You live abroad and your French company owes you money. Months ago you wired 50,000, 150,000 or 400,000 euros from your foreign parent or your personal account to the French SAS (simplified joint-stock company, SASU when single-member) or SARL (limited liability company, EURL when single-member). The advance sits in the French ledger as a shareholder current account (compte courant d’associé). Now the French bank asks for stronger equity before renewing the overdraft, the balance sheet shows half the capital lost, or the tax adviser warns that interest above the legal ceiling will be added back every year. Asking for cash repayment would empty the company you are trying to save. Converting the claim into capital by set-off (augmentation de capital par compensation avec une créance) solves all three problems at once: no new wire, stronger equity, and interest stops because the debt disappears.

This operation is common in French groups and fully open to foreign shareholders, but it fails whenever the claim is not liquid and payable, the certificate is missing, or the vote is irregular. The greffe (registry of the commercial court) rejects the file, the Kbis (the official company identity extract) never shows the new capital, and the tax administration keeps taxing the interest as if nothing happened. This guide explains, for a founder or parent company living outside France, when conversion beats repayment, what claim qualifies, and how to vote, certify, file, and defend the tax cut-off entirely from abroad.

For the full formation sequence around this transaction, from blocked capital to Kbis and VAT number, see our pillar guide Setting Up a Company in France as a Foreign Founder: Bank Account, Kbis, VAT and Your First Hire. For the choice between operating through a subsidiary that you can recapitalise and a branch that you cannot, read Your French Company From Abroad: Branch or Subsidiary, Registration, Liability and Tax. The present article covers only the conversion route: turning an existing shareholder advance into shares without moving fresh money across borders.

I. Why convert the shareholder advance into capital instead of asking for repayment?

Repayment returns cash to you and weakens the French company. Conversion cancels the debt and strengthens equity by the same amount, with no cash leaving the business. A 120,000 euro current-account credit converted into shares increases shareholders equity by 120,000 euros and reduces debt by 120,000 euros on the same day. The bank ratio improves, the half-capital alarm can be cured, and future profits can be distributed as dividends rather than consumed by non-deductible interest. The price is irreversibility: once converted, the money returns only through dividends, a formal capital reduction, or liquidation. Choose conversion when the French company needs a balance sheet, choose repayment when you need the cash at home.

Both the SAS and the SARL accept this technique. Article L227-1 of the Code de commerce provides that “Une société par actions simplifiée peut être instituée par une ou plusieurs personnes qui ne supportent les pertes qu’à concurrence de leur apport”, in French “Une société par actions simplifiée peut être instituée par une ou plusieurs personnes qui ne supportent les pertes qu’à concurrence de leur apport”. No residence condition applies to the subscriber, so a Delaware, British, Emirati or Singapore parent can subscribe the new shares by setting off its existing claim. French banking-monopoly law confirms the starting point: a controlling foreign company may fund the French subsidiary through treasury operations, since article L511-7 of the Code monétaire et financier 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”, in French “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”. The advance was therefore a valid loan; conversion simply changes its nature from debt to capital.

The statute names set-off expressly as a way to pay for new shares. Article L225-128 of the Code de commerce provides that “Ils 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”, in French “Ils 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”. Two words carry the whole control: liquid (liquide, fixed in amount) and payable (exigible, due now). An on-demand current account meets both tests by definition; a blocked or term advance meets them only at maturity or on release. Conversion planning therefore starts by reading your own blocking letter before calling the auditor.

A. When does set-off beat cash repayment from abroad?

Three situations make conversion the better move. The first is the half-capital warning. When losses reduce equity below half the share capital, the directors must consult the shareholders within four months of approval of the accounts on whether to dissolve early, then file and publish the decision and rebuild equity within two years. A shareholder who demands repayment in that moment deepens the hole and invites a wrongful-trading claim if liquidation follows. Converting the advance rebuilds equity without fresh cash and documents a responsible response to the alarm. Keep the approval of the accounts, the equity calculation, and the conversion minutes in one file: the court reads them together.

The second is bank leverage. French banks routinely condition professional credit on the blocking (blocage) of shareholder current accounts for the life of the loan. While blocked, the advance cannot be reclaimed, yet it remains debt and keeps accruing interest that may be only partly deductible. Converting the blocked portion into capital satisfies the bank more durably than blocking, because equity needs no release letter. Negotiate the conversion amount with the branch manager before the vote: banks often accept a partial conversion that restores the debt-to-equity ratio, keeping a smaller working advance for daily needs. Get that acceptance in writing, since the credit committee decides on papers, not on promises made by phone from abroad.

The third is tax drag. Interest on shareholder advances is deductible only within a public ceiling and only if capital is fully paid. Article 39, 1-3° of the Code général des impôts allows “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”, in French “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 text adds that “Cette déduction est subordonnée à la condition que le capital ait été entièrement libéré”. When the advance carries 5 percent and the published average sits near 4 percent, the excess is added back every year, and related-company rules under article 212 of the Code général des impôts, which states that “Les intérêts afférents aux sommes laissées ou mises à disposition d’une entreprise par une entreprise qui est son associée ou par une entreprise liée, directement ou indirectement, au sens du 12 de l’article 39, sont déductibles”, in French “Les intérêts afférents aux sommes laissées ou mises à disposition d’une entreprise par une entreprise qui est son associée ou par une entreprise liée, directement ou indirectement, au sens du 12 de l’article 39, sont déductibles”, cap the deduction further to market proof. Conversion ends the accrual on the converted amount: no more ceiling math, no more transfer-pricing memo for that portion, and future returns flow as dividends under their own regime.

A numerical example clarifies the trade. A US parent leaves 200,000 euros on current account with its Paris SAS at 5 percent, capital fully paid, published average 4.2 percent. Annual contractual interest is 10,000 euros, deductible interest about 8,400 euros, leaving 1,600 euros added back plus evidence work each year. Convert 150,000 euros into capital: debt falls to 50,000 euros, next-year contractual interest falls to 2,500 euros, deductible interest covers it fully, equity rises by 150,000 euros, and the bank renews the line. The parent gives up repayment of 150,000 euros on demand but gains a distributable position and a cleaner audit. Run that comparison with your accountant before choosing the amount to convert.

B. What claim qualifies: liquid, payable and documented?

Only a liquid and payable claim can be set off. Liquid means certain in amount: principal fixed in euros, accrued interest calculated to the conversion date, no dispute on the figure. Payable means due: an on-demand advance is payable by definition, a term advance becomes payable at maturity, a blocked advance only on expiry or written release. Interest not yet due, conditional earn-outs, disputed invoices from the parent, and uncalled guarantees do not qualify. The auditor will refuse the certificate if either word fails, and the greffe will refuse the file.

Document the claim as if the auditor arrived tomorrow. Keep the signed loan or current-account agreement with amount, rate, term or on-demand clause, and French governing law; every wire slip showing euros credited to the French company account; the French ledger (accounts 455 or 451 with sub-accounts for interest) naming the lender and the agreement date; the foreign parent minutes authorising the advance and later the conversion; and a detailed statement of account (arrêté de compte) stopping interest on the conversion date, signed by the French director. If the advance came in dollars or pounds, keep the exchange tickets proving the euro value actually received, because the certificate is issued in euros.

The default repayment rule helps foreign lenders here. The Cour de cassation confirmed on 12 February 2025, pourvoi No 23-17.483, available at Cour de cassation, chambre commerciale, 12 February 2025, No 23-17.483, 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”, in French “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”. An on-demand advance is therefore payable at any moment, which is exactly what set-off requires. Conversely, if you signed a bank blocking letter, that letter is the stipulation contraire: the claim is frozen until release, and conversion needs either the bank release or a conversion structured as the agreed outcome of the blocking period. Read the blocking letter line by line from abroad before promising the auditor a payable claim.

Direction of the flow must also be correct. French company law voids loans from the company to an individual director or shareholder, but it allows advances from the shareholder to the company. Article L223-21 of the Code de commerce states 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”, in French “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”. Article L225-43 of the Code de commerce states the parallel ban for directors of joint-stock companies with the words “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”, in French “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”. Your file must therefore show money flowing from the foreign shareholder to the French company, never the reverse. A file that mixes personal expenses paid by the company with the shareholder advance contaminates the certificate and must be cleaned before conversion.

II. How do you convert the loan into shares from abroad without a new wire?

The conversion follows four steps that can all be done remotely with proper powers: approve the related-party arrangement, vote the capital increase, obtain the certificate, then file and publish. No new money crosses the border. The claim disappears by set-off on the effective date stated in the minutes, new shares are issued to the foreign subscriber, the articles are amended, and the greffe issues a new Kbis showing the higher capital. Each step has a remote-execution detail that foreign shareholders often miss: the form of the meeting, the identity checks for the Guichet unique, and the exact certificate wording.

Anticipate the calendar. The statement of account and the draft minutes should be ready the same week. The auditor needs a few days to verify the ledger and the wires. The meeting can be held by videoconference or written consultation if the SAS articles or the SARL rules allow it. The Guichet unique filing takes days, and BODACC publication follows. Interest stops on the conversion date fixed in the minutes, not on the later Kbis date, so date the set-off precisely and keep proof that the claim existed and was payable that day.

A. What vote, certificate and filing turn the claim into capital?

First, treat the conversion as a regulated related-party agreement as well as a capital decision. In a SARL, article L223-19 of the Code de commerce requires “un rapport sur les conventions intervenues directement ou par personnes interposées entre la société et l’un de ses gérants ou associés”, in French “un rapport sur les conventions intervenues directement ou par personnes interposées entre la société et l’un de ses gérants ou associés”. In a SAS, article L227-10 of the Code de commerce requires “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”, in French “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 foreign parent holding more than 10 percent that subscribes by set-off falls in that report. Present the report, have the disinterested shareholders vote, and record the interested person abstention. An unapproved agreement still takes effect but leaves the subscriber exposed to liability for harm to the company, which a minority or a liquidator will raise later.

Second, vote the increase under the majority for amending the articles. In a SARL that means shareholders representing at least three-quarters of the shares on the relevant convocation, unless the articles demand unanimity for specific matters. In a SAS the articles set the collective-decision rule, including videoconference and written consultation from abroad, except for matters the law reserves to collective vote. State in the minutes the total increase, the number and nominal value of new shares, the subscriber name, the exact claim set off with principal and stopped interest, the effective date, the waiver of pre-emptive rights by the other shareholders where needed, and the new articles text. Attach the subscription form (bulletin de souscription) signed by the foreign subscriber with apostille or legalisation where the greffe asks for it, plus a certified French translation.

Third, obtain the set-off certificate. Article L225-146 of the Code de commerce provides that “Les libérations d’actions par compensation de créances liquides et exigibles sur la société sont constatées par un certificat du notaire ou du commissaire aux comptes de la société, ou, s’il n’en a pas été désigné, d’un commissaire aux comptes désigné à cet effet selon les modalités prévues aux articles L. 225-228 et L. 22-10-66”, in French “Les libérations d’actions par compensation de créances liquides et exigibles sur la société sont constatées par un certificat du notaire ou du commissaire aux comptes de la société, ou, s’il n’en a pas été désigné, d’un commissaire aux comptes désigné à cet effet selon les modalités prévues aux articles L. 225-228 et L. 22-10-66”. The same text adds that “Ce certificat tient lieu de certificat du dépositaire”, meaning no fresh bank deposit is needed. Send the auditor the agreement, the full ledger, the wire slips, the statement of account, and the draft minutes. The auditor checks that the amount is fixed, that it was due on the conversion date, and that the accounting matches the bank. If part of the claim is disputed or not yet due, split the operation: convert the clean portion now, keep the rest as a smaller current account, and avoid a qualified certificate that the greffe will reject.

Fourth, file on the Guichet unique and publish. Upload the minutes, the amended articles, the certificate, the updated beneficial-owner information if thresholds moved, and the identity documents of the foreign subscriber. Pay the greffe and BODACC fees online, track the filing number daily, and answer any rejection within days: missing translation, wrong shareholder address, or a certificate dated before the vote are the three usual grounds. On registration, download the new Kbis, verify the capital figure and the director details, and send the Kbis to the bank the same day so the credit file reflects the stronger equity. Keep the filing receipt with the minutes: the conversion is effective between parties on the minute date, but only the published Kbis proves it to banks and courts.

B. How do tax, interest and insolvency change on the conversion date?

Tax follows the clock. Interest accrues until the conversion date and stops after, because the debt no longer exists. Deduct interest pro rata to that date within the article 39 ceiling, attach the statement of account to the tax file, and report the stopped figure in the corporate return. The foreign lender reports interest received until conversion under its own law and treaty article for interest, not dividends. Future distributions on the new shares follow the dividend regime with its own withholding, forms, and treaty relief. Mixing the two periods in one line invites reassessment: one line for interest until conversion, another for dividends after.

Do not use conversion to hide excessive interest already paid. If past interest exceeded the ceiling or lacked market proof under article 212, the excess stays added back for the years concerned; converting the principal does not erase the prior add-back. If the administration already notified a reassessment on the rate, answer it on the rate with bank comparables and the published average, then convert to stop the bleed. Conversion is prospective relief, not retroactive amnesty. Keep the rate evidence for the statutory limitation period even after the claim disappears from the balance sheet.

Insolvency timing makes early conversion valuable. Once the court opens reorganisation or liquidation, article L622-28 of the Code de commerce provides that “Le jugement d’ouverture arrête le cours des intérêts légaux et conventionnels, ainsi que de tous intérêts de retard et majorations, à moins qu’il ne s’agisse des intérêts résultant de contrats de prêt conclus pour une durée égale ou supérieure à un an ou de contrats assortis d’un paiement différé d’un an ou plus”, in French “Le jugement d’ouverture arrête le cours des intérêts légaux et conventionnels, ainsi que de tous intérêts de retard et majorations, à moins qu’il ne s’agisse des intérêts résultant de contrats de prêt conclus pour une durée égale ou supérieure à un an ou de contrats assortis d’un paiement différé d’un an ou plus”. On 9 September 2026 the Cour de cassation applied that stop strictly against a foreign parent in Cour de cassation, chambre commerciale, 9 September 2026, No 25-16.955, holding that “Seuls les intérêts résultant d’un contrat de prêt conclu pour une durée égale ou supérieure à un an ou d’un contrat assorti d’un paiement différé d’un an ou plus échappent à la règle de l’arrêt du cours des intérêts édictée par le premier de ces textes et rendue applicable au redressement et à la liquidation judiciaires par les deuxième et troisième”, in French “Seuls les intérêts résultant d’un contrat de prêt conclu pour une durée égale ou supérieure à un an ou d’un contrat assorti d’un paiement différé d’un an ou plus échappent à la règle de l’arrêt du cours des intérêts édictée par le premier de ces textes et rendue applicable au redressement et à la liquidation judiciaires par les deuxième et troisième”. Because the original 2020 cash-pool left the Swedish lender free to demand repayment at any time with no fixed term, later five-year papers could not save post-opening interest. A conversion completed while the company is still healthy avoids that fight entirely: converted principal no longer bears interest, and the new shares rank as equity rather than as a contested interest claim in the liabilities statement.

From abroad, protect the conversion against later challenge. Complete it before cash-flow insolvency (cessation des paiements), keep proof of solvency on the conversion date, and never convert selectively to favour one shareholder just before filing while leaving other creditors unpaid. The court can review transactions in the suspect period and sanction preferences. A conversion at nominal value when the shares are nearly worthless, or with a claim whose amount was inflated the week before, draws the same scrutiny as a late repayment. Clean amount, auditor certificate, disinterested vote, prompt filing: those four papers are the best defence if a later liquidator questions the operation.

Conclusion

Turning a shareholder advance into capital by set-off lets a foreign owner strengthen a French SAS or SARL without a new cross-border wire, provided the claim is liquid, payable, and certified. Check the blocking letter first, stop the interest calculation on a precise date, approve the regulated agreement without the interested vote, vote the increase with the correct majority, obtain the auditor or notary certificate that replaces the bank deposit, and file until the new Kbis arrives. Interest then ends on the converted amount, equity rises by the same amount, and the bank file improves while you remain abroad. Keep the agreement, the ledger, the wires, the certificate, and the Kbis together: that file proves the debt existed, that it was due, and that it became capital on a fixed day.