France’s business future depends on employee ownership, creditor flexibility and operational efficiency
23 October 2026
France faces a difficult period for its businesses. According to Banque de France, 70,766 business failures were recorded over the twelve months ending August 2026. Meanwhile, research by Groupe BPCE suggests that approximately 370,000 French businesses will need new owners over the next five years. Rising financing costs, succession difficulties and pressure on operating margins are making it increasingly important to distinguish between businesses that are no longer viable and those that need new ownership, financing or management arrangements.
Business transitions are a normal and often beneficial part of economic development. New shareholders can bring capital, expertise and access to markets. But the acquisition of smaller businesses by larger competitors should not be treated as the default solution to every succession problem. Where acquisitions contribute to market concentration, they can reduce competition and weaken the independence of local suppliers and producers. Nor should the search for capital automatically lead businesses towards foreign ownership, particularly when employees or local investors could provide a credible alternative.
France already has a legislative tradition of encouraging continuity in business ownership. The Dutreil regime, established in 2003, provides preferential tax treatment for qualifying family business transfers. The 2014 Social and Solidarity Economy Law introduced employee-information provisions concerning certain business sales, while the 2019 PACTE Law expanded measures relating to employee savings and share ownership. Alongside these reforms, the country's cooperative sector has long provided practical examples of enterprises owned and governed by their employees.
The proposed Pacte Papin, included in Article 10 of the draft 2027 Finance Bill, builds on this history. It seeks to make employee buyouts more accessible through fiscal incentives, including reduced registration duties for qualifying transactions, more favourable treatment of certain capital gains and additional deductions for productive investment following a takeover. The measures remain subject to parliamentary approval.
The proposed tax treatment includes a 0.1% registration duty for certain qualifying acquisitions by employees, a possible increase to €1 million in the retirement-related capital gains allowance for qualifying sellers, and additional depreciation deductions for eligible investments following a business transfer. The investment measure would not be limited exclusively to employee buyouts. The precise conditions will depend on the final legislation.
VIVACE supports the proposal because it addresses an important weakness in conventional approaches to business transmission. Employees often understand a company's production processes, customers, equipment and commercial relationships better than prospective external buyers. Their knowledge has considerable economic value, even if it rarely appears explicitly on a balance sheet. Giving employees greater opportunities to acquire ownership can help preserve that value through a change in management or shareholders.
The advantages extend beyond succession planning. Local and employee ownership can also be part of a long-term risk-management strategy. A business whose shareholders have a continuing interest in its workforce, suppliers and surrounding economy may be better placed to maintain productive investment through periods of uncertainty. Local ownership can help retain decision-making capacity within a territory, while employee participation can improve the flow of information between management and operations.
These outcomes are not automatic. Employee ownership requires competent governance, adequate financing and safeguards against concentrating too much of workers' personal wealth in their employer. Local investors can also make poor decisions, just as international investors can make valuable long-term commitments. The objective should therefore be to broaden the available ownership models, not to impose a preference regardless of the circumstances.
The same reasoning should inform the way companies respond to financial difficulty. In VIVACE's view, when an otherwise viable enterprise begins to experience pressure on its cash flow, one of management's first considerations should be whether employee shareholding can be increased. This might involve a gradual transfer of shares, a collective investment structure or a negotiated change in ownership involving employees and existing shareholders. Such arrangements must be voluntary and financially realistic, but they deserve consideration before the company begins disposing of productive assets or reducing employment.
Equally important is the timing of discussions with creditors. Companies too often approach their lenders and suppliers only after payments have been missed. By then, confidence may have deteriorated and the options for preserving the business may be considerably narrower. Management should instead initiate discussions as soon as credible financial forecasts indicate that difficulties are approaching, while the company remains solvent and can present a realistic plan for maintaining operations.
This is the reasoning behind VIVACE's Collective Continuity and Financing Protocol (PFC), developed for businesses seeking to anticipate financial difficulties and coordinate their relationships with creditors, shareholders, employees and other stakeholders. The protocol brings together financial planning, operational performance and collective financing arrangements, with the aim of maintaining activity and preserving the company's ability to invest.
An important part of this work is evaluating the business beyond its conventional financial indicators. A company may be experiencing temporary liquidity problems while retaining a strong customer base, valuable intellectual property, specialised equipment or opportunities to improve its productivity. These factors matter when assessing whether the business can recover and how its financing should be structured.
VIVACE's Business Resilience Diagnostic examines financial, operational, human, energy and organisational risks together. It can help identify improvements in working capital, resource efficiency, energy consumption or production processes that would strengthen the company's ability to meet its obligations. For lenders, this type of analysis can provide useful information about future debt-servicing capacity alongside traditional credit measures.
There is also scope to consider more varied collateral arrangements. Many SMEs hold valuable patents, protected inventions, intellectual property rights or equity interests that may, under appropriate legal and valuation conditions, contribute to a financing package. These assets cannot replace sound cash-flow analysis, but they may help broaden the options available to companies whose economic value is not adequately represented by their tangible assets.
Employee ownership also needs to be accompanied by practical measures to preserve employment. Where demand declines temporarily, work-sharing, training and greater flexibility in the organisation of production may help retain experienced employees. VIVACE's Work-Sharing and Employment Preservation Framework, together with its Collective Employee Buyout Guide, is intended to support companies considering these arrangements as part of a wider transition.
The territorial implications deserve particular attention. When an independent manufacturer, agricultural business or local service provider disappears, the effects extend to suppliers, customers, employment and the availability of specialised skills. An acquisition may preserve these activities, but it may also lead to their gradual consolidation elsewhere. Employee and local ownership offer another route, particularly where regional banks, cooperative networks and long-term investors are prepared to support the transition.
The Pacte Papin is therefore relevant to more than the transfer of businesses whose owners are approaching retirement. It raises a wider question about the organisation of productive capital in France and the role employees can play in preserving independent enterprises.
VIVACE supports measures that make employee buyouts more accessible and encourages their extension through practical financing and continuity arrangements. We would also like to see a more systematic approach to business distress in which companies consider employee participation and engage creditors before payment difficulties become defaults. Such action cannot eliminate commercial risk or replace formal insolvency procedures when these become necessary. It can, however, give viable businesses more time and more options.
France needs investment, entrepreneurship and successful business transitions. It also needs to preserve competition, industrial knowledge and the economic independence of its territories. A stronger role for employees and local shareholders, supported by credible financial planning and operational improvements, can contribute to all three.
The value of the Pacte Papin will ultimately depend not only on the number of businesses transferred, but on what happens to those businesses afterwards: whether they continue to invest, retain their employees, serve their customers and contribute to the economies in which they operate.
CPM
References
Banque de France, Business failures – August 2026.
Groupe BPCE, research on French business transfers, September 2026.
French Ministry of the Economy, 2027 Finance Bill: main measures for individuals and businesses.
Coop FR, Pacte Papin: a positive signal for business transfers, 14 September 2026.
Bpifrance Création, Business transfers to employees.
French legislation on business transfers: Dutreil regime (2003), Social and Solidarity Economy Law (2014) and PACTE Law (2019).
VIVACE, Business Resilience Diagnostic.
VIVACE, Collective Employee Buyout Guide.
