Business gifts: What does the law say?

In order to promote its sales, many professionals offer gifts to their business partners or privileges. However, we must be careful. Indeed, some practices constitute an offence of corruption and are punishable by a fine. There are legal ordinances in social, fiscal and commercial matters that govern them.

What the law says about business gifts

In the business world and in the world of commercial links between professionals, the Commercial Code, in its article L. 441-6, stipulates that what constitute the starting point for negotiation in the world of commerce are the supplier’s conditions of sale. The supplier, through its practice of discounting prices, prices, conditions of sale and advertising, will explain its sales policy and try to persuade its customers of the advantages of its offer. As the negotiation commits itself on this basis, the offer will be even more captivating with sales promotion operations such as the implementation of attractive prices, privileges that the supplier will grant to the firm, its employees, its managers and others. Sales promotion actions are increasingly deployed, through the donation of gifts, meals, training, invitations to trade fairs, products offered, bonuses, etc.

Some sectors, especially health and public procurement, are already subject to strict conceptual regulation. In the Public Health Code, for example, Article L. 41 13-6 stipulates that it is not permitted to receive privileges (whether in cash or in kind, indirectly or directly) provided by firms providing services, productions or offering for sale articles covered by compulsory social security schemes. Apart from these special regimes, the practice of promoting sales by giving privileges must nevertheless comply with certain rules.

The privilege granted to the legal person

The advantage granted to the legal person is legally comparable to the practice of selling with offered items or bonuses. It allows the buyer to be allocated another item on profitable terms or free of charge. In the business world, between professionals, this practice is legal, but subject to the consideration of the rules relating to pricing practices and those called restrictive of competition (prohibition of resale at a loss, mention in contracts and on invoice…).  What about business leaders and employees? What does the law say about the special benefits granted to officers and employees?

The privilege granted to company directors and employees

With regard to the privilege granted to managers and employees, in order to boost sales, there may be a strong temptation for the supplier to offer privileges to employees or managers of the client firm. However, this may constitute an offence of corruption, punishable by article 445-1 of the Criminal Code, if this privilege is not related to the activity, if its value is excessive and if its objective is to receive compensation contrary to professional obligations and/or practices (disproportionate promotion of products by dismissal of competing articles, volume of orders exceeding the distributor’s real need…). This offence is punishable by a fine of up to €375,000 and/or imprisonment. In addition, a privilege granted to a company director may constitute an abuse of the company’s assets. This manager, who uses, in bad faith, the credit or property of his firm that he knows is contrary to its interest, in order to support another firm in which he is interested, or for his own purposes, may be prosecuted. This is indeed a criminal offence.

What is the risk of qualifying as a privilege in kind?

In the sense of social security law, it is necessary, first and foremost, to bear in mind that gifts offered to a supplier’s employees by a client are a privilege in kind. Therefore, this type of gift must be paid into social security contributions. In response to the growth of these practices, this regulation, previously dedicated to case law, was explicitly written in the Social Security Code in 2011, by the financing legislation. Consequently, to the extent that employees enjoyed a privilege because of their membership in a client company, this privilege is, according to the law, qualified as a prerogative in kind and must therefore be included in the social contributions that are paid/ removed under the responsibility of the employer.

However, derogation has been provided for when the employee works in the field of commerce or when he is in direct contact with customers. No social contribution or contribution is due in this case if the privilege does not exceed a certain amount, more precisely 15% of the monthly minimum.

In summary, although offering a gift or granting privileges to business partners is a way used by many to promote their sales, it is important to know what the regulations say on this subject, in order not to commit a crime.

 

 

 

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