Legal Update
Corporate & Securities
Hospitality & Leisure
Real Estate
Hong Kong
Mainland China
13 March 2013
Buying a Vineyard in France? Some Considerations…
In the last few years there has been a marked
increase in the number of wine-loving overseas
investors seeking to purchase vineyards in France.
A host of considerations apply when making an
overseas real estate purchase, particularly a high
value investment such as a vineyard. Some of these
considerations are self-evident, such as having
advisers who can deal with language and cultural
issues and making sure the seller actually owns the
property being sold. Other considerations are more
technical or abstract in nature, such as
understanding the relevant laws and proper
transaction structuring. The following are some of
the key considerations:
Question 1 – Who can (or Would) purchase a
French vineyard?
French investment law does not generally restrict
investment on the basis of citizenship or jurisdiction
of incorporation of the investor so the short answer is
that anyone can purchase a vineyard (or at least
anyone with the necessary funds!). This is subject to
obtaining government approvals which apply to all
such purchases, and making certain administrative
lings (discussed in greater detail under the relevant
headings below).
Generally, the starting price for a French vineyard is
likely to be in the order of a million Euros
(approximately RMB 8 million), but this will depend
on factors such as plot size, quality, reputation and
whether the acquisition is just of real estate or of an
entire business. Although not for everyone, there are
many reasons why an investor might look to
purchase a vineyard, ranging from a desire to
consolidate related business interests (such as wine
distribution/retailing or restauranteering), to
wanting to make a pure investment, to simply having
a love of French wine.
Question 2 – acQuisition structure –
purchase oF real estate or purchase oF
shares?
An important issue that will need to be decided early
on is whether the underlying real estate of the
vineyard will be acquired (and whether any other
assets or business will be acquired) or, alternatively,
whether the shares of the company owning the real
estate will be acquired.
This decision, although made early on in the process,
will have signicant implications for the transaction.
It will affect what consents and notications are
required, and the amount and types of tax payable.
Ultimately, the nal decision will depend on the
investor’s particular needs and requirements, as well
as the particular circumstances of the transaction.
Question 3 – What tax considerations apply?
As transaction structure is often driven by tax
considerations you may like to bear in mind the
following French taxes and related costs may apply
to your purchase:
• Sale of real estate - A sale of real estate assets
located in France is subject to French registration
tax at a rate of 5.09%. Real estate transactions
also require a deed to be prepared by a French
notary, who charges additional fees in the region
of 1.5% - 2.5% of the transaction value. In
addition, sales of certain real estate assets (such
as certain plots of land which could be built on)
may be subject to French VAT. The top rate of
2 Mayer Brown JSM | Buying a Vineyard in France? Some Considerations…
VAT is due to rise slightly next year and reach
20%.
• Sale of a company - Generally, the sale of an
ownership interest in a French company is
subject to stamp duty. The rate of stamp duty
depends on the type of company (there are several
types of French corporation), but is generally
between 0.1% and 3% of the transaction value. If
the company is considered a ‘real estate company’,
then the rate of stamp duty is 5%.
• Sale of assets of a business - A sale by an
enterprise of all of its assets and liabilities is
considered a sale of a going concern. This is
subject to French registration tax at a rate of 5%
of the sale price. A sale of only some of the assets
of a business is generally subject to French VAT
although there are certain exceptions to this.
In addition, there may be tax considerations arising
from tax laws in the buyer’s home jurisdiction which
need to be factored in to the transaction.
Question 4 – What government approvals
are reQuired?
Depending on the transaction structure, a number of
consents, notications and approvals may be
required. The buyer’s legal adviser will need to work
through these issues with their client to determine
which of these items are applicable. An indicative list
is as follows:
• Approval of the Ministry of Agriculture
- Under French law, the prior approval of
the Ministry of Agriculture is required for a
non-French individual or company to own an
agricultural business in France. A company falls
into this category if either: (i) more than 50%
of its shareholders are non-French nationals; or
(ii) more than 50% of its share capital is held,
directly or indirectly, by non-French nationals.
The Ministry of Agriculture also determines the
type of activities which the applicant is permitted
to conduct once an operating licence has been
granted.
• Operating licence from the local Ministry of
the Interior (Préfecture) – French law requires
that a vineyard holds an operating licence
prior to engaging in agricultural activities.
If a corporate entity holding such an operating
licence is acquired and retains the necessary
qualied personnel to operate the vineyard, the
licence will transfer along with ownership of the
business and it will not be necessary to apply for a
new licence. However, if the investment takes the
form of an asset acquisition, this will constitute
a change in operator and a new operating licence
will usually be required.
As an operating licence must be obtained prior to
completion of a transaction, an application can be
made between signing and completion of the
transaction (which can add to the time taken to
complete the purchase). An application for an
operating licence usually takes up to 4 months.
• SAFER notication and pre-emption rights
– SAFERs (Sociétés d’aménagement foncier et
d’établissement rural) are public organisations
with pre-emption rights to buy most real estate
currently or potentially used for agriculture and
related agricultural buildings or moveable assets.
There are a number of SAFER across France
which operate in relation to their respective
regions. The purpose of the SAFER system is to
avoid farming monopolies and over-speculation
in agricultural land and to reorganise land
parcels in order to enlarge farms that were
previously below the threshold of protability.
As such, the relevant SAFER has jurisdiction over
agricultural real estate, including vineyards, and
must be ofcially notied of a relevant sale so
that it can decide whether to exercise its pre-
emption rights. Although this is not strictly a
‘consent’, if the SAFER decides to exercise its
pre-emption rights then SAFER will purchase
the land in place of the would-be buyer, thereby
frustrating the purchase. This therefore needs to
be closed-off as part of the transaction. A relevant
transaction structuring point is that a transfer of
shares in a company owning real estate will not
be subject to a SAFER pre-emption right.
It is possible to require in the purchase
documentation that obtaining necessary consents is
a condition precedent to the completion of the
transaction. If this approach is adopted, it will mean
there is a time lapse between the signing of deal
documents and the closing of a transaction.
Question 5 – are there any other
reQuirements For Foreign buyers?
For non-EU investors, the following declarations may
be required if the respective criteria are met
(although these are simply declarations and no
consent is required):
3 Mayer Brown JSM | Buying a Vineyard in France? Some Considerations…
• If there is an investment in real estate in excess
of €1.5 million (approximately RMB 12 million)
or an investment in agricultural land in order
to operate a vineyard, a declaration must be
led with the French Ministry of Finance
and Economy at the time of completion of the
investment.
• If the investment is for more than €15 million
(approximately RMB 120 million) and results
in the investor owning more than 10% of the
capital/voting rights of a French company
or more than 10% of a piece of real estate, a
declaration must be led with the Banque de
France (France’s central bank) within 20 days of
completion of the investment.
• If the investment involves the acquisition of
more than 33.3% of the share capital/voting
rights of a French company (either directly or
at a higher level in the corporate group, such
as by acquisition of its parent entity), a further
administrative declaration to the Ministry of
Finance and Economy is required. This is not
required if the acquisition is of the underlying
agricultural land rather than shares in a holding
company.
Additionally, if the transaction involves a French
company to which the buyer is appointing a legal
representative (and potentially other ofcers and
directors, depending on the type of corporate entity)
and the appointed person is both: (i) a non-EU
national; and (ii) not a resident of France, then the
activities of the legal representative must be declared
to the local Ministry of the Interior (Préfecture).
There is no such requirement for EU nationals.
Alternatively, if a legal representative wishes to
reside in France, a temporary residence permit is
required authorising such person’s business
activities.
Conclusion
As should be evident from the above, there are a
multitude of issues to consider in relation to the
acquisition of a French vineyard and the ve
questions discussed in this article are only a starting
point.
A potential investor should make it a priority to
instruct a legal adviser at an early stage of the
process, making sure that their legal adviser can
provide language support and cultural experience in
both France and their home jurisdiction and that the
adviser has the experience necessary to effectively
progress the transaction.
Mayer Brown JSM is part of Mayer Brown, a global legal services organisation advising many of the world’s largest companies, including a signicant
portion of the Fortune 100, FTSE 100, DAX and Hang Seng Index companies and more than half of the world’s largest banks. Our legal services include
banking and nance; corporate and securities; litigation and dispute resolution; antitrust and competition; employment and benets; environmental;
nancial services regulatory & enforcement; government and global trade; intellectual property; real estate; tax; restructuring, bankruptcy and insolvency;
and wealth management.
OFFICE LOCATIONS AMERICAS: Charlotte, Chicago, Houston, Los Angeles, New York, Palo Alto, Washington DC
ASIA: Bangkok, Beijing, Guangzhou, Hanoi, Ho Chi Minh City, Hong Kong, Shanghai, Singapore
EUROPE: Brussels, Düsseldorf, Frankfurt, London, Paris
TAUIL & CHEQUER ADVOGADOS in association with Mayer Brown LLP: São Paulo, Rio de Janeiro
Please visit our web site for comprehensive contact information for all our oces. www.mayerbrownjsm.com
This publication provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is intended
to provide a general guide to the subject matter and is not intended to provide legal advice or be a substitute for specic advice concerning individual
situations. Readers should seek legal advice before taking any action with respect to the matters discussed herein. Please also read the Mayer Brown
JSM legal publications Disclaimer.
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown
Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and
regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its
associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer
Brown Practices in their respective jurisdictions.
© 2013. The Mayer Brown Practices. All rights reserved.
0313
Contact Us
For inquiries related to this Legal Update, please
contact the following persons or your usual contacts
with our rm.
Mark Stevens
Partner
T: +852 2843 2326
E: mark.stevens@mayerbrownjsm.com
Hannah Ha
Partner
T: +852 2843 4378
E: hannah.ha@mayerbrownjsm.com
Erwan Heurtel
Partner
T: +33 1 53 53 43 43
E: eheurtel@mayerbrown.com
Nicholas Cook
Associate
T: +852 2843 2255
E: nicholas.cook@mayerbrownjsm.com
Guillaume Kuperls
Partner
T: +33 1 53 53 43 43
E: gkuperls@mayerbrown.com
Jean-Pierre Lee
Partner
T: +33 1 53 53 43 43
E: jplee@mayerbrown.com
