#Acquisition Due Diligence Lawyer in France

Due diligence is the acquisition audit carried out before buying a company. It examines the legal, tax, employment and technical position of the target to inform the buyer’s decision. The due diligence lawyer organises the review of documents, identifies the risks and reflects the findings in the sale agreement. Hashtag Avocats, in Paris, assists buyers and investors on mergers and acquisitions, from the data room to the final report.

What is due diligence when acquiring a French company?

Due diligence is an in-depth audit of the target company before its acquisition. It gives the buyer a precise view of assets, liabilities and risks. It feeds into the price negotiation and the drafting of warranties. A rigorous audit avoids unpleasant surprises after closing.

This process extends the pre-contractual duty to inform. Article 1112-1 of the French Civil Code (Code civil) requires the party that knows information decisive for the other party’s consent to disclose it, where the other party is legitimately unaware of it. This duty does not cover the estimate of the value of the performance. Due diligence enables the buyer to collect and verify this information in an organised way. It also documents the level of diligence actually exercised.

Where minority shareholders wish to scrutinise questionable management, the law provides for a management expert review (expertise de gestion). Article L225-231 of the French Commercial Code (Code de commerce) allows shareholders holding at least 5% of the share capital to ask written questions about management transactions. If no satisfactory answer is given within one month, they may apply to the court in summary proceedings (référé) for the appointment of an expert. This mechanism remains separate from the contractual audit carried out in an acquisition.

The scope of due diligence

The legal audit of the target

The legal audit examines the target’s corporate structure. It checks title to the shares, the articles of association, the minutes and the shareholders’ agreements. It lists the material contracts, leases and administrative authorisations. It identifies change of control clauses likely to be triggered by the sale.

This audit also checks that past corporate decisions were validly taken. A meeting that was improperly convened or a shareholders’ agreement that was not complied with weakens the company. The auditor checks the chain of title to the shares since incorporation. The auditor makes sure that no security interest or pledge encumbers the shares being sold.

Tax due diligence

The tax audit checks that returns and payments comply. It assesses the risk of reassessment for financial years not yet time-barred. It analyses the regimes applied, tax losses carried forward and intra-group transactions. Our team works with the tax lawyer to quantify the target’s tax exposure.

Employment due diligence

The employment audit reviews employment contracts, the collective bargaining agreement and employee-related commitments. It identifies pending employment tribunal (prud’hommes) disputes and reclassification risks. It checks compliance with obligations on working time and staff representation. Employment liabilities often carry significant weight in the negotiation.

This audit also examines variable pay and the applicable collective agreements. It assesses pension commitments and the corresponding provisions. It checks that the use of external service providers and freelancers is lawful. Retaining a key executive may determine the value of the target.

IP/IT and environmental due diligence

The IP/IT audit checks ownership of intellectual property rights and software. It reviews licences, domain names and IT contracts. It examines the GDPR compliance of data processing. The environmental audit, for its part, assesses obligations relating to sites, classified installations (installations classées) and remediation.

Ownership of software developed in-house deserves particular attention. A poorly documented assignment of rights by a service provider creates a gap in the intangible assets. The auditor also checks the open source components incorporated and their licences. Our team draws on its expertise in IT contracts to secure this area.

The data room and the due diligence report

The data room is the space, now virtual, where the seller makes the target’s documents available. The buyer’s advisers review the documents there under a confidentiality undertaking. A well-structured data room speeds up the audit and limits back-and-forth.

The data room often contains personal data: employment contracts, customer files, correspondence. Disclosing it must comply with the GDPR. Article 28 of the General Data Protection Regulation governs the use of a processor, for example the provider hosting the platform, through a written contract specifying the subject matter, the duration and the controller’s instructions. Minimising and anonymising sensitive data remain recommended.

The due diligence report summarises the audit findings. It ranks the risks by type and severity. It makes practical recommendations: price adjustment, specific indemnities or conditions precedent. This document guides the buyer’s decision and the next stage of the negotiation.

The report distinguishes confirmed findings from points that remain uncertain. Where possible, it quantifies the financial exposure of each risk. It also flags the areas where the data room remained incomplete. This level of precision allows the buyer to make an informed decision.

Red flags and how they link to the SPA warranties

Red flags are the warning signs revealed by the audit. A major dispute with no provision, a key contract that can be terminated, a tax irregularity or a GDPR compliance gap are examples. Each red flag calls for an appropriate contractual response.

The audit findings translate directly into the SPA (share purchase agreement) (in French). An identified risk becomes a specific representation, a dedicated indemnity or a condition precedent. The warranty and indemnity (garantie d’actif et de passif) covers pre-existing liabilities revealed after the sale. Due diligence therefore determines how the protections are calibrated.

Every situation is different. The scope of the audit depends on the sector, the size of the target and the buyer’s risk profile. Our team adapts the scope and coordinates the specialists in corporate law, tax and intellectual property.

FAQ

How long does due diligence take?

The duration depends on the size and complexity of the target. An audit may take a few weeks for an SME and several months for a group. The quality of the data room has a strong influence on the pace. A realistic timetable avoids a rushed audit.

Who pays for the audit?

The buyer in principle bears the cost of its own due diligence. It instructs its legal, tax and financial advisers. The seller may, for its part, prepare a vendor due diligence. This practice makes the sale process smoother.

Is due diligence mandatory in France?

No law requires due diligence. It nevertheless remains an essential step before an acquisition. It informs the decision and documents the buyer’s diligence. Without it, the buyer is exposed to risks that have not been properly assessed.

What should you do if there is a major red flag?

A major red flag does not mean abandoning the deal. The buyer may renegotiate the price, require a specific indemnity or set a condition precedent. In some cases, the buyer chooses to walk away from the acquisition. The response depends on how serious the risk is.

Official sources

• Article 1112-1 of the French Civil Code, pre-contractual duty to inform: Légifrance (in French)
• Article L225-231 of the French Commercial Code, management expert review: Légifrance (in French)
• Article 28 of the GDPR, controller and processor: CNIL (in French)

Law checked as at 5 October 2026. This content provides general information and does not constitute legal advice. Every situation is different: contact our team to organise the due diligence for your acquisition.