Key points. In Geneva, a restaurant, hotel or shop can be sold in three ways: by transferring the business itself (the fonds de commerce), by selling the company that operates it, or by selling the premises. Each follows its own legal regime. The transfer of the commercial lease (Art. 263 of the Swiss Code of Obligations, CO), the fate of the staff (Art. 333 CO), the notary’s involvement for the premises (Art. 216 CO) and the cantonal operating licence (LRDBHD) often decide the outcome more than the price does, which is why the contract must anticipate each of them.
A café-restaurant run for thirty-seven years, a tenant in poor health who wants to hand over, a transfer agreement signed for CHF 150,000. The landlord delays, then refuses to transfer the lease, and the buyer walks away. After seven years of litigation, the Swiss Federal Supreme Court holds that the refusal was unjustified, yet awards the seller only CHF 21,077 (Federal Supreme Court, 4A_30/2020 of 23 March 2021). The seller had let the buyer withdraw from the agreement without checking whether the agreement allowed it, so he could no longer claim the agreed price, and his business, loss-making for three years, was found to have no value.
The landlord was in the wrong, and the seller still lost most of what was at stake. In my view, that is the main lesson of the judgment: a business transfer rarely fails on price. It fails far more often on a consent, a licence or a clause nobody thought of writing down.
Business, company or premises: three distinct transactions
A transfer of business (remise de commerce, an asset deal) covers the business itself: goodwill, trade name, fittings, furniture, equipment and stock. The seller, whether a company or a sole trader, stays in place with its own debts.
A sale of the company (share deal) transfers nothing at the level of the establishment. The lease, the contracts, the staff and the trade name remain with the same company, whose shareholders alone change.
A sale of the premises, finally, is a real estate transaction, which may accompany either of the first two or stand entirely apart. I recently saw a hotel offered either as premises only or as premises and business together, with a price gap of nearly a third. These are two different transactions with two different types of buyer, not two versions of the same price.
The choice determines who must consent, who is liable for debts, what happens to the staff and whether a notary must be involved.
The commercial lease, first hurdle of an asset deal
Since most Geneva establishments rent their premises, the business loses most of its value if the lease does not follow.
A tenant of commercial premises may transfer the lease to a third party with the landlord’s written consent (Art. 263 para. 1 CO), which the landlord may refuse only for good cause (para. 2). The Federal Supreme Court stresses that these rules are absolutely mandatory, so the lease cannot validly exclude them.
The buyer’s insolvency is a typical example of good cause. So, less obviously, is the payment of key money, meaning a price paid solely for the right to occupy the premises, without any real consideration in goodwill or equipment (4A_30/2020, recital 3.1.2). The transfer price must therefore correspond to identifiable value, which a priced inventory, ideally a valuation, helps establish.
Once the transfer is accepted, the buyer steps into the tenant’s shoes. The seller nonetheless remains jointly liable with the buyer until the lease expires or is terminated, but for no more than two years (Art. 263 para. 4 CO). The buyer’s solvency therefore matters to the seller as much as to the landlord.
If the landlord refuses without good cause, the tenant may bring an action to compel the transfer, starting with the conciliation authority and then the Tenancy Court, as well as a damages claim against the landlord. The first route is only worth pursuing if the buyer is still willing to proceed at the end of the case.
In a share deal, by contrast, the lease does not change hands and no landlord consent is required, unless the lease contains a change-of-control clause, which should be checked before anything is signed.
The staff follow the business
When a business is transferred, employment relationships pass to the buyer with all related rights and obligations on the day of transfer (Art. 333 para. 1 CO). The buyer does not choose which employees it takes over, while an employee may object, in which case the contract ends at the expiry of the statutory notice period (para. 2).
Where employment is governed by a collective labour agreement, the buyer must comply with it for one year (para. 1bis), and in the hotel and restaurant sector the national agreement has been declared generally binding and applies in any event. The former and new employer are also jointly liable for employee claims that fell due before the transfer (para. 3), such as unused holidays, overtime or the thirteenth-month salary. In a thirteenth-salary dispute I am currently pleading before the Geneva Labour Court, the claim covers several financial years, which gives an idea of the amounts a buyer may face.
The seller must also inform the staff in good time before the transfer about its reasons and consequences, and consult them before any measures are decided as a result (Art. 333a CO). None of these rules apply in a share deal, since the employer remains the same.
Buying the company means buying its past
A transfer of shares in a limited liability company (Sàrl/GmbH) must be in writing (Art. 785 CO) and requires the approval of the members’ meeting, which may refuse without giving reasons unless the articles provide otherwise (Art. 786 CO). A transfer of registered shares in a company limited by shares (SA/AG) remains subject to any transfer restrictions in the articles (Art. 685a et seq. CO). No notary is needed unless the share capital is being changed. In the shareholder exits I handle, the departing member’s shareholder loan is also dealt with in a separate agreement, since the share transfer alone does not settle that claim.
The buyer takes over the company with all its liabilities, including those it does not know about, and its statutory protection is limited. The Federal Supreme Court has held that where a business is acquired by purchasing its shares, the seller’s warranty covers the economic value of the business only if specific qualities were promised (BGE 107 II 419). The buyer must also inspect and give notice of defects promptly (Art. 201 CO). Due diligence and precise contractual warranties are therefore essential, even for a modest establishment.
The premises: a matter for the notary
A sale of real estate is valid only if executed as a notarial deed (Art. 216 para. 1 CO), and the same applies to a promise to sell and to a purchase option (para. 2). A heads of terms on the premises signed privately does not bind the parties. The same requirement applies to the real estate part of a transfer of assets under the Merger Act (Art. 70 para. 2 FusG).
Where the premises are sold while a third-party operator occupies them, the lease passes to the buyer with ownership (Art. 261 para. 1 CO). The new owner may terminate it early, for the next statutory date, only by showing an urgent need for itself or close relatives (para. 2 lit. a). A buyer who intends to run the business itself must therefore check the remaining term of the lease before committing. Where the operator sells the premises but keeps the business, or the reverse, the lease must be concluded or adjusted before the sale.
Foreign buyers and the Lex Koller
The acquisition of real estate used as a permanent establishment for a commercial activity does not require a permit (Art. 2 para. 2 lit. a of the Federal Act on the Acquisition of Real Estate by Persons Abroad, the Lex Koller). A restaurant, hotel or shop qualifies, so a buyer domiciled abroad can in principle acquire the premises or the operating company without a cantonal permit.
The difficulty lies in residential space. A flat above the restaurant, studios let by the month or part of a hotel used as housing may fall under the permit regime, and a share deal does not avoid it, since acquiring shares in a company whose actual purpose is the acquisition of real estate is itself covered (Art. 4 para. 1 lit. e of the Lex Koller). What counts is the actual use of each area.
A Geneva licence cannot be sold
Cafés, restaurants, bars and hotels are subject to the Geneva Act on Catering, the Sale of Alcoholic Beverages, Accommodation and Entertainment (LRDBHD). The operating licence must be applied for again with the Trade Police (PCTN) whenever the operator or the owner of the establishment changes.
The law distinguishes the owner, meaning whoever holds the business, from the operator, meaning the person who personally runs the establishment and holds the cantonal restaurateur’s diploma. Where both change, which is the ordinary case in an asset deal, the establishment must close until the new licence is issued. Where only the operator changes, the new operator has 60 days from notice of the former operator’s departure to file an application.
This is, frankly, the point buyers discover last, often after signing. Acquiring the business does not confer the right to run it, and every week of closure costs rent, wages and customers. The timetable of the deal must therefore be built around the licensing procedure, not the other way round.
The clauses that decide everything
The transfer agreement allocates the risks the law leaves open, and it is on the agreement that the 2021 case turned.
Conditions precedent come first: the landlord’s written consent or a new signed lease, the operating licence, and, where residential space is involved, confirmation that the Lex Koller does not apply. Each needs a deadline and a clear rule for what happens if it passes, failing which the seller, as in the case above, has no leverage against the landlord.
The price should be allocated between goodwill, fittings and equipment and be based on an inventory, which dispels any suspicion of key money and, if needed, supports a claim against the landlord.
The seller’s warranties, essential in a share deal, cover turnover, the absence of debts and disputes, compliance of the installations and the staff list, with a notice period more realistic than that of Art. 201 CO. Responsibility for holidays and overtime accrued before the transfer must be allocated expressly, since the law makes both employers jointly liable.
Ongoing contracts call for specific review. A supply agreement with a brewery, often combined with exclusivity and a loan, does not follow without the brewery’s consent, nor do leasing or franchise agreements, some of which contain change-of-control clauses that apply even in a share deal.
The seller’s non-compete undertaking, which is not governed by Art. 340 et seq. CO (reserved for employees), is valid provided it is limited in time, territory and scope (Art. 27 para. 2 of the Swiss Civil Code). Payment terms, finally, should provide for instalments or escrow until the conditions are met, together with the handover date and a stock count on that day.
Which deed, which form?
| Transaction | Form | Key consent or formality |
|---|---|---|
| Asset deal (transfer of business) | No statutory form, detailed written agreement essential | Landlord’s written consent (Art. 263 CO), LRDBHD licence |
| Transfer of Sàrl shares | Written form (Art. 785 CO) | Approval of the members’ meeting (Art. 786 CO) |
| Transfer of SA shares | Written assignment or endorsement | Transfer restrictions in the articles (Art. 685a et seq. CO), change-of-control clauses |
| Transfer of assets and liabilities | Written contract, commercial register (Art. 70 FusG) | Notarial deed for real estate, three-year joint liability (Art. 75 FusG) |
| Sale of the premises | Notarial deed (Art. 216 CO) | Promise to sell also notarised, existing lease transferred (Art. 261 CO) |
Frequently asked questions
Can the landlord refuse to transfer my commercial lease?
Only for good cause (Art. 263 para. 2 CO), such as the buyer’s insolvency or the payment of key money. An unjustified refusal makes the landlord liable.
Does the buyer have to keep the staff?
In an asset deal, employment contracts pass to the buyer unless the employee objects (Art. 333 CO). In a share deal, the employer does not change.
Is a notary required to sell a restaurant in Geneva?
Only where premises are sold, including at the stage of a promise to sell (Art. 216 CO). Asset deals and share transfers are concluded in writing.
Does the licence pass with the restaurant?
No. The restaurateur’s diploma is personal, and the operating licence must be applied for again with the PCTN when the operator or owner changes.
Can a foreigner buy a hotel or restaurant in Geneva?
In principle yes, without a Lex Koller permit, as it is a permanent establishment. Any residential space included in the deal needs separate review.
Every establishment has its own configuration, whether a lease close to expiry, premises owned by a third party, staff under a collective agreement or a buyer based abroad. Sentinel Legal advises sellers and buyers in Geneva, from the letter of intent to the actual handover of the business.