Your French SAS (société par actions simplifiée, the flexible joint-stock company most foreign groups choose) or SARL (société à responsabilité limitée, the limited liability company with stricter operating rules) has its Kbis extract, which is the official identity card of the company issued by the greffe, the registry office of the commercial court. The share capital is deposited, the SIREN number (the unique nine-digit identifier issued by INSEE, the national statistics institute) is active, and now the company needs real operating cash: a first hire to pay, a lease deposit, stock to buy. Wiring money from the foreign parent looks like the simplest move in the world, and most founders do it with a one-line transfer reference. Months later the French accountant turns pale: the advance was never documented, the interest rate written in an email exceeds what French tax law allows, and the director who also lent money in his own name has entered a prohibition that voids the contract. This article explains how a group living abroad funds its French subsidiary cleanly through the shareholder current account, known in France as the compte courant d’associé, at what rate interest stays deductible, and how the money comes back without a dispute.
The technique is ordinary and expressly lawful between related companies, but it sits at the crossing of three regimes that each punish informality: the banking monopoly, which reserves lending to licensed institutions subject to narrow exemptions; company law, which voids loans to individual directors and forces shareholder loans through a regulated-approval procedure; and tax law, which caps deductible interest by reference to market rates. The pages below follow the order in which a founder should act: first, lend in a form the law recognises, then keep the interest within the deductible limit, and finally organise approval, repayment or conversion into capital from abroad. For the earlier steps of the project, read our guides on how to choose between a SAS, a SARL, a branch and a subsidiary in France and the official English procedure for forming and depositing company share capital. The public business service also publishes an English guide to the mechanism itself at shareholder current accounts: operation and taxation.
I. Lend to your French company in a form the law recognises
A. How does a foreign parent fund a French subsidiary through a shareholder current account?
The compte courant d’associé is not a bank account at all: it is a loan recorded in the company’s books on an account in the name of the shareholder, which can be credited by wire transfers from the parent, debited by repayments, and remunerated by interest if the parties agree. Its first virtue is speed: unlike a capital increase, which requires a shareholders’ decision, an auditor’s report in some cases, a new deposit certificate and a filing with the INPI one-stop shop (the Guichet unique run by the Institut national de la propriété industrielle, where all company filings are now made), a current-account advance can be wired the day the written agreement is signed. Its second virtue is reversibility: the money can be repaid when the subsidiary generates cash, whereas capital can only return through dividends, which require distributable profits, or a formal capital reduction. For a foreign parent testing the French market, the current account is therefore the natural bridge between incorporation and profitability, provided it is documented as a genuine loan from the start.
Documentation starts with a single written agreement, ideally signed before the first transfer, stating the lender, the borrower, the maximum amount or an open facility with a ceiling, the interest rate and its computation method, the term or the on-demand nature of the advance, the repayment mechanics, and the governing law and jurisdiction. French law does not impose a statutory template for shareholder loans, which is exactly why disputes concentrate on missing terms: an undated email saying “we will send 100k” proves neither the rate nor the maturity, and in a later conflict between the parent and a minority shareholder, or between the company and the tax administration, the absence of writing turns every term into an allegation. Practical discipline from abroad means signing with a qualified electronic signature, which French courts accept, keeping each drawdown notice with its value date, and reconciling the account quarterly so the French balance sheet matches the parent’s books to the euro. Where several group companies contribute, open one sub-account per lender rather than pooling everything in a single line: tracing is the difference between an intragroup facility and an unexplainable cash movement that a bank’s compliance software will flag.
The banking monopoly question worries founders unnecessarily once the group structure is understood. French law reserves the habitual granting of credit to licensed institutions, but it expressly provides that prohibitions do not prevent a company from carrying out cash operations with related companies, in the statutory words “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” (Article L511-7 of the Monetary and Financial Code, in force at the date of writing). A foreign parent that controls its French subsidiary through its shareholding therefore lends within the intragroup treasury exemption, and groups that move cash regularly formalise the practice in a centralised treasury agreement, known as a convention de trésorerie, under which a group treasurer collects surpluses and covers needs against remunerated current accounts. Two limits frame the exemption. First, the counterparty must genuinely be a related company with capital links conferring effective control: lending to a company in which the parent holds no stake falls outside the exemption. Second, the operation must remain a treasury operation between group companies, not a credit activity offered to the public. A parent financing its own subsidiary’s payroll, rent and suppliers sits squarely inside the safe harbour; a structure that collects money from third parties and on-lends it does not.
One transfer-pricing reflex should accompany every cross-border loan file, even for small amounts. The interest rate, the absence of a guarantee, and the subordination of the advance must be terms that independent parties would have accepted, because the French tax administration can challenge rates that shift profit abroad without economic substance. Keep a one-page memo with each agreement explaining why the rate was chosen by reference to what the subsidiary could have obtained from an independent bank, attach any bank quote the subsidiary requested, and file the memo where the accountant will find it at year-end. This memo costs an hour and routinely saves months in a later audit, since the auditor’s first question is always what market comparison supports the rate.
B. When is the loan forbidden and the contract void?
The most dangerous confusion in this area is mixing up the parent company, which is a legal person and may lend, with the individual director, who in most cases may not borrow a euro. In a SARL, the statute 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” (Article L223-21 of the Commercial Code). The ban extends to the legal representatives of corporate shareholders, to spouses, ascendants and descendants, and to any intermediary, with only a narrow exception for companies that operate a financial institution in the ordinary course of business on normal terms. In companies limited by shares the parallel prohibition 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” (Article L225-43 of the Commercial Code), extended to the general manager, deputy managers, permanent representatives of corporate directors, family members and intermediaries, adding that “Elle s’applique également aux conjoint, ascendants et descendants des personnes visées au présent article ainsi qu’à toute personne interposée.”
For a foreign founder, three concrete situations trigger the prohibition, and all three look innocent at the time. First, the founder wires personal money to the French company and records it as a current account in his own name while also serving as gérant (the manager of a SARL) or président (the president of a SAS): the advance itself, from an individual to the company, is generally tolerated in practice as a shareholder loan to the company, but the reverse flow is absolutely forbidden, so the founder must never use that same current account as a personal overdraft by withdrawing more than he contributed or by taking advances before contributing. Second, the company guarantees the founder’s personal commitments, for example by standing surety for his Paris apartment lease or his personal loan: the statute expressly forbids having the company guarantee or endorse obligations towards third parties, and the guarantee is void. Third, the founder routes the loan through a relative or a second company he controls to disguise the borrower: intermediaries are caught by the text, and courts reconstruct the real parties without difficulty. The only safe architecture is directional: legal persons lend to the company; the company never lends to, overdraws for, or guarantees individuals.
The SAS deserves a special warning because its freedom of contract misleads founders into believing nothing is prohibited. While the SAS has no exact equivalent of the SARL borrowing ban for its president in every commentary, loans and guarantees involving its management fall into the regulated-agreements procedure with a severity that surprises: the auditor, or the president if no auditor has been appointed, must present a report to the shareholders covering agreements between the company and its president, its managers, any shareholder holding more than 10 percent of voting rights or the controlling company, since “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 %” (Article L227-10 of the Commercial Code). In a single-shareholder SAS, known as a SASU, the agreement is simply recorded in the decision register. A shareholder loan from the foreign parent, which typically holds 100 percent of the votes, therefore always passes through this procedure in a SAS: report it, record it, approve it. The five minutes this takes are what separate a documented intragroup facility from an “undisclosed agreement” that a minority investor, a buyer or an administrator in insolvency proceedings will attack first.
II. Keep the interest deductible and organise the money’s return
A. How much interest can the French company deduct each year?
French tax law starts from a generous principle and then imposes a precise ceiling on related-party interest. The principle is that “Le bénéfice net est établi sous déduction de toutes charges” (Article 39 of the General Tax Code), so interest paid by the French subsidiary on a genuine loan is in principle a deductible charge of the financial year. The ceiling for money made available by a shareholder or a related company is then set by a dedicated rule: “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 : a) Dans la limite de ceux calculés d’après le taux prévu au premier alinéa du 3° du 1 du même article 39 ou, s’ils sont supérieurs, d’après le taux que cette entreprise emprunteuse aurait pu obtenir d’établissements ou d’organismes financiers indépendants dans des conditions analogues” (Article 212 of the General Tax Code). In practice the subsidiary deducts interest computed at the statutory maximum rate published quarterly by the tax administration, which is derived from average bank lending rates, or at a higher rate only if it proves that an independent bank would have lent to it on similar terms at that rate.
Two calculations therefore belong in every cross-border loan file before the rate is chosen. First, look up the published maximum rate for the relevant quarter and compare it with the rate the parent proposes: if the parent’s rate sits below the published maximum, deductibility is mechanically safe and no further proof is needed. Second, if the group wants a higher rate, assemble in advance the evidence an independent bank would have offered: written loan quotes, the subsidiary’s credit file, the absence of collateral, and the subordination of the shareholder advance to bank debt, all of which explain a spread above the average. Founders who skip this step and charge 8 or 10 percent because “that is the group policy” discover at audit that the excess is added back to taxable profit with penalties, while the parent may already have paid tax on the corresponding interest at home, producing double taxation on the spread. The BODACC (the Bulletin officiel des annonces civiles et commerciales, the official gazette where insolvency and company notices are published) publishes no warning about this; the reassessment arrives by post from the tax office three years later, which is why the rate memo described above matters more than any clause on governing law.
Interest paid to a non-resident parent also crosses the withholding-tax frontier, which the loan agreement should address explicitly rather than leave to year-end improvisation. France generally levies withholding tax on interest paid to foreign lenders subject to relief under the applicable bilateral tax treaty, and the paying subsidiary must report and pay it on time; the agreement should state whether the agreed rate is gross or net of withholding, who bears a treaty-reduced levy, and which party provides the certificate of residence the treaty requires. Coordinate with the parent’s advisers so the same interest is not taxed twice without relief, and calendar the declaration because late withholding declarations attract their own penalties independently of the corporate income tax. None of this requires the founder to fly to Paris: residence certificates, treaty forms and bank attestations circulate electronically, but they must be collected before the interest payment, not reconstructed for the auditor afterwards.
B. How do you approve, repay or convert the loan while living abroad?
Approval follows the shape of the company, and each shape can be handled remotely if the paperwork is prepared. In a SARL, the manager or the auditor presents “un rapport sur les conventions intervenues directement ou par personnes interposées entre la société et l’un de ses gérants ou associés. L’assemblée statue sur ce rapport. Le gérant ou l’associé intéressé ne peut prendre part au vote” (Article L223-19 of the Commercial Code), and where the company has a single shareholder the agreement is merely recorded in the decision register. In companies with a board, any agreement with a general manager, a director, a shareholder holding more than 10 percent of voting rights or the controlling company “doit être soumise à l’autorisation préalable du conseil d’administration.” (Article L225-38 of the Commercial Code), and that prior authorisation must be reasoned, since “L’autorisation préalable du conseil d’administration est motivée en justifiant de l’intérêt de la convention pour la société, notamment en précisant les conditions financières qui y sont attachées.” An unapproved agreement is not automatically void, because “Les conventions non approuvées produisent néanmoins leurs effets, à charge pour le gérant, et, s’il y a lieu, pour l’associé contractant, de supporter individuellement ou solidairement, selon les cas, les conséquences du contrat préjudiciables à la société.” But the interested party then personally bears any harm the agreement causes the company, which is a risk no founder should accept when a short report and a vote would have removed it. From abroad, hold the meeting by video where the articles allow it, sign minutes electronically, and keep the auditor in copy so the report exists before the vote rather than being drafted for the file afterwards.
Repayment is where undocumented loans die: the parent asks for its money back, the subsidiary’s new accountant finds no agreement, and the bank treats the outgoing transfer as suspicious. A well-drafted facility avoids this by stating from day one whether the advance is repayable on demand or at a fixed maturity, how many days’ notice the subsidiary needs to protect its cash, whether repayment can be set off against future invoices or dividends, and what happens if the subsidiary cannot pay without breaching its own obligations. On-demand repayment suits testing phases because the parent can recall the cash, but it obliges the subsidiary to disclose the liability as short-term, while a fixed maturity with a subordination clause reassures banks and suppliers that the shareholder will not empty the company overnight. Never repay by netting informally in spreadsheets: each repayment should be a real transfer with a reference to the agreement, matched the same week in both companies’ books, so that the current account balance is provable to the euro on any date.
When the subsidiary becomes profitable, conversion of the current account into capital, known as incorporation de créance, is often better than repayment because it strengthens equity, improves the balance sheet the banks read, and avoids moving cash twice. The operation requires a genuine, liquid and due claim, an auditor’s certificate confirming the amount in most cases, a shareholders’ decision, and a filing with the INPI Guichet unique, after which the parent holds more shares instead of a receivable. Alternatively, the parent can simply waive part of the claim, wholly or in exchange for a return to better fortunes clause, but waivers have immediate tax consequences on both sides and should be priced and documented as carefully as the original loan. Whatever the exit, inform URSSAF (the network collecting employer and employee social security contributions) of nothing in particular but keep payroll running from the French account throughout: lenders, courts and buyers all read a company that pays its wages and social charges on time as a healthy borrower, and no loan documentation compensates for contribution arrears that any due-diligence report will surface.
Conclusion
A foreign parent can finance its French subsidiary quickly and lawfully through a shareholder current account, and most groups should do exactly that instead of leaving the subsidiary to negotiate alone with banks that do not know it. Put the loan in a signed agreement before the first transfer, lend within the intragroup treasury exemption, never let the company lend to or guarantee its individual directors, and keep the interest rate at or below the published deductible maximum unless a bank quote proves a higher arm’s-length rate. Approve the agreement through the regulated procedure of the SARL, the SAS or the board-governed company, repay by traceable transfers rather than spreadsheet netting, and convert the claim into capital when the business turns profitable. Founders who follow that sequence get the two things that matter: cash available in weeks rather than months, and a file that survives the accountant, the bank, the tax auditor and the future buyer’s lawyers without a correction.