You might be wondering…

“Is the transfer of part of a business different from the transfer of the whole?”
“What if the transferred part is not clearly described?”
“Do receivables and debts related to just that part automatically transfer as well?”

Clients often ask me…

“I want to sell just one branch – do I need a special contract?”
“How do we determine which liabilities will transfer to the buyer?”

What the law says (Section 2183 Civil Code)

• The transfer of part of a business (an organizational unit) is governed by the same rules as the transfer of the whole enterprise, provided the contract specifies what exactly constitutes the transferred part.

• The part must be organizationally independent and separable (e.g., a branch, division, or department).

• Assets, receivables, and debts related to this part transfer to the buyer, just as with the entire enterprise.

Practical implications

• Seller: must clearly define the transferred part, otherwise the contract risks being vague or even invalid.

• Buyer: acquires a complete segment of the business, along with its associated liabilities.

• Creditors: their rights are protected similarly as in a full business sale – rules on guarantees and ineffectiveness still apply.

Common mistakes

• Describing the transferred part too vaguely (“the sales department”) without detailing the assets and liabilities.

• Omitting obligations that are logically tied to the transferred unit.

• Underestimating due diligence – the buyer later discovers they assumed debts they were unaware of.

How to proceed correctly

1. Contract specification: list in detail the assets, rights, and liabilities forming the organizational unit.

2. Documentation: link the contract to the company’s accounts and organizational structure.

3. Creditor protection: respect rules on guarantees and creditor notification.

4. Legal review: have the contract checked by a lawyer to ensure clarity and enforceability.

Real-life examples

• A company sold a “branch” without specifying the assets and liabilities involved. This led to a lengthy court dispute about what the buyer had actually acquired.

• A buyer acquired part of a business and later found out that employment contracts also transferred, even though the contract did not mention them.

Lawyer’s recommendation

When transferring part of a business, the key is to have a detailed and unambiguous contract. Both the buyer and the seller must be certain of what exactly is being transferred. Only then can later disputes be avoided.

FAQ

Is the contract for transferring part of a business different from one for the whole enterprise?
The basic rules are the same, but the transferred part must be clearly defined.

What if the definition is missing or too vague?
The contract may be challenged for ambiguity or even invalidity.

Do liabilities connected with the transferred part also transfer?
Yes, the buyer assumes liabilities that logically belong to the transferred unit.