Commercial Leases/Business Goodwill

In French law, the fonds de commerce (business goodwill or business assets) is a unique legal construct that ecompasses the goods and rights of a merchant's business. It is not a person or an autonomous estate: it is a factual universality organized around a center of gravity - the customer base - comprised, depending on the case, by tangible and intangible elements. The establishment of this universal structure has profoundly structured exchanges: it has enabled the organization of the transfer of activities (sale, lease-management), the provision of dedicated secruity for financing  in the form of pledges (nantissement), and, more broadly, the provision of stable asset value to activities previously considered in  a fragmented manner.

This concept, absent from the Commercial Code of 1807, gradually became established due to very specific needs. Initially fiscal needs, with the Law of 28 February 1872 instituting transfer duties on the overall sale of operating elements; then financial needs, with the Law of 1 March 1898 (now repealed) which paved the way for pledges without displacement (gages sans déplacement) by registration . The legal framework properly took shape with the Law of 17 March 1909, which set the rules for the publication of transfers, “vendor's privilege”, pledges and seizure, supplemented during times of crisis by the Law of 29 June 1935, which established rules on sales intended to be permanent . Simultaneously, the Law of 30 June 1926 on commercial property consolidated the right to lease and, by extension, enhanced the economic value of businesses. Subsequent legislation refined the publication formalities and introduced special regimes (lease-management, judicial pledge, leasing). More recently, Law No 2019-744 of 19 July 2019 modernized the whole by repealing Article L. 141-1 of the Commercial Code. This journey reveals the originality of a French model, shaped by practice and finance more than by theoretical abstraction: where other systems favor the category of “enterprise” (Germany, Italy) or goodwill (common law countries), French law French law has developed a distinctive legal construct - readily assignable and subject to pledge -which brings together, around the customer base, the key elements required for business operations. 

The composition of the goodwill reflects this purpose. Typically included within its scope are tangible elements - such as equipment and merchandise—and intangible elements—trade name, signage, commercial lease rights, and industrial property rights like trademarks or patents. The list is not fixed: these elements only make sense as they contribute to the operation and connect a client base to the business. The client base is not ancillary; it conditions the very existence of the business. This leads to two major consequences. On one hand, certain elements may be absent without destroying the business if the client base remains. On the other hand, assets that are essential in practice, primarily real estate, remain excluded from the scope, confirming the movable nature of the business and justifying specific mechanisms—primarily the commercial lease right—to ensure continuity of operation. For the same reason, the transfer of the business does not, in principle, entail the transfer of operating claims and debts, unless otherwise stipulated by clause or law: the universality remains, in fact, adjustable by will, but incomplete with regard to a true dedicated estate.

The interest of the mechanism is measured by its functions. In terms of circulation, identifying a coherent economic entity facilitates transfers under a protective regime: information mentions, notice, creditors' opposition period, escrow of the price. In credit matters, the ability to pledge the value of the business has been decisive: a creditor can secure a claim on an asset that remains in operation, subject to registrations and renewals, which closely ties the concept to trade financing. From the perspective of legal certainty, the structure of notices and priorities (seller's privilege, enforceability) clarifies the position of each party—buyer, creditors, lessor—and stabilizes expectations. The fiscal adjustments made over time have aimed to support these functions without excessively increasing the cost of operations.

The business assets are not just a legal category: they are an economic value. The possibility of selling them and using them as collateral implies a price that capitalizes on the ability to attract customers, the strength of a location—via the commercial lease—and the distinctive power of signs (name, signage, trademark). This valuation permeates the entire system: the sale is regulated to preserve the buyer's information and creditors' access to the price; the pledge depends on registrations and renewals, compliance with which conditions the creditor's preference; the lease, an intangible element of the business assets, provides stability that enhances value while imposing delivery and compliance requirements. The whole transforms the operation into a transferable and financeable asset, while introducing costs and frictions that the law attempts to balance.

Legal scholars also highlight more prosaic limitations. The business goodwill remains an imperfect assembly: real estate is excluded, operating claims and debts do not transfer automatically, and its boundaries blur within integrated networks, franchises, or collective stores, where there is hesitation between the customer base of the point of sale and that of the network. Added to this is an economic critique, often termed “parasitism": the customer base, capitalized in a transferable asset, becomes the object of a price that, for the buyer, is analyzed as a market access rent—a "location rent” or "customer rent"—paid upfront to benefit from a location, a name, or signage, independently of future performance. This logic is not illegitimate in itself, as it compensates for prior accumulation work, but it can lead to overvaluation when the price of the business becomes disconnected from realistic profit capacities. It is then understandable that, depending on circumstances, transfers decline despite incentive reforms: the cumulative cost of rights, fees, and compliance, added to this entry rent, can discourage buyers and ultimately impact the prices charged to the public.

Ultimately, goodwill remains a mechanism serving value creation: it captures the convergence of a customer base, a location, and distinctive signs to enable its transfer, use as collateral, and management. Its strength lies in the coherence it brings to business operations and the security it provides to stakeholders; its weakness, in the fluidity of its boundaries and the costs its protection may incur. The future of the concept lies neither in its sanctification nor in its abandonment, but in a measured updating: clarifying what does -or does not - fall within this universality of movable assets, simplifying publication formalities and price allocation, and stabilizing the criteria for customer attribution. On these terms, the business asset will continue to fulfill its primary function: making the value of a business visible, transferable, and financeable.

In line with this approach, this study will begin by examining its tangible and intangible components (Title I), continue with an analysis of its circulation through sale (Title II), then address its exploitation by third parties through lease management (Title III), before concluding with the allocation of the goodwill to as security for creditors through pledges (Title IV).

356. Introduction