Financial structuring, representations and warranties, and the choice between an MBO and a Scop. The acquisition of a company by its employees is a legal project in its own right. Numa Rengot, a partner in Franklin’s restructuring practice, explains the key issues in the September 2026 issue of Caractère.
In the feature by José Roda on internal buyouts in the graphic arts industry, Numa Rengot provides a lawyer’s perspective on transferring a business to its employees. He explains why familiarity between the seller and the buyers, reassuring though it may be, does not eliminate the need for preparation or independent advice.
An internal buyout that requires several years of preparation
A management buyout requires forward planning. Numa Rengot explains the mechanisms that enable future buyers to build up their contribution gradually, including the allocation of free shares, discounted stock options and a Manco-type holding company. The acquisition vehicle can then borrow from banks on the basis of the company’s financial statements.
The pitfalls of proximity: obtaining advice
Knowing the business is not enough. According to Numa Rengot, the close relationship built over time can be as blinding as it is enlightening, and this is one of the most common mistakes made by internal buyers.
« Internal buyers sometimes make the mistake of failing to seek advice. »
— Numa Rengot, Partner, Franklin (Caractère, September 2026)
Representations and warranties: a delicate exercise between colleagues
Negotiating representations and warranties with employees who have become buyers raises specific difficulties. When the CFO or HR Director is part of the buyer group, the seller grants them warranties relating to tax, employment and litigation matters, namely areas that fell precisely within their responsibilities.
MBO or Scop: choosing the right vehicle
Internal buyers have two options. An MBO is based on an acquisition holding company financed through debt, whereas a Scop is more collective and progressive. Numa Rengot cautions against idealising the Scop model. Without a distinctive business positioning, strong management and a robust equity base, it may result in failure. Knowing the company and having a strong sense of collective responsibility will not always be enough.
The legal framework: prior information for employees
Since the 2014 Hamon Act, the head of an SME with fewer than 250 employees who wishes to sell the business must inform the employees at least two months before the sale. This does not give employees a pre-emption right, but failure to comply with this obligation may result in the sale being declared void.
Numa Rengot’s advice: plan ahead and seek support
Prepare the transaction structure over several years, involve independent advisers from the outset and address the representations and warranties rigorously.
Read the article in Caractère
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