Contact us 
Often likened to a merger, the "Transmission Universelle de Patrimoine" (TUP) in French is a different, faster and less restrictive procedure to the absorption of one company by another. This dissolution by confusion of assets, i.e. without liquidation, is a concept enshrined in law. If you'd like to find out more about the TUP, you've come to the right place. Follow Cabinet Sion Avocat's guide to the subject.
What is a TUP?
To begin this guide, it is very important to understand what a TUP is, and therefore to give you a definition of the universal transfer of assets and liabilities, as well as the advantages it offers, and in which cases it is necessary.
Definition of universal transfer of assets
TUP is a procedure for dissolving a company, without liquidation, since all the company's assets and liabilities will be transferred to another company. The company dissolved under a TUP will no longer have a legal personality, but unlike a liquidation, there will be no sale of assets, distribution of a liquidation bonus or payment of creditors.
A TUP is only possible if the "absorbing" company owns the entire capital of the dissolved company, which distinguishes a simple merger from a TUP.
The advantages of TUP
If you're wondering why you should do a TUP, it's worth noting that it essentially facilitates the dissolution process. A TUP is in fact one of the options for closing a company, and differs from a dissolution/liquidation, but also from a sale, or even a business transfer, in its simplicity.
For example, with a TUP, there is no need to draw up a merger report, nor to appoint an auditor. Another advantage is that the TUP has no impact on the absorbed company's current contracts.
The universal transfer of assets and liabilities is therefore an effective restructuring tool in the event of liquidation, for example. It ensures the continuity of the activities from the company in difficulty and avoids the time-consuming and costly procedures involved in liquidation.
As you can see, one of the main advantages of a TUP is its simplicity! There's no need to wind up the company, appoint a liquidator or auditor, or even draw up a merger report.
On the other hand, it is advisable to be accompanied by a tax lawyer to avoid any surprises or overlook any possibilities for tax optimization.
Is the TUP compulsory?
If you're thinking of closing a one-person business (EURL or SASU), and the company's sole shareholder is a legal entity, then a TUP is compulsory.
If the parent company absorbs the company in financial difficulty, the economic activity of the absorbed company can continue, thus avoiding the formalities of compulsory liquidation.
On the other hand, if the sole shareholder is an individual, the classic dissolution-liquidation procedure must be used.
How to do a TUP?
Before carrying out a TUP, you need to be familiar with the formalities involved in the universal transfer of assets and liabilities, which are relatively straightforward compared with a liquidation.
The procedure involves four stages, which Cabinet Sion Avocat will explain below.
The decision to dissolve the company
To begin with, the sole shareholder (i.e., the legal entity) must draw up the minutes of the AGM (General Meeting), which establish the decision to dissolve the company.
The sole shareholder must then register the dissolution decision with the SIE (Service des Impôts des Entreprises) within one month of drafting the minutes.
Finally, the dissolution minutes are filed with the clerk of the relevant commercial court.
Publication of the TUP in the legal gazette
Publication of the legal announcement of the Transmission Universelle du Patrimoine (TUP) makes the decision binding on third parties.
It should be noted, however, that creditors have the right to object to the TUP within 30 days of publication of the legal announcement.
Opposition will not call into question the TUP as a whole, but it is possible that the judge may order measures such as the repayment of claims or the provision of guarantees.
This means that the TUP will only be effective at the end of the opposition period, or once the measures ordered by the judge have been completed.
Amending the registration of the TUP with the RCS
The company must then register the dissolution decision with the RCS (Registre du Commerce et des Sociétés).
This is done using the M2 form for declaring the modification of a company, Cerfa 11682*06, which must be filed with the CFE (Centre des Formalités des Entreprises) along with the declaration of dissolution and the notice of publication obtained in the previous step.
Finally, the clerk's office must publish the decision in the BODACC, the official bulletin of civil and commercial announcements.
Company deregistration
Once the first three TUP formalities have been completed, the dissolved company will receive an M4 certificate declaring the striking off of a company (Cerfa 11685*02).
This certificate must be completed within one month of the effective transfer of assets and liabilities, and marks the disappearance of the legal entity.
Now that we've seen the formalities involved in the TUP, let's ask ourselves what it means for the various parties involved!
What are the consequences of TUP?
There are several consequences to a universal transfer of assets and liabilities.
The first is the dissolution of the sole proprietorship, which will no longer have a legal existence. The sole shareholder, a legal entity as a reminder, then becomes the holder of all the rights and obligations of the subsidiary, without exception.
The entire assets of the dissolved company are transferred to the parent company, including all debts and receivables. This means that, in the event of a TUP, existing contracts continue to apply!
It should be noted that franchise contracts, mandates and surety bonds are excluded from the TUP, and will cease to apply when the absorbed company is dissolved, unless the absorbing company expressly agrees. The commercial lease, on the other hand, must be transferred!
What is the tax treatment of TUP?
Another major advantage of a TUP is its tax treatment. Indeed, the dissolved and absorbed company can benefit from the preferential merger regime if the sole shareholder so requests when declaring the decision to dissolve. This allows the company to be exempt from capital gains tax on the assets transferred.
The parent company will also be exempt from capital gains tax on the assets absorbed, as well as on any merger bonus arising from the universal transfer of assets and liabilities. The latter, known as the TUP merger bonus, may consist of an increase in the value of the shares following the absorption of the dissolved company.
Note that there is no liquidation bonus, since the TUP is, as a reminder, a dissolution without liquidation!
It should also be noted that the TUP can be applied retroactively for tax purposes, but that a retroactivity clause must be included in the decision to dissolve without liquidation, as it cannot be presumed.
To conclude this article, let's see some frequently asked questions about TUP
FAQ on Universal Transfer of Assets (TUP)
How to account for a TUP?
The absorption of the subsidiary's assets must be reflected in the parent company's accounts. The TUP registration should show two sets of accounting entries:
- Debit asset accounts:
- amortization recovery
- recovery of fixed assets
- recovery of inventory
- recovery of receivables (including from the State)
- recovery of cash
- Credit liability accounts:
- loans
- debts (including those to the State)
The balance between assets and liabilities provides the net book value of the dissolved company's shares in the TUP, which should be credited to the "Associates - Operations" account in the parent company's capital.
What is the difference between a simplified merger and a TUP?
TUP and mergers are similar as one company absorbs another. The main difference is that, in a simplified merger, holding 90% of the capital is sufficient for absorption, whereas, in a TUP, 100% of the capital is required.
What is the impact of TUP on active contracts?
Current contracts signed by the single-member company are automatically taken over by the parent company, ensuring no interruption.
What is a company dissolution?
Company dissolution is a decision made by associates, such as in a TUP, or by the court, such as in a liquidation, marking the end of the company.
Can dissolution be opposed?
In the context of a TUP, creditors can oppose the dissolution within 30 days of the decision's publication.
What are the necessary conditions to execute a TUP?
To execute a TUP, the absorbing company must hold 100% of the dissolved company's capital. Additionally, a dissolution decision must be made by the sole shareholder during a general meeting and registered with the relevant authorities.
What are the timelines to finalize a TUP?
TUP formalities, including the publication of the legal notice and creditor opposition, must be completed within 30 days after the dissolution decision. The dissolution must then be registered within a month following the effective asset transfer.
What are the tax implications of a TUP?
A TUP allows the dissolved company to benefit from the favorable merger regime, with an exemption from taxes on the capital gains of the transferred assets. The parent company can also be exempt from capital gains on the absorbed assets and any potential merger premium, provided this is requested during the dissolution declaration.
So now you know more about the TUP, the universal transfer of assets and liabilities, as well as its procedure, advantages and taxation. If you have any further questions, or would like assistance with your TUP or tax optimization procedures, don't hesitate to contact Cabinet Sion Avocat!
Back