When a partner transfers his shares, the question of the fate of his partner’s current account must be dealt with. Indeed, the transfer of securities by a partner does not result in the automatic transfer to the purchaser of his debts in the partner’s current account.
Therefore, it is necessary that the deed of transfer of the securities deals with the fate of the debts in the partner’s current account belonging to the transferor. Failing this, the latter may claim the reimbursement of his current account as a member at any time.
The basic principle: the transferor keeps his partner’s current account
When the deed of transfer of the securities does not contain any indication of the fate of the current account of the transferring partner, the latter remains the holder of his debt and may request reimbursement thereof at any time after the transfer.
Unless otherwise stipulated in the articles of association or an act, the partner may demand reimbursement regardless of the company’s financial situation and regardless of whether the amount he claims exceeds the available cash. This situation may therefore be liable to lead to financial difficulties at the level of the company.
Therefore, it is important that the securities transfer deals with the fate of the debt in the current account of the assignor or that the debt in the current account of the shareholder is reimbursed before proceeding with the sale of the securities.
Deal with the fate of the partner’s current account in the deed of transfer of securities
In general, the transferor’s transfer of securities is accompanied by the transferor reimbursement of his partner’s current account so that he is no longer a creditor of the company at the end of the transaction. The partner’s current account debt can also be waived in favor of the company.
We will therefore discuss below the main possible solutions concerning the fate of the assignor’s current account, namely:
- A transfer of the associate’s current account from the transferor to the purchaser,
- A repayment plan for the debt in a partner’s current account,
- A total or partial waiver of the debt in the current account of the assignor.
The transfer of the partner’s current account to the purchaser of the securities
In the deed of sale, the purchaser and the assignor may provide that the assignment of the securities and the partner’s current account form an indivisible whole. In this case, it will be preferable to provide a sale price broken down between the sale price of the securities and the sale price of the partner’s current account.
This allows the parties to avoid taxation for capital gains and registration fees on the part of the price corresponding to the partner’s current account transfer. The partner’s current account’s sale price does not necessarily have to correspond to the amount shown in the balance sheet.
The reimbursement of the partner’s current account in the deed of transfer of the securities
When the transferor is expected to keep his partner’s current account, it is possible to define a repayment plan in the deed of the securities transfer and block the debt for a certain period.
This allows the acquirer to stagger the repayment of the receivable over time and preserve the business’s cash flow during the first months of the takeover. Failing that, the transferor could ask at any time for the reimbursement of his partner’s current account.
If possible, the transferor can also reimburse its receivables from a partner’s current account before transferring its securities.
The total or partial abandonment of the debt in the assignor’s current account of the assignor
Finally, the assignor can also completely or partially waive the amount of his debt in the partner’s current account before assigning his securities to the purchaser.
The maneuver allows the company to lighten the weight of its debt and avoid an outflow of cash. However, the amount of the abandonment constitutes taxable income and therefore generates income tax.