Business succession, Family buy out

The family buy out: transferring the family business to a successor child

The family buy out (FBO) makes it possible to transfer the family business to the child who takes it over while fairly compensating his or her siblings. The structure rests on a partition gift with an equalisation payment (French Civil Code, articles 1075 et seq.), a takeover through a holding company that buys the shares with borrowed funds, and the 75% Dutreil exemption (French Tax Code, article 787 B). The firm structures the transaction from end to end, from the civil-law engineering to the tax optimisation.

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How can a business be passed to one child without disadvantaging the others?

Through a partition gift with an equalisation payment (soulte): the owner gives the company's shares to all the children in a single deed, the shares are allocated to the successor child, who owes his or her siblings a payment that equalises the lots. Under a Dutreil pact, gift duties are computed on each child's theoretical share after a 75% exemption of the shares' value, and halved if the donor is under 70 and gives full ownership.

The equalisation payment is usually financed by a loan taken over by a holding company controlled by the successor, to which he or she contributes the shares; Article 787 B, f, maintains the exemption in that case, subject to conditions. The holding then repays the debt with the company's dividends.

French Tax Code, art. 787 B (Légifrance); art. 790; BOI-ENR-DMTG-10-20-40-10, para. 340 and BOI-ENR-DMTG-10-20-40-20, para. 83 (BOFiP). Checked on 6 October 2026.

— 01

What is a family buy out?

The family buy out, or FBO, is a family business succession transaction combining three mechanisms: a partition gift allocating the company's shares to the successor child, an equalisation payment owed by that child to his or her siblings to preserve equality between heirs, and a buy-out holding company that purchases the shares and carries the financing of the equalisation payment through leverage.

The objective is twofold. It is a matter of entrusting the management and the capital of the business to the child who is meant to take it over, without excluding the others from the family wealth. The equalisation payment serves precisely to compensate the non-successor children in cash, while the business remains in the hands of a single child, ensuring continuity of the operations.

Properly executed, the FBO is combined with the Dutreil pact (French Tax Code, article 787 B), which exempts 75% of the value of the transferred shares from gift and inheritance tax. It may also rely on the contribution-sale regime (French Tax Code, article 150-0 B ter) where the manager has previously placed his or her shares in a holding company. The firm deliberately limits the number of matters it takes on to ensure the partners are directly involved in every case.

  • Partition gift, French Civil Code, articles 1075 et seq.
  • Equalisation payment for the benefit of the non-successor children
  • Buy-out holding company & leverage of the loan
  • 75% Dutreil exemption, French Tax Code, article 787 B
  • Contribution-sale, French Tax Code, article 150-0 B ter
  • Preference shares to fine-tune governance
— 02

A worked example: transferring a EUR 10 million company to one of three children

Assumptions. A 62-year-old owner has held alone, for more than two years, all the shares of an operating SAS he or she chairs, valued at EUR 10,000,000, The company mainly carries on a commercial or industrial activity and its value includes none of the assets that Article 787 B has excluded from the exemption since 21 February 2026 where they are not used exclusively for the business (housing, passenger cars, yachts, aircraft, jewellery, works of art, racehorses, wines and spirits, hunting and fishing assets): otherwise the value of those assets would be left out of the 75% exemption. There are three children; one of them, A, takes over the business. No gift has been made in the last fifteen years. Amounts rounded to the euro, law as at 6 October 2026. The example illustrates a method; it does not replace analysis of your own file.

Gift duties, per childWithout Dutreil pactWith Dutreil pact
Theoretical share of the poolEUR 3,333,333EUR 3,333,333
After 75% exemption (Article 787 B)EUR 3,333,333EUR 833,333
After EUR 100,000 allowance (Article 779)EUR 3,233,333EUR 733,333
Duties at the direct-line scale (Article 777)EUR 1,217,394EUR 162,962
50% reduction, donor under 70 (Article 790)no (no pact)EUR 81,481
Duties per childEUR 1,217,394EUR 81,481
Duties for the three childrenEUR 3,652,182EUR 244,443
  • Step 1, the pact. The owner has held shares for at least two years above the thresholds of 17% of financial rights and 34% of voting rights, and has managed the company for two years: the collective retention commitment is deemed met (Article 787 B, b, 2), provided the operating activity has also been carried on for two years. Failing that, the owner signs a sole collective commitment of at least two years before the gift.
  • Step 2, the partition gift. The owner gives all the shares, in full ownership, to the three children in a partition gift. The shares are allocated to A, who owes each of the other two children an equalisation payment of EUR 3,333,333. Equalisation payments stipulated in a partition gift give rise to no duty (BOI-ENR-DMTG-20-20-10, para. 260). Gift duties are computed on each child's theoretical share of the pool, i.e. EUR 3,333,333 of pact-eligible shares; A, the only actual recipient of the shares, signs the six-year individual retention commitment (BOI-ENR-DMTG-10-20-40-10, para. 340).
  • Step 3, the buy-out holding. A borrows EUR 6,666,667 to pay the equalisation payments, then contributes the shares to a holding he or she controls, which takes over the loan: the contribution is remunerated as to EUR 3,333,333 by holding shares and as to EUR 6,666,667 by assumption of the debt. Article 787 B, f, maintains the exemption for a contribution partly remunerated by the assumption of an equalisation payment resulting from a partition if the holding's gross assets consist of more than 50% of the committed shareholding, A holds at least three quarters of its capital and voting rights and manages it, the holding undertakes to keep the contributed shares and A keeps the holding shares received, until the commitments end (BOI-ENR-DMTG-10-20-40-20, paras. 81 to 87). The bank's agreement to the assumption of the loan is required.
  • Step 4, capital gain and contribution duty. Shares received by gift have as acquisition cost the value used for gift duties (Article 150-0 D, 1): contributed shortly afterwards at the same value, they produce no gain. The part of the contribution remunerated by assumption of the debt is a contribution for consideration, subject to the duty on transfers of company rights (Article 726): 0.1%, i.e. about EUR 6,667, if the company is not real-estate-rich, in which case the rate would be 5%.
  • Step 5, management. As the commitment is deemed met, it is A, the donee bound by the individual commitment, who must hold an eligible management role in the company for three years after the gift (Article 787 B, d): the donor, who signed no commitment, cannot meet this condition alone, although he or she may keep another role (BOI-ENR-DMTG-10-20-40-10, para. 395). A also manages the holding until the commitments end.

The pact reduces the burden here from EUR 3,652,182 to EUR 244,443, about EUR 3.4 million less in duties. Each child owes the duties on his or her theoretical share, including the two who receive only the equalisation payment: who bears them is settled in the deed. The computation ignores deed costs.

— 03

Repaying the acquisition debt: parent-subsidiary regime, tax consolidation and the Charasse amendment

The holding repays the loan with the company's dividends. On EUR 6,666,667 borrowed over seven years at 4%, the annuity is about EUR 1,110,731 and cumulative interest about EUR 1,108,449: the company must be able to distribute an amount of that order each year, after its own corporate tax, without weakening its operations.

  • Parent-subsidiary regime (Articles 145 and 216): dividends received by the holding are exempt, subject to a 5% share of costs and expenses, reduced to 1% for dividends from a company in the same tax group for more than one financial year. On a distribution of EUR 1,110,731, the taxable share is EUR 55,537 (5%) or EUR 11,107 (1%), i.e. a theoretical tax of about EUR 13,900 or EUR 2,800 at the 25% standard rate, before deduction of the loan interest, which is deductible from the holding's result and absorbs that base. Dividends also fund repayment of principal, which is not deductible: distribution capacity must be checked against the financing plan.
  • Tax consolidation (Articles 223 A et seq.): if the holding owns at least 95% of the company, the two may form a group and the holding's interest then offsets the operating company's profit. The general cap on net financial expenses, assessed at the level of the consolidated group (Article 223 B bis: the higher of EUR 3 million and 30% of the group's adjusted result), has no effect at this level of debt; outside consolidation, Article 212 bis applies. The other conditions of Article 223 A (liability to corporate tax, continuous holding, valid election) must also be met.
  • Charasse amendment (Article 223 B, the so-called buy-back-from-oneself rule, still in force on 6 October 2026): where a group company buys the shares of a company that becomes a group member from the persons who control it, directly or indirectly, within the meaning of Article L. 233-3 of the Commercial Code, a fraction of the group's financial expenses is added back to consolidated income for the year of acquisition and the following eight years. That fraction equals the ratio of the acquisition price to the group's average debt.
  • In the example, the authorities set the rule aside for shares received through a contribution remunerated in shares or through a transfer for no consideration, but apply it to a contribution burdened with a liability that is a contribution for consideration (BOI-IS-GPE-20-20-80-10, para. 10). The part of the contribution remunerated by assumption of the debt can be analysed as an acquisition from A, who controls the holding: if the group is consolidated, the risk of application is serious, even though the doctrine does not expressly cover the assumption of a loan taken to pay an equalisation payment, and it is secured before the operation, if need be by a tax ruling. The saving at stake is at most about EUR 277,000 over seven years (25% of interest).
  • Buy-back from a family member. The rule only targets sellers who control the buying company. A buy-back from the successor's siblings, who do not control the holding, is in principle outside it (BOI-IS-GPE-20-20-80-10, paras. 120 to 180), unless they act in concert. But this variant, which differs from the example's structure where the siblings receive only an equalisation payment, presupposes that they received shares: if they received them under a Dutreil pact, selling during the individual commitment makes them lose the exemption (BOI-ENR-DMTG-10-20-40-10, para. 350). Had each received shares worth EUR 3,333,333, the loss of the exemption would cost each additional duties of about EUR 1,135,913 (EUR 1,217,394 instead of EUR 81,481), plus late-payment interest.

The interest saving does not offset the loss of the exemption: the partition gift with an equalisation payment followed by a contribution to the holding remains the reference structure, and the choice of tax consolidation is made with the Charasse amendment in mind, on a financing plan drawn up before the deed.

— 04

Variants of the structure and the 2027 budget

  • Re-incorporation of earlier gifts. If the other children have already received gifts, these may be re-incorporated into the partition gift to form their lots (Civil Code, Articles 1078-1 et seq.) and reduce the equalisation payment accordingly. Re-incorporated assets in principle bear partition duty (Article 746) and not new gift duties (BOI-ENR-DMTG-20-20-10, para. 250).
  • Gift of bare ownership. It remains compatible with the pact if the usufructuary's voting rights are limited to profit-allocation decisions, but without the 50% reduction; above all, dividends then in principle go to the usufructuary and not to the holding, which does not allow the debt to be repaid.
  • Preference shares. They can give non-successor children enhanced financial rights and limited voting rights, where the family prefers to reduce the equalisation payment rather than indebt the holding.
  • Prior contribution-sale. If the owner first contributed shares to a holding with tax deferral (Article 150-0 B ter), a gift of that holding's shares currently wipes out the deferred gain for the donor, the donee who controls the holding taking over the deferral. In the example the owner holds the shares directly and is not concerned. See the contribution-sale regime.
  • Transferred company that is itself a holding. In the example the company is an operating one; where it is an animating holding, the Court of Cassation holds that the animation activity is assessed at the date of transfer and that the court of appeal could not require it to be maintained during the retention period (Court of Cassation, Commercial Chamber, 25 May 2022, no. 19-25.513, published, Légifrance, in French). The judgment concerns a transfer prior to the 2026 reform; the firm checks its bearing case by case.
— 05

The levers of the family buy out

01

Partition gift and equalisation payment

The partition gift allocates and transfers assets during the manager's lifetime, freezing the value of the shares at the date of the deed to prevent subsequent revaluation disputes.

  • Allocation of the shares to the successor child (French Civil Code, art. 1075 et seq.)
  • An equalisation payment owed by that child to the non-successor children
  • Value frozen at the date of the partition gift, with no subsequent hotchpot
  • A civil-law framework securing equality between forced heirs
02

Buy-out holding company and leverage

The successor child sets up a holding company that buys the shares received and borrows to finance the equalisation payment. Dividends distributed by the operating company repay the loan.

  • Formation of a buy-out holding company by the successor child
  • Equalisation payment financed by a bank loan, leverage effect
  • Repayment through dividend distributions (parent-subsidiary regime)
  • Concentration of capital control in the hands of the successor
03

Dutreil pact (French Tax Code art. 787 B)

The Dutreil pact sharply reduces the tax cost of the transfer by exempting 75% of the value of the shares from gift and inheritance tax, subject to retention commitments.

  • 75% allowance on the value of the transferred shares
  • Collective retention commitment (2 years minimum) followed by an individual commitment (6 years)
  • Thresholds of financial and voting rights depending on whether the company is listed
  • A management function held by one of the signatories
04

Contribution-sale and preference shares

Where the manager has contributed his or her shares to a holding company, the tax deferral of the contribution-sale regime and preference shares refine the structuring.

  • Tax deferral of the contribution gain (French Tax Code, art. 150-0 B ter)
  • Obligation to reinvest in an economic activity in the event of a rapid sale
  • Preference shares to separate capital and control
  • Adjustment of governance between the successor and the non-successor children
— 06

Lead counsel, Jonathan Bensaid

Founding partner of the firm, Jonathan Bensaid advises on family business succession transactions, wealth engineering and buy-out structures combining partition gifts, holding companies and the Dutreil pact. He coordinates the civil, tax and corporate aspects of the family buy out, in France as well as on French-Swiss matters between Paris and Geneva.

  • Family buy out
  • Partition gift, French Civil Code 1075
  • Dutreil pact, French Tax Code 787 B
  • Buy-out holding company
  • Contribution-sale, French Tax Code 150-0 B ter
  • France · Switzerland
— FAQ

Frequently asked questions

What is a family buy out (FBO)?

The family buy out is a transaction that transfers the family business to a successor child while compensating his or her siblings. It combines a partition gift with an equalisation payment (French Civil Code, articles 1075 et seq.), the purchase of the shares by a holding company that borrows to finance the equalisation payment, and, in most cases, the Dutreil exemption covering 75% of the transfer taxes (French Tax Code, article 787 B). The successor child receives the shares, takes on the equalisation payment, and the holding company repays the loan with the dividends distributed by the operating company.

What is the purpose of the equalisation payment in a family buy out?

The equalisation payment preserves equality between the children. When the business, the main family asset, is allocated to a single successor child, that child owes a cash compensation to his or her non-successor siblings: this is the equalisation payment. It is placed at the successor's charge within the partition gift (French Civil Code, articles 1075 et seq.) and, in practice, financed by the buy-out holding company through a loan. It makes it possible to entrust the business to the child who runs it without prejudicing the other forced heirs.

How do the buy-out holding company and its leverage work?

The successor child forms a buy-out holding company to which he or she contributes, or which purchases, the company shares received under the partition gift. This holding company takes out a bank loan to finance the equalisation payment owed to the other children. Repayment is ensured by the dividend distributions from the operating company to the holding company, largely exempt under the parent-subsidiary regime. This is the leverage effect: the business largely finances its own transfer, without the successor having to commit equivalent personal savings.

How does the Dutreil pact fit into the family buy out?

The Dutreil pact (French Tax Code, article 787 B) exempts 75% of the value of the transferred shares from gift and inheritance tax, which sharply reduces the tax cost of the partition gift. It requires a collective retention commitment over the shares of at least two years, extended by an individual commitment of six years after the transfer, compliance with voting and financial rights thresholds, and a management function held by one of the signatories. The family buy out is therefore designed so that the partition gift and the holding takeover remain compatible with these commitments.

What does the contribution-sale regime (article 150-0 B ter) add to the structure?

The contribution-sale comes into play where the manager has previously contributed his or her shares to a holding company under his or her control. Article 150-0 B ter of the French Tax Code then provides for a tax deferral of the contribution gain. If the holding company sells the shares within three years, it must reinvest at least 70% of the proceeds in an economic activity within three years of the sale, and keep those investments for five years, to keep the benefit of the deferral. In a family buy out, this regime can prepare the structuring upstream, by placing the shares in a holding company before the transfer transaction itself. See our dedicated page on the contribution-sale regime (French Tax Code 150-0 B ter).

What is the purpose of preference shares?

Preference shares make it possible to separate the holding of capital from the exercise of control. In a family buy out, they serve to adjust governance between the successor child, who must retain control of management, and the non-successor children, who may receive shares with enhanced financial rights but limited voting rights. They offer flexibility to reconcile continuity of management and fairness between heirs, without calling into question the logic of the takeover.

What are the main risks of a family buy out?

The risks relate first to compliance with the Dutreil commitments: a sale of shares or the loss of a management function during the retention period can forfeit the 75% exemption. They relate next to the repayment capacity of the holding company, whose debt must remain sustainable in light of the expected dividends. They relate finally to the rigour of the civil-law side: the partition gift and the valuation of the equalisation payment must preserve the hereditary reserve and equality between children. Each lever calls for precise coordination, which justifies tailored support.

Is the family buy out suitable for every family business?

No. The family buy out requires a business generating regular dividends sufficient to repay the holding company's loan, a child genuinely intending to take over and run the business, and a valuation that allows the equalisation payment to be financed without weakening the operations. It is particularly suited to profitable operating companies transferred to a single child among several. Where these conditions are not met, other succession schemes may be preferable. The firm systematically assesses the relevance of the transaction before any commitment.

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Sources

  • French Tax Code, Articles 787 B (version in force since 21 February 2026), 790, 777, 779, 150-0 D, 150-0 B ter, 145, 216, 212 bis, 223 A, 223 B, 223 B bis and 726 (Légifrance, consulted 6 October 2026)
  • French Civil Code, Articles 1075, 1078 and 1078-1; Article L. 233-3 of the Commercial Code
  • BOI-ENR-DMTG-10-20-40-10 (10 August 2026), paras. 340, 350 and 395; BOI-ENR-DMTG-10-20-40-20 (10 August 2026), paras. 81 to 87; BOI-ENR-DMTG-20-20-10, paras. 250 and 260; BOI-IS-GPE-20-20-80-10, paras. 10 and 120 to 230
  • Court of Cassation, Commercial Chamber, 25 May 2022, no. 19-25.513; finance bill for 2027, no. 3210, filed 1 October 2026, Article 5 (bill not passed)

Cette note présente l'état du droit à sa date de publication et ne constitue pas un avis juridique. Chaque situation appelle un examen particulier.

© BENSAID Avocats, The information on this site does not constitute legal advice. Law as in force on 6 October 2026; passages on the 2027 finance bill concern a text not yet passed.