Activating the Pacte Papin: steps, conditions and timeline

First question: will the text be voted

The next step is to have the Pacte Papin adopted as tax provisions voted in the 2027 budget. The parliamentary process runs as follows.

1. 30 September 2026Budget bill tabled

   The government plans to table the bill at the National Assembly on 30 September, the constitutional deadline being 6 October. This is when the exact wording of the articles becomes public, with the explanatory memorandum and the impact assessment. The first date to watch.

2. 12 to 20 October 2026Debate and vote on the first part

   The revenue part carries the tax measures, and therefore the Pacte Papin. Formal vote on 20 October. Amendments tabled at this stage can change the rates and the eligibility conditions.

3. 27 October to 17 November 2026Second part and vote on the whole bill

   Review of ministerial appropriations, then vote on the whole budget at first reading, scheduled for 17 November.

4. November and December 2026Senate and shuttle between the chambers

   Transmission to the Senate, possible joint committee, final reading, then promulgation before the end of the year.

5. 1 January 2027Likely entry into force

   Subject to the final wording. For registration duties, the usual rule links application to the date of the deed of sale.

Two caveats deserve to be stated clearly. The Assembly has given itself five weeks to vote a text that took fourteen the previous year. And the ordinary session closes on 28 February 2027 to make way for the presidential campaign, whose first round is set for 18 April. A budget deadlock, adoption through Article 49.3 or a motion of censure could make the scheme disappear. No acquisition decision should rest on its adoption.

Second question: will you be eligible

The final conditions will appear in the text. Three requirements have, however, been announced or can be anticipated by analogy with existing regimes.

Employee status

The scheme would cover individuals as well as legal entities, when several employees set up a company to buy the business. The neighbouring Article 732 ter regime currently requires a full-time permanent contract for at least two years, or apprentice status. Anticipate a comparable length-of-service requirement.

The continuity commitment

The ministry describes an exchange in which the buyer commits to continuing the business. The existing regime requires the business to be continued effectively and continuously and the company to be run effectively for the five years following the buyout. This commitment is not symbolic; it conditions keeping the advantage.

The seller's profile

For the capital gains strand, retirement remains the way in. It takes five years in an effective, paid management position before the sale, and claiming one's pension within the twenty-four months before or after the sale. The detail of the calculation is in our worked example.

The operational reverse schedule

A well-run internal buyout takes between nine and fifteen months from the first serious discussion to closing. Here is the sequence we apply on our deals.

1. Months 1 and 2Scoping

   Identify the group of buyers and check that each of them is truly committed, which is never a given. Set a valuation range. Check the target's legal form, since an SAS is already at 0.1% and will gain nothing from the registration duties strand. Put a figure on each person's real capacity to contribute. This step brings down half of all projects, and it is a good thing that they fall early.

2. Months 2 and 3Structuring

   Choose between a direct acquisition by the individuals and an acquisition through a joint holding company. This choice determines access to the existing allowance and, if the pact is voted, the reach of the new rate. Draft the shareholders' agreement, dealing from the outset with the exit, death and departure clauses. Negotiate and sign the letter of intent.

3. Months 3 and 4Informing the employees

   For companies with fewer than 250 employees, the law requires employees to be informed of a planned sale at least two months before it is concluded, so that they can make an offer. In an internal buyout, this obligation is often seen as a formality. It is not: failing to comply is sanctionable and the way it is handled shapes the social climate of the buyout.

4. Months 4 to 7Financing and audits

   Putting together the bank file, negotiating the vendor loan with the seller, a Bpifrance guarantee where applicable, financial, employment, tax and environmental due diligence. The longest and most uncertain phase.

5. Months 7 to 9Documentation and closing

   Drafting the sale agreement, the asset and liability warranty, the conditions precedent, lifting the conditions and signing.

6. Within a month of closingRegistering the deed

   The deed of sale must be registered with the business tax office and the duties paid within a month of signing. This is when the rate applies, and therefore the moment that determines whether or not the deal falls under the Pacte Papin.

7. Following yearTax formalities

   Capital gains return filed by the seller and, where there is a vendor loan, a request to pay the tax in instalments. This request is made to the public accountant and requires guarantees to be provided. It is not granted automatically.

8. Next five yearsKeeping the commitments

   Continuing the business and its effective management. Any breach can lead to the advantage being withdrawn. Insolvency proceedings opened within the five years do not call into question the Article 732 ter allowance, nor do cases of force majeure such as the buyer's death or incapacity for work.

The question of the signing date

If your deal can be signed equally well in December 2026 or in January 2027, the question of postponing it is a legitimate one. On a €1m share sale, the gap between 3% and 0.1% comes to nearly €30,000.

Three caveats before deciding. The text may not be adopted, in which case the postponement will have gained nothing. The final eligibility conditions may exclude your configuration. And postponing closing also costs money, in advisory fees, execution risk and seller fatigue. A 64-year-old owner-manager who has decided to leave will not wait for a parliamentary vote.

Our recommendation is to prepare the deal without depending on the scheme, to follow the text from its tabling on 30 September, then to adjust the signing date only if adoption is certain and the gain clearly exceeds the cost of the delay.

What to do right now

Three actions cost nothing and keep every option open.

Check the length of service and status of each prospective buyer. A two-year service condition has to be prepared in advance; it cannot be made up at closing.

Check the date on which the seller can claim their pension. The twenty-four-month window structures the whole timeline of the deal, and a shift of a few months means losing eligibility for the allowance.

Put a figure on the equity the group can contribute. It is this line, not tax, that decides the fate of most internal buyouts.

Frequently asked questions