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M&A Transactions in France: Clarification of the Pre-Contractual Duty to Inform under French Law

When engaging in M&A transactions in France, the pre-contractual duty to inform is a critical legal concept governed by the French Civil Code. A recent ruling by the French Cour de cassation has clarified the obligations of sellers and buyers during this stage, especially regarding financial disclosures and the role of due diligence. This decision underscores the need for professional expertise — exactly where Coffra group excels in guiding clients through the complexities of French M&A transactions.

French M&A Case Overview

In this French case, a potential buyer had signed a letter of intent to acquire a company for €12.5 million, based on four years of financial statements. However, after conducting due diligence, the buyer found that provisions for doubtful receivables were understated by approximately €1.2 million. Seeking a price adjustment, the buyer was refused, and negotiations were terminated.

The buyer then initiated legal proceedings, alleging a breach of the pre-contractual duty to inform and an obligation to negotiate in good faith. The French Court of Appeal dismissed these claims, and the buyer appealed to the Cour de cassation, which ultimately rejected the appeal.

Key Takeaways from the French Cour de cassation Decision

This ruling provides several important lessons for companies engaging in M&A transactions in France:

Differences of opinion on valuation do not equate to a breach of the pre-contractual duty to inform, provided that:
- All relevant information is disclosed, and
- The buyer can conduct its own due diligence and investigations.
Under Article 1112-1 of the French Civil Code, sellers must give access to all information that may impact the transaction’s value. However, they are not responsible for the buyer’s interpretation of the information.
Even when accounts are audited and certified, buyers cannot simply rely on the seller’s financial interpretations — independent analysis is essential.

The French Supreme Court underlines that this duty is not unlimited; it is about providing accurate data so that the buyer can make an informed decision.

Why Professional Guidance Is Essential in French M&A

This decision reinforces a core principle of M&A transactions in France — buyers must do their own thorough due diligence. It also highlights the need to involve experienced professionals who understand French law and local market practices.

Whether it’s analyzing financial information, verifying statutory accounts, or negotiating fair terms, the Coffra groupprovides specialized expertise to help international investors navigate French M&A deals with confidence.

To learn more about our transaction advisory services and expertise