights. You do not buy the selling company itself. Specify precisely what is included and what is excluded: a description such as ‘the entire business’ is not clear enough.

A business asset purchase does not necessarily leave you free of historical liabilities. Tax and social security rules, as well as rules on the transfer of employees, may have implications. Have these examined separately.

Before valuing the business, ask for:

• the identity of the seller and the operating company;
• an inventory of the assets to be acquired;
• a summary of debts, security interests and ongoing disputes;
• a list of contracts needed to continue trading.

This helps you avoid negotiating for an outlet whose essential components do not belong to the seller.

2. Investigate the history behind the purchase price

In a share purchase, the business’s history remains within the same company. Look beyond the latest annual accounts to recent accounting records, tax returns, outstanding supplier invoices and potential claims. Also check any loans or current account balances involving the seller: will these be cleared on the sale, or will they still need to be repaid?

Distinguish between known debts and contingent liabilities. A supplier debt recorded in the accounts is visible. A disputed invoice, a notified tax inspection or an employee claim may only result in costs later. Ask the seller for written statements and supporting documents on these matters.

In a business asset purchase, the investigation shifts towards the assets being sold. Is the equipment owned, hired or leased? Is the stock saleable? Are there retention-of-title clauses or security interests affecting the transfer? Check that the seller can actually deliver everything included in the price.

Pay particular attention to tax and social security certificates and any notification formalities. When a business is transferred through an asset purchase, the buyer may, in certain circumstances, face liability for the seller’s debts. Ask a Belgian adviser to establish which certificates are needed, when they must be valid and how the transfer must be notified. A statement from the seller that ‘everything has been paid’ is no substitute for these checks.

3. Check whether the franchise can continue

Buying a trading shop is not the same as obtaining permission to continue using the franchise concept. In a business asset purchase, the franchise agreement does not transfer automatically. In a share purchase, the contracting party usually remains the same, but a change-of-control clause may still require prior consent.

Put a specific question to the franchisor: will the existing agreement remain in force, will it be transferred, or must I enter into a new agreement? Get the answer in writing, including any conditions and costs.

Belgium has specific pre-contractual rules for commercial cooperation agreements in Book X, Title 2 of the Code of Economic Law, notably Articles X.26 to X.33. Where these rules apply, the prospective franchisee must, in principle, receive the draft agreement and the pre-contractual disclosure document at least one month before entering into the agreement. General contract law and rules on unfair terms between businesses also play a role.

Have an adviser assess which disclosure obligations apply to your chosen acquisition structure. Do not assume that an existing outlet automatically falls outside these protections, or that every share transfer necessarily requires a new disclosure process. Plan the acquisition timetable accordingly.

4. Allocate the risks in the acquisition agreement

Turn the findings into specific contractual provisions. The agreement should set out which debts remain the seller’s responsibility, what representations the seller makes and how you can claim compensation if those representations prove incorrect. Also discuss notification deadlines, evidence requirements and any limits on liability.

Contractual protection is only valuable if the seller can pay when required. Discuss whether retaining part of the purchase price or obtaining another form of security would be appropriate. This requires a tailored approach, not a standard percentage.

Make any necessary franchisor consent and the proper transfer of essential assets conditions of completion. Have your accountant and solicitor review the same final documents: the price calculation and the legal terms must be consistent.

Practical conclusion: first decide what you are buying, then investigate the associated liabilities, and only then settle the final price. An existing franchise is a sound purchase only when both its history and the conditions for continuing to trade are clear.