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BUSINESS LEASE AND TRANSFER

  • 23/07/2022
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What is a business? What are the legal events affecting it?

THE BUSINESS

The business is the complex of assets organised by the entrepreneur for the running of the business (art. 2555).
These assets may be tangible (machines) or intangible (licences).
What these assets have in common is their intended purpose, i.e. the exercise of productive activity.

THE TRANSFER OF THE BUSINESS

The transfer of a business (or business branch) involves the transfer of ownership of the assets forming part of the business and of the ownership of the legal relationships inherent therein.
The transfer is regulated under the profiles of the succession of contracts and the destiny of the relationships (assets and liabilities) belonging to the entrepreneur.

SUCCESSION IN CONTRACTS (2558 Civil Code)

"Unless otherwise agreed, the purchaser of the business succeeds to contracts entered into for the operation of the business that are not of a personal nature. The third party may, however, withdraw from the contract within three months of the notice of transfer if there is a just cause, except in this case, the liability of the transferor. The same provisions shall also apply to the usufructuary and tenant for the duration of the usufruct and tenancy".
It follows from the wording of the provision that:

1. the purchaser does not automatically take-over contracts of a personal nature concluded for the operation of the business (such as, for example, commercial leases).
For other relationships, take-over is automatic (no express agreement required) unless otherwise agreed;

2. notwithstanding the automatic take-over, the other contracting party is entitled to terminate the contract, provided it is for a just cause.
It is clear that the automatic take-over, provided for in order to preserve the business's integrity and productive functionality, may not prejudice the contractual freedom of the third contracting parties, who must nevertheless provide valid reasons (just cause) for not wishing to continue the contractual relationship with the purchaser.


CREDITS AND DEBTS RELATING TO THE BUSINESS ASSIGNED (2559-60 Civil Code)

"The assignment of claims relating to the transferred business, even in the absence of notification to the debtor or its acceptance, shall take effect, vis-à-vis third parties, from the time of registration of the transfer in the commercial register. However, the assigned debtor is discharged if he pays the transferor in good faith."
The same provisions also apply in the case of usufruct of the business if it extends to claims relating to the business.
The transferor is not discharged from debts, inherent in the operation of the transferred business prior to the transfer, unless the creditors have consented to it. In the transfer of a commercial business, the purchaser is also liable for the aforementioned debts, if they are apparent from the statutory books of account".

In simple terms:

a) Status of claims: the assignment has a different effect depending on the party concerned.
For the debtor the notification or acceptance of the assignment applies; for third parties the registration of the transfer in the commercial register.
Good faith releases the obligor who has paid the transferor.

b) Status of debts: the transferor is never released from its debts prior to the transfer unless creditors are released (consent must be given).
The purchaser of a commercial business (i.e. an enterprise professionally engaged in an organised economic activity for the purpose of producing or exchanging goods or services, pursuant to Art. 2082 of the Civil Code) is jointly and severally liable with the transferor for the debts arising from the statutory books of account.


USUFRUCT AND LEASING OF THE BUSINESS (2561-1 of the Civil Code)

"The usufructuary of the business must run it under the firm* that distinguishes it. He must manage the business without changing its destination and in such a way as to preserve the efficiency of the organisation and installations and the normal stock. If he does not fulfil this obligation or if he arbitrarily ceases to manage the business, the discipline provided for abuses of the usufructuary applies (Art. 1015 Civil Code). The difference between the inventory at the beginning and end of the usufruct shall be settled in money, based on the current values at the end of the usufruct. The provisions of the preceding article shall also apply in the case of the lease of the business".

* The name of the business (Art. 2563), represents, together with the sign and the trade mark, one of the distinctive signs of the business. It must consist of at least the surname or initials of the entrepreneur.

THE LEASE OF THE BUSINESS

In accordance with the dictate of Art. 2555, according to the Supreme Court, the object of a business lease contract is the whole of the assets intended for the exercise of the entrepreneurial activity, but such a contract differs from a commercial lease in terms of the object of the contract: in the commercial lease, in fact, the object is only the immovable property in which the activity is to be exercised and not also the assets instrumental to it (Court of Cassation 13689/2001).
For further details on the events of the lease contract with reference to the lease and the transfer of the business we refer to our previous article.


The provisions dictated for the transfer of a business also apply to usufruct and business leases for the duration of the usufruct and lease.

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