You run a French SAS or SARL from London, New York, Dubai or Singapore. Instead of raising the share capital, your foreign parent company wires 150,000 euros to the French subsidiary and your accountant books it as a shareholder current account, in French a compte courant d’associé. Months later the French company needs the cash for something else, or the parent needs it back, and a simple question turns into a dispute: can the parent demand repayment at any time, can the French company refuse, what interest rate is lawful, and what will the French tax office accept as deductible? This article answers those questions for the foreign founder who funds a French company from abroad.

A shareholder current account is one of the most flexible ways to finance a French company, but it sits at the crossing of three French regimes that punish improvisation: the banking monopoly that reserves lending to licensed institutions, the company-law rules on agreements between a company and its shareholders, and the tax-law caps on deductible interest. Add the practical reality of managing everything from abroad, with a bank that asks for documents, a chartered accountant who books the advance, and a tax inspector who may reclassify the interest, and the need for a written, priced and documented loan becomes clear. The paragraphs below explain how to set up the advance lawfully, how to price the interest so that it survives a tax audit, and how to recover the money or convert it into capital when repayment becomes difficult.

French acronyms appear throughout this article and deserve a short glossary. The RCS is the Registre du commerce et des sociétés, the trade and companies register where your company is identified. The Kbis is the official extract that proves the company exists. The greffe is the registry office of the commercial court that keeps the RCS. The BODACC is the official bulletin where company events are published. The CGI is the Code général des impôts, the French tax code. The SIE is the service des impôts des entreprises, the tax office in charge of companies. With these terms in mind, the analysis can begin.

I. Funding your French company with a foreign parent loan: what French law allows and how the interest is taxed

Before pricing anything, the foreign founder must confirm that the parent company is legally allowed to lend to its French subsidiary. French law starts from a prohibition, then opens a narrow door for intra-group financing. Company law adds a second layer of approvals, and tax law a third layer of caps. Each layer is examined in turn.

A. How a foreign parent can lawfully advance funds to its French subsidiary without a banking licence

French law reserves lending to licensed banks. Article L511-5 of the Code monétaire et financier states that “Il est interdit à toute personne autre qu’un établissement de crédit ou une société de financement d’effectuer des opérations de crédit à titre habituel.” Read literally, this sentence would terrify any foreign parent that sends money to its French subsidiary. The text continues with a second prohibition on receiving repayable funds from the public, which does not concern a single intra-group advance. The practical question is therefore whether a one-off or occasional shareholder advance counts as habitual lending, and whether an explicit exception covers it. The full text of the prohibition can be read at Article L511-5 of the Code monétaire et financier on Légifrance.

The exception that protects most foreign parents is written in Article L511-7 of the same code, which lists the transactions that escape the banking monopoly. Among them, the statute allows a company to “Procéder à des opérations de trésorerie avec des sociétés ayant avec elle, directement ou indirectement, des liens de capital conférant à l’une des entreprises liées un pouvoir de contrôle effectif sur les autres”. A foreign parent that controls its French subsidiary through its shareholding falls squarely within this description, so a cash advance, a shareholder loan or a current-account credit from the parent to the subsidiary is a treasury operation between related companies, not unlawful banking. The wording of the exception is available at Article L511-7 of the Code monétaire et financier on Légifrance. Three practical conditions follow from this analysis. The lending company must hold capital links giving it effective control over the borrower, which a majority shareholding satisfies. The operation should remain a treasury operation between those two related companies, documented as such, rather than a general lending activity offered to third parties. And the advance should be traceable by wire transfer between identified company accounts, because cash movements without paperwork look like hidden distributions or undeclared income to both the bank and the tax office.

Company law then decides who must approve the advance inside the French company. The answer depends on the vehicle. In a SAS, the French simplified joint-stock company that most foreign founders choose, Article L227-10 of the Code de commerce requires that “Le commissaire aux comptes ou, s’il n’en a pas été désigné, le président de la société présente aux associés un rapport sur les conventions intervenues directement ou par personne interposée entre la société et son président, l’un de ses dirigeants, l’un de ses actionnaires disposant d’une fraction des droits de vote supérieure à 10 % ou, s’il s’agit d’une société actionnaire, la société la contrôlant au sens de l’article L. 233-3.” A loan from a foreign parent that holds more than 10 percent of the votes, or that controls the SAS, is such a regulated agreement, and the statute adds that “Les associés statuent sur ce rapport.” The procedure and its effects are set out at Article L227-10 of the Code de commerce on Légifrance. An unapproved agreement still produces its effects, but the interested party bears any harmful consequences for the company, so the foreign parent has every interest in seeing the loan submitted to the shareholders and minuted. In a single-shareholder SASU, the formality is lighter, with a mere entry in the register of decisions, but it should not be skipped.

In a SARL, the French limited liability company, and in a SA, the public limited company, the mirror rule runs in the opposite direction: managers and individual directors are forbidden from borrowing from their own company. Article L223-21 of the Code de commerce provides that “A peine de nullité du contrat, il est interdit aux gérants ou associés autres que les personnes morales de contracter, sous quelque forme que ce soit, des emprunts auprès de la société, de se faire consentir par elle un découvert, en compte courant ou autrement, ainsi que de faire cautionner ou avaliser par elle leurs engagements envers les tiers.” The prohibition for directors of a SA is identical in Article L225-43, which states that “A peine de nullité du contrat, il est interdit aux administrateurs autres que les personnes morales de contracter, sous quelque forme que ce soit, des emprunts auprès de la société, de se faire consentir par elle un découvert, en compte courant ou autrement, ainsi que de faire cautionner ou avaliser par elle leurs engagements envers les tiers.” Both texts are worth reading in full at Article L223-21 of the Code de commerce on Légifrance and Article L225-43 of the Code de commerce on Légifrance. Note the careful scope: the ban targets individuals, while loans granted by a corporate shareholder, such as a foreign parent company, fall outside it. The direction of the money matters. A foreign parent lending to its French subsidiary is analysed under the regulated-agreements procedure, while a French subsidiary lending to its individual foreign director would hit the prohibition and risk nullity of the contract.

Two administrative steps complete the lawful setup. The loan agreement should be written, dated and signed before or at the same time as the funds move, stating the amount, the currency, the interest rate or the reference used to compute it, the term or the on-demand nature of the advance, and the repayment mechanics. The agreement is then communicated to the French accountant, recorded in the shareholders report where one is required, and kept with the bank transfer slips. Separately, the French company reports its effective beneficiaries in the register of beneficial owners held by the INPI single window, the guichet unique, and any change in the funding structure that alters control should be reflected consistently. The official company-formalities portal is the right starting point at service-public.fr page on company formalities through the guichet unique. A founder who runs these steps from abroad through a documented signing process and a single Gordian file of transfer proofs will face the bank, the auditor and the inspector with a coherent story.

B. Pricing the interest so that it survives a French tax audit: the two statutory caps and the proof to keep

Interest is where foreign founders lose the most money, because the rate agreed between a parent and its subsidiary is not automatically deductible in France. Two cumulative caps apply, and the lower one wins. The first cap is mechanical and public. Article 39 of the CGI allows the deduction of “Les intérêts servis aux associés à raison des sommes qu’ils laissent ou mettent à la disposition de la société, en sus de leur part du capital, quelle que soit la forme de la société, dans la limite de ceux calculés à un taux égal à la moyenne annuelle des taux effectifs moyens pratiqués par les établissements de crédit et les sociétés de financement pour des prêts à taux variable aux entreprises, d’une durée initiale supérieure à deux ans.” The same paragraph adds a condition that foreign founders sometimes discover too late: “Cette déduction est subordonnée à la condition que le capital ait été entièrement libéré.” In plain terms, if the French company still owes part of its subscribed capital, none of the interest on shareholder advances is deductible, whatever the rate. The full paragraph, with its exceptions for qualifying parent companies, is published at Article 39 of the Code général des impôts on Légifrance. The reference rate itself is published quarterly by the Banque de France and relayed by the tax administration, so the founder or the accountant must look up the rate for the relevant quarter and apply it pro rata to the outstanding balance. Interest booked above that rate is added back to taxable profit, and penalties for deliberate understatement can follow if the excess was concealed.

The second cap is economic and far more demanding. Article 212 of the CGI provides that interest on sums left or made available to a company by a related party is deductible within the limit of interest calculated either at the Article 39 rate or, where higher, “d’après le taux que cette entreprise emprunteuse aurait pu obtenir d’établissements ou d’organismes financiers indépendants dans des conditions analogues”. The provision is short and dense, and it deserves a direct reading at Article 212 of the Code général des impôts on Légifrance. This sentence reverses the burden in practice: if the French subsidiary pays its foreign parent 8 percent while a standalone French company of the same size, sector and creditworthiness could only borrow at 4 percent from an independent bank, the tax inspector will challenge the excess unless the company proves that an independent lender would truly have charged 8 percent in similar conditions. Evidence that persuades includes a contemporaneous bank term sheet offered to the French company, a documented group credit rating with a calculated arm’s-length margin, or a transfer-pricing study that benchmarks comparable loans. Evidence that does not persuade includes a rate copied from another country without adjustment, a round number chosen for convenience, or interest that was never actually paid and simply accumulated on paper year after year.

A practical pricing method that survives scrutiny has four steps. First, confirm that the French share capital is fully paid up, and if it is not, complete the release of capital before booking deductible interest. Second, identify the Article 39 reference rate for the period and treat it as the default ceiling for a plain current-account advance. Third, if the group wishes to charge more, assemble before the year-end the proof that an independent bank would have charged at least that much: the subsidiary’s financial statements, the loan-to-value or debt-to-equity position, guarantees given or withheld by the parent, and at least one external comparable. Fourth, actually pay the interest through the bank account and record any withholding analysis, because interest paid to a non-resident lender can trigger French withholding unless a tax treaty or a European Union instrument removes or reduces it, and the SIE will ask for the treaty form and the beneficial-ownership justification. General guidance on business taxation and withholding mechanics is published by the tax administration at impots.gouv.fr professional section for companies. A founder who prices at the reference rate, pays the interest, and keeps the capital fully released will rarely face an adjustment on this point, while a founder who prices high, pays nothing and keeps no benchmark invites one.

Zero-interest advances deserve a separate warning. A foreign parent often proposes to lend at zero percent to help the French subsidiary, assuming that no interest means no tax problem. The deduction caps do not punish this choice, since nothing is deducted, but the inspector may ask the symmetric question: would an independent lender have lent at zero percent, and does the zero-rate loan hide a transfer of profit abroad? In most routine financings of active subsidiaries, a zero rate on a documented short-term advance is accepted without drama. Where the amounts are large and the term is long, the safer course is to charge the reference rate, pay it, and let the parent declare the income at home under the applicable treaty. The decision belongs in a dated memo that the accountant keeps with the loan agreement, so that a later inspector sees a deliberate policy rather than an oversight.

II. Getting the money back or converting it into equity: blocked accounts, repayment rights and remedies from abroad

Loans are made to be repaid, yet shareholder current accounts generate the sharpest conflicts precisely at repayment. The parent demands its money, the subsidiary answers that the till is empty, and each side discovers that the paperwork signed two years earlier decides everything. French case law gives the lender a strong default right, allows the parties to contract out of it through blocking agreements, and gives judges tools to grant time. Tax and company law then offer conversion routes when cash repayment is impossible.

A. Demanding repayment from abroad: the on-demand default, the blocking agreement that reverses it, and the extra time a judge can grant

The starting rule favours the lender, and the Cour de cassation confirmed it in a widely cited 2025 ruling. Approving the reasoning of the Versailles cour d’appel, the chamber stated that “sauf stipulation contraire, tout associé était en droit d’exiger à tout moment et peu important les motifs de sa demande le remboursement du solde de son compte courant, dès lors que l’avance ainsi consentie constituait un prêt à durée indéterminée”. The decision, which rejected the appeal, is published with its official summary at Cass. com., 12 February 2025, No. 23-17.483 on courdecassation.fr. Three consequences flow from this sentence for a foreign parent. The demand needs no justification, so the French subsidiary cannot answer that the parent does not really need the money. The demand can be made at any moment, including at an awkward moment for the subsidiary, unless the contract says otherwise. And the characterisation as an open-ended loan means that limitation and termination rules for indefinite obligations apply, which rewards the party that sends a clear written demand. From abroad, the demand should take the form of a registered letter with acknowledgment of receipt or its electronic equivalent, stating the account, the amount, the contractual basis and a reasonable payment deadline, followed by wire details. Oral pressure proves nothing before a French court.

The exception that reverses this default is the blocking agreement, in French a convention de blocage. Parent and subsidiary agree in writing that the current account will remain blocked, unavailable for repayment, for a defined period or until a defined event such as the full repayment of a bank loan. Banks routinely require such blocking as a condition for lending to the French company, because the bank wants the shareholder money to behave like quasi-equity while its own loan is outstanding. The Cour de cassation treats the blocking clause as the stipulation contraire that displaces on-demand repayment, provided the clause is certain, accepted and limited in scope. A clause that purports to block repayment forever, or whose release conditions are entirely at the borrower’s discretion, risks being set aside or reinterpreted, while a clause with a fixed term, a measurable release event and a stated interest regime during the blocked period is routinely enforced. Foreign founders should therefore read any bank side letter before drawing the loan: signing a blocking commitment to obtain a French bank facility and then demanding immediate repayment of the same account exposes the parent to a stay of its claim and to liability for the costs of the incident.

When neither the contract nor the cash position yields a solution, the French judge can grant breathing room. Article 1343-5 of the Code civil provides that “Le juge peut, compte tenu de la situation du débiteur et en considération des besoins du créancier, reporter ou échelonner, dans la limite de deux années, le paiement des sommes dues.” The power is discretionary, capped at two years, and conditioned on a balance between the debtor’s situation and the creditor’s needs. The text and its detailed conditions appear at Article 1343-5 of the Code civil on Légifrance. In practice, a French court seised by the foreign parent will order payment of the credit balance with contractual or statutory interest, and may, at the subsidiary’s request, spread payment over up to twenty-four months, sometimes reducing the running rate to at least the statutory rate or ordering that payments apply to principal first. The subsidiary that seeks such grace periods must file accounts, cash forecasts and evidence of good faith, while the parent that opposes them must document its own cash need. Proceedings are brought before the commercial court of the subsidiary’s registered office, which for a Paris company means the specialised business court whose registry handles RCS Paris filings, and the timeline from writ to judgment commonly runs well over a year, which itself creates a negotiation window. A Paris-based company checks its registration data, filing deadlines and court details through the registry network presented at service-public.fr page on company formalities through the guichet unique, and Paris founders should budget for in-person or represented hearings rather than expecting a purely paper procedure.

Limitation periods add a final layer of discipline. An action for repayment of a current-account balance is subject to the ordinary five-year commercial limitation, running from each demand or acknowledgment, so a parent that lets the balance sleep for years without a statement, a demand or an interest payment may discover that part of its claim is stale. Annual confirmation letters, signed by both companies and reconciled to the French accounting ledger, interrupt the clock and keep the audit trail clean. The discipline is the same one that governs the annual legal calendar of French companies, described in our guide to approving accounts and filing from abroad at Your French Company Has a Legal Calendar: Approve Accounts, Hold the Meeting and File From Abroad, and the current-account file should follow the same yearly rhythm of approval, signature and filing.

B. When cash repayment fails: setting the claim off into capital, waiving the debt cleanly, and defeating a tax reassessment

Where the French subsidiary cannot repay in cash, the claim itself can become the currency of a capital increase. Article L225-128 of the Code de commerce provides that new shares “sont libérés soit par apport en numéraire y compris par compensation avec des créances liquides et exigibles sur la société, soit par apport en nature, soit par incorporation de réserves, bénéfices ou primes d’émission, soit en conséquence d’une fusion ou d’une scission.” The mechanism is set out at Article L225-128 of the Code de commerce on Légifrance. For the foreign parent, the route has three gates. The claim must be liquid and due, which excludes a blocked account whose release event has not occurred and a disputed balance. The shareholders must vote the capital increase and record the set-off, with an auditor’s certificate confirming that the claim is certain and due where the procedure requires it. And the resulting shareholding change must be filed with the greffe, published where required, and reflected on the Kbis, because an unfiled capital increase is unenforceable against third parties and leaves the parent with neither cash nor shares. Priced correctly, the conversion strengthens the subsidiary’s balance sheet, ends the interest dispute, and gives the parent equity that a later sale can monetise, a path developed in our analysis of selling the shares of a French subsidiary at How a Foreign Owner Sells the Shares of a French Subsidiary: Price, Warranties and Getting Paid From Abroad.

Debt waiver, in French abandon de créance, is the alternative that looks simple and taxes badly. A parent that forgives the current account improves the subsidiary’s equity at the price of a taxable exceptional profit in the subsidiary, unless the waiver is tied to the subsidiary’s financial difficulty and accompanied by a claw-back clause, in French clause de retour à meilleure fortune, that brings the waived amount back into profit if the subsidiary recovers. The parent, for its part, generally cannot deduct the waived amount except within narrow statutory openings for aids to distressed companies, and a cross-border waiver without a commercial justification for the parent invites a transfer-pricing adjustment on top of the French charge. The documented comparison is therefore straightforward: conversion into capital defers taxation and preserves value, while waiver crystallises an immediate taxable profit in France and a probable non-deduction abroad. Founders who face sustained losses should model both routes with the accountant before signing anything, because an undocumented waiver booked as a miscellaneous gain is the first line a tax inspector underlines.

Tax reassessments on shareholder loans follow a predictable script, and each line of the script has a rebuttal. The inspector argues that the interest rate exceeds the Article 39 reference rate, and the company answers with the quarterly rate table and the computation sheet. The inspector argues that no independent bank would have lent at the charged rate, and the company produces the term sheet, the rating memo or the benchmark study. The inspector argues that the advance is really a hidden capital contribution or a disguised distribution, and the company produces the signed loan agreement, the wire slips, the shareholder report approving the regulated agreement, the interest payments with bank statements, and the annual confirmation letters. The inspector argues that the capital was not fully paid up, and the company produces the bank certificate of the capital deposit and the RCS entries. Companies that hold this file from day one routinely close audits with minor adjustments, while companies that reconstruct it after the audit notice pay the excess rate, late interest and penalties. Where the assessment nevertheless arrives, the French company challenges it first through a written claim to the SIE, then before the administrative court, within the statutory deadlines stated on the assessment notice, and the foreign parent supports the case with a transfer-pricing consistent story in its home jurisdiction, so that winning in France does not create a mirrored adjustment abroad.

For Paris and Ile-de-France companies, three local details sharpen the general advice. The competent registry is the greffe attached to the Paris business court, and filings, Kbis requests and capital-increase publications for a Paris-registered SAS or SARL run through that office and the single window, with processing times that lengthen around the summer and year-end peaks. Local banks in Paris apply the most standardised blocking templates in France, so a foreign parent negotiating a facility for its Paris subsidiary should expect a two-to-five-year blocking clause with quarterly compliance certificates, and should align the loan agreement, the shareholder report and the bank side letter on identical release language before drawing funds. Court timelines before the Paris business court are among the longest in France for contested collection cases, which makes a staged strategy, formal demand, negotiated schedule, then writ, more economical than an immediate lawsuit over a recoverable balance. None of this changes the substantive law, but it changes the calendar, and in current-account disputes the calendar decides the leverage.

Conclusion

A foreign parent can finance its French company by current account safely when four conditions are met. The advance fits the intra-group treasury exception to the banking monopoly and moves by documented wire. The French company approves it through the regulated-agreements procedure that matches its form, with a written agreement that states the rate, the term and the blocking regime. The interest stays within the Article 39 reference rate or is defended by proof that an independent lender would have charged as much, the capital is fully paid up, and the interest is actually paid. And the balance is confirmed every year, so that repayment, set-off into capital or a reasoned waiver can be executed from abroad without reconstructing history under pressure. The founders who treat the shareholder loan as a real bank file, with a contract, a rate memo, transfer slips and yearly signatures, borrow cheaply and sleep well. Those who treat it as an informal family arrangement discover, at the worst moment, that French law treats it as a real loan with real consequences, and that the paperwork they skipped was the cheapest protection they ever declined.