The Dutreil pact: pitfalls to avoid
The Dutreil pact is one of the few tools available to business owners to optimise their business assets.
Provided a number of conditions are met, it significantly reduces the tax cost of passing on business assets, by granting heirs and donees a 75% exemption from duties on the value of the shares transferred.
However, the scheme is strictly regulated. A prior analysis by the notaire of the shareholding structure, the company's activity and the partners' situation is essential.
Here are the main pitfalls to avoid.
1) Misclassifying the company's activity
The Dutreil Pact only applies to companies whose main activity is industrial, commercial, craft, agricultural or professional (libérale). Companies whose activity is mainly civil (management of unfurnished property) are excluded.
2) Failing to comply with the holding commitments
The scheme is based on a collective holding commitment of at least 2 years (covering 20% of the rights in a listed company, 34% in an unlisted one), followed by an individual commitment of 6 years. Any uncontrolled transfer may break the pact. Precise drafting of the articles of association or shareholders' agreements is essential.
3) Failing to plan the duration of the pact
The collective commitment must be in progress on the day of the transfer, but must have ended for the 6-year individual commitment to start running. Specific clauses make it possible to plan this duration precisely.
4) Failing to lock in voting rights in the case of usufruct
In the case of a gift with reservation of usufruct, the usufructuary's voting rights must be limited by the articles of association to decisions on the allocation of profits only. The articles must be adapted beforehand.
5) Neglecting the management requirement
One of the signatories or beneficiaries must hold a management position for three years from the transfer. This point must be anticipated, in particular in the event of the owner's retirement or death.
6) Setting up an active holding company too late
The shares of a holding company can benefit from the Dutreil scheme if it actively and predominantly manages its subsidiaries. Creating a holding company shortly before the gift with a purely theoretical management agreement is not enough.
In summary
The Dutreil pact is a powerful but complex lever. The support of a notaire and a chartered accountant is essential to secure the transaction.