A foreign founder may see cash in a newly incorporated French company and ask a practical question: can that cash be transferred to the shareholder immediately, before the company has closed and approved its first annual accounts? The short answer is normally no. Cash in the bank is not the same thing as a distributable profit. An ordinary dividend requires annual accounts, approval by the competent shareholders, a finding that distributable sums exist, and a decision that records how the result is allocated. This applies to a société par actions simplifiée (SAS, a simplified joint-stock company), a société à responsabilité limitée (SARL, a private limited liability company), a SASU (a single-member SAS) and an EURL (a single-member SARL).

There is a narrow route for an interim dividend, called an acompte sur dividendes in French. It depends on an interim balance sheet, the required accounting adjustments and, in the cases covered by the statute, certification by a commissaire aux comptes (CAC, statutory auditor). It is not a way to withdraw the capital deposited for incorporation, repay a shareholder informally or turn an unverified forecast into a dividend. A payment made outside the statutory conditions can be treated as a fictitious dividend, expose the managers or directors to criminal risk and weaken the company precisely when it needs its first working capital.

This article separates the legal answer from the tax and implementation steps. It is written for a founder or foreign parent who is not yet familiar with French terms such as the Kbis, the official extract connected with the Trade and Companies Register; the greffe, the court registry; the INPI, the National Institute of Industrial Property that operates the single business formalities portal; the RCS, the Registre du commerce et des sociétés; URSSAF, the body that collects much of the French social-security financing; and BODACC, the Official Bulletin of Civil and Commercial Announcements. The Kbis is evidence of registration, not evidence that a dividend is available.

The article complements the firm’s broader French company-formation and corporate-structuring service by focusing on the cash-distribution question that arises after incorporation.

I. Can a new French company distribute dividends before its first annual accounts?

A. Why incorporation money and trading cash are not distributable profit

The first distinction is between the legal origin of the money and its accounting destination. The cash paid into a blocked account for a capital contribution belongs to the company once the contribution is completed. It forms part of the company’s capital and working resources. It does not become a dividend merely because the founder is the only shareholder, because the bank account is temporarily well funded or because the company has not yet hired staff.

French company law starts with a reserve rule. Article L. 232-10 of the Commercial Code applies to SARLs and companies limited by shares. The official text states: “un prélèvement d’un vingtième au moins affecté à la formation d’un fonds de réserve dit \” réserve légale \””. In practical terms, at least one twentieth of the relevant annual profit must be allocated to the legal reserve until the reserve reaches one tenth of the share capital. The same provision adds that a contrary decision is void. A founder therefore cannot simply label the initial capital, an advance from the parent company or a customer prepayment as a profit available for personal extraction.

The second rule defines the pool from which an ordinary dividend may be paid. Under Article L. 232-11 of the Commercial Code, “Le bénéfice distribuable est constitué par le bénéfice de l’exercice”. The calculation starts with the profit for the financial year, subtracts prior losses and amounts that must be placed in a reserve under the law or the articles of association, and adds a positive retained earnings balance. The provision also limits a distribution where equity would fall below the share capital plus non-distributable reserves. A bank statement cannot replace that calculation.

This matters particularly for a foreign founder who has funded a French subsidiary from abroad. The incoming transfer may be one of several legally different items: a share-capital contribution, an issue premium, a shareholder loan, an expense reimbursement, a payment for services or revenue earned by the company. Each item has a different accounting and tax treatment. A payment to the founder before the first accounts are approved should therefore be classified before it is made. Calling it a “dividend advance” after the transfer does not cure the absence of a lawful corporate decision.

The Civil Code supplies a further structural rule. Article 1844-1 of the Civil Code provides that “La part de chaque associé dans les bénéfices et sa contribution aux pertes se déterminent à proportion de sa part dans le capital social”, subject to a valid contrary clause. That rule concerns the allocation of profits; it does not create a right to take money out of the company before a profit has been established. The articles may regulate distribution rights and voting mechanics within the limits of mandatory law, but they cannot turn capital into a dividend or authorise a prohibited distribution.

For an ordinary distribution, Article L. 232-12 of the Commercial Code states: “Après approbation des comptes annuels et constatation de l’existence de sommes distribuables, l’assemblée générale détermine la part attribuée aux associés sous forme de dividendes.” That sequence is decisive. The company first closes its accounts; the competent body approves them; the existence of distributable sums is established; and the shareholders decide the allocation. A first-year founder who has not reached that sequence does not have an ordinary dividend to pay.

The Cour de cassation applied the same sequence in its commercial decision no. 19-23.669, 8 April 2021. The court wrote: “Si la décision de distribution des dividendes relève, selon l’article L. 232-12 du code de commerce, de l’assemblée générale des associés, après approbation des comptes annuels et constatation de l’existence de sommes distribuables”. The case concerned an SARL and later insolvency, but the operational lesson is wider: even a decision formally taken by shareholders can create management liability when the distribution deprives the company of reserves needed for provisions and debts. A foreign founder should not treat sole ownership as a waiver of this sequence.

There is also a timing difference between incorporation and the first accounting period. The articles of association set the first closing date, subject to the statutory framework and the company’s circumstances. A first financial year may be shorter or longer than twelve months within the permitted limits, but the company still needs accounts for the period that has ended before the result can ordinarily be allocated. An early commercial success does not move the allocation date forward. If the founder needs cash before that date, the correct solution may be a documented loan, an expense reimbursement supported by invoices or a properly structured remuneration decision, not a dividend label.

B. The narrow exception: interim dividends and why it rarely helps a newly incorporated company

French law does recognise a limited exception before annual accounts have been approved. The second paragraph of Article L. 232-12 allows an interim dividend when an interim balance sheet, prepared during or at the end of the financial year and certified by a statutory auditor, shows that the company has made a profit since the close of the previous financial year. The balance sheet must take account of necessary depreciation and provisions, prior losses, legal or statutory reserves and any retained profit. The amount cannot exceed the profit shown by that balance sheet. The same article ends with the warning: “Tout dividende distribué en violation des règles ci-dessus énoncées est un dividende fictif.”

The implementing provision, Article R. 232-17 of the Commercial Code, states that the board, executive board or managers “ont qualité pour décider de répartir un acompte à valoir sur le dividende”. That power does not remove the accounting test. It identifies the corporate organ that can act once the statutory conditions have been met. It does not authorise a president or manager to transfer money on the basis of a forecast, a management account that has not been adjusted, or the shareholder’s personal cash need.

For a newly incorporated company, this mechanism must be approached with particular caution. The wording refers to profit made since the close of the previous financial year. A company that has never closed a financial year has no ordinary prior-year result to use as a simple reference point. The absence of a previous closing does not create a safe assumption that a first-year distribution is available. The company must ask its accountant and, where required, its CAC whether the statutory conditions can genuinely be met, whether the company has the relevant accounting records, whether the articles and corporate form permit the required decision and whether the amount remains distributable after all adjustments. If those conditions cannot be demonstrated, the transfer should not be made as an interim dividend.

Three practical tests should be applied before anyone uses the word “interim”. First, the accounts must be a real interim balance sheet, not a cash report. It must include accruals, depreciation, provisions, tax, payroll and obligations that have arisen even if they have not yet been paid. Second, the profit must survive prior losses and the legal or statutory reserve calculation. Third, the certification and decision trail must be complete. The founder should have the balance sheet, the accountant’s working papers, the CAC report where required, the written decision of the competent organ, the payment instructions and the tax filing in one file.

The criminal boundary is not theoretical. For an SARL, Article L. 241-3, 2° of the Commercial Code punishes the managers who “opérer entre les associés la répartition de dividendes fictifs, en l’absence d’inventaire ou au moyen d’inventaires frauduleux”. For a société anonyme, Article L. 242-6, 1° refers to the president, directors or general managers who “opérer entre les actionnaires la répartition de dividendes fictifs”. The exact corporate form changes the provision, but the risk is the same: a false result or a distribution without a lawful distributable basis can become a personal criminal problem for the people who organised it.

The recent case law illustrates the importance of the underlying accounts. In decision no. 24-81.263, 12 June 2025, the Cour de cassation recorded that “M. [U] a autorisé une distribution de 45 000 euros de dividendes à son profit”. The decision concerned a distribution supported by an incorrect financial presentation and confirmed the criminal analysis of fictitious dividends and related accounting conduct. The case is a warning against treating an interim situation as a formality. If the balance sheet does not reflect the company’s real obligations, the resolution and payment do not become safe because an accountant or shareholder signed a document.

A contrasting decision helps explain what a founder must preserve. In decision no. 18-25.892, 10 February 2021, involving a Dutch company and a French group, the court noted that “les comptes de la société LSO donnaient de son patrimoine, de sa situation financière et de son résultat une image fidèle”. The Court upheld the assessment that the dividends in dispute were not fictitious on the facts found, because the accounts and disclosures presented the company’s financial position faithfully. For a foreign shareholder, accurate reporting and evidence are not administrative extras; they are part of the defence against a later challenge.

The safe conclusion for a first-year business is therefore narrow. An ordinary dividend normally waits for the first annual accounts, their approval and a lawful allocation decision. An interim dividend may be possible only after a documented statutory analysis, and the first-year context makes that analysis more demanding, not less. If a founder needs liquidity now, the company should examine a different legal instrument instead of forcing a dividend through an incomplete accounting route.

II. What should a foreign founder do before transferring cash out of France?

A. How SAS, SARL, SASU and EURL shareholders approve, document and pay a dividend

The second stage is procedural. The founder must identify the company’s legal form, its shareholder structure, the relevant articles of association and the date of the financial year-end. “French company” is not enough to determine the approval route. An SAS may organise collective decisions in its articles. A SARL follows a more prescriptive statutory process. A single-member company has a decision by the sole shareholder, but that does not eliminate the need for accounts, an allocation decision and a written record.

For an SAS, Article L. 227-9 of the Commercial Code provides: “Les statuts déterminent les décisions qui doivent être prises collectivement par les associés dans les formes et conditions qu’ils prévoient.” The articles should therefore be read before sending a notice of meeting or signing a written resolution. They may specify notice periods, voting thresholds, consultation by correspondence, remote participation, the chairman’s role and the way minutes are kept. They cannot disapply the mandatory rules on annual accounts and benefits. The same article assigns collective powers for accounts and benefits to the shareholders and provides a six-month approval period for an SASU where the sole shareholder is involved in the conditions described by the text.

For an SARL, Article L. 223-26 of the Commercial Code requires the management report, inventory and annual accounts to be submitted to the shareholders within six months from the close of the financial year, subject to an extension ordered by a court. The official wording includes “dans le délai de six mois à compter de la clôture de l’exercice”. If the meeting is not held, the public prosecutor or an interested person may ask the competent court to order the managers to convene it or appoint a representative. A founder abroad should not assume that a missing meeting is cured by a bank transfer or an email exchange.

For a société anonyme, the annual meeting rule appears in Article L. 225-100 of the Commercial Code, which states that “L’assemblée générale ordinaire est réunie au moins une fois par an, dans les six mois de la clôture de l’exercice”. An SA may not be the first choice for a small foreign-owned venture, but the reference is useful where an international group uses a more complex French vehicle or where a subsidiary may later change form.

The documents should tell one coherent story. Start with the final annual accounts or the compliant interim balance sheet. Reconcile the result with the trial balance and bank accounts. Identify prior losses, the legal reserve, statutory reserves, retained earnings and any restriction in the articles. Confirm that the company’s equity will remain above the statutory floor after distribution. Then prepare the shareholder decision: accounts approved, result stated, reserve allocation recorded, dividend amount calculated, beneficiaries identified and payment date fixed. The minutes should use the same amount as the accounting entries and the tax return.

The legal reserve needs particular attention in a first profitable year. Article L. 232-10 requires the minimum one-twentieth allocation until the reserve reaches one-tenth of capital. Service Public Entreprendre explains the same mechanism in its official page on company equity and notes that the shareholders have six months after closing to approve the accounts and decide how any profit is allocated. The page also distinguishes capital, reserves, retained earnings, issue premiums and the result for the year. That distinction is useful for a founder who funded the company with a mixture of equity and a shareholder loan. The source is available at Service Public Entreprendre’s page on company equity.

Once the resolution is valid, payment still has a deadline. Article L. 232-13 of the Commercial Code states that payment “doit avoir lieu dans un délai maximal de neuf mois après la clôture de l’exercice”, subject to a judicial extension. The decision should specify the payment method, especially where the beneficiary holds a foreign bank account. The company should retain the bank instruction, the proof of payment, the accounting entry and the tax filing. The payment date may affect the withholding and reporting steps, so it should not be left to an informal message from the shareholder.

Foreign participation changes the logistics, not the legal test. A shareholder may sign from abroad, use a power of attorney or participate remotely if the articles and applicable formalities permit it. The company should retain evidence of identity, authority, beneficial ownership, the signed resolution and any translation or certification needed for the bank or tax authority. If a change to the beneficial-owner information or another corporate event must be filed, the INPI single portal is the relevant administrative route. The INPI explains that the Guichet unique centralises registrations, modifications, cessations and annual-accounts filings, and that information is validated by bodies including the RCS registries, tax services and social-security authorities. Its official explanation is available at INPI’s Guichet unique and National Business Register page.

That filing route should not be confused with the payment decision itself. The Kbis is the registration extract connected with the RCS; it is not the shareholder resolution. The greffe is the registry that receives or records certain corporate documents; it is not a substitute for an accounting close. BODACC is the official bulletin used for certain civil and commercial announcements; it does not certify that a dividend is lawful. These distinctions matter when a foreign bank asks for a Kbis and the founder assumes that the Kbis somehow proves a distributable profit.

Before approving payment, a founder should also compare the new decision with the company’s existing internal documents. If an earlier article, shareholder agreement or financing document requires a reserve, consent, covenant or notice, the dividend resolution should address it. A distribution that is valid under one rule may still breach a financing covenant or a shareholder agreement. The company should not conceal the transfer by booking it temporarily to a suspense account, a director’s current account or an unexplained “other debt”. The accounting description should match the legal reality from the first entry.

The company can use the existing French legal-calendar and annual-accounts resources as an operational cross-check, but the article on foreign shareholders approving French annual accounts from abroad addresses the remote decision mechanics, while this article addresses the earlier question of whether a first-year dividend exists at all. The two issues should not be merged. A perfectly signed shareholder resolution still fails if there are no distributable sums.

B. What a foreign founder must check: tax withholding, evidence, liability and alternatives

A lawful corporate distribution and its taxation are separate questions. The company must identify the beneficiary: an individual, a French company, a foreign parent, a trust-like vehicle where relevant or another legal person. It must also identify the beneficiary’s tax residence, beneficial ownership, treaty position and the capacity in which the recipient holds the shares. The same gross dividend can produce different reporting and withholding requirements depending on those facts.

For a foreign shareholder, Article 119 bis of the General Tax Code states that “Les produits visés aux articles 108 à 117 bis donnent lieu à l’application d’une retenue à la source” when the beneficiaries do not have their tax domicile or registered office in France, subject to the detailed statutory conditions and exceptions. The domestic rule is not the final answer where a tax treaty applies. The company must identify the treaty, obtain the evidence required for the treaty rate or exemption and retain it before applying a reduced withholding rate. A founder should not ask the bookkeeper to use the founder’s nationality as a substitute for tax residence evidence.

For an individual tax resident in France, Article 117 quater of the General Tax Code says that eligible individuals “sont assujetties à un prélèvement au taux de 12,8 %”. Article 200 A of the General Tax Code also fixes the relevant flat-rate tax in its text at 12.8%, subject to the option and provisions stated there. Those rules concern the recipient’s income taxation and should not be confused with the corporation’s right to distribute. For a non-resident, the domestic withholding rate, treaty relief, residence certificate and beneficiary status require a separate analysis.

The company’s practical reporting tool is the form 2777-SD for income from movable capital and withholding. The official impots.gouv.fr page for Form 2777-SD states that the form must be filed electronically and accompanied by the corresponding electronic payment. The page provides the current form and notices. A company paying a dividend to a non-resident should align the shareholder resolution, gross amount, withholding calculation, treaty evidence and 2777 filing. If the payment is to a foreign parent, the treaty and any participation exemption or parent-subsidiary regime may require additional conditions; the existing guide on dividends from a French subsidiary to a foreign parent deals with that different recipient profile.

The French tax administration’s page “Mes dividendes” for non-resident taxpayers explains that French-source dividends received by a non-resident are subject to a withholding or flat-rate levy, subject to more favourable treaty provisions. It also explains that the rate can be increased for payments made to a non-cooperative State or territory under the statutory conditions. That information is relevant to a founder who lives outside France, but it does not answer whether the company had a legal dividend to pay. Tax compliance cannot validate an unlawful corporate distribution.

Evidence should be prepared before payment, not after a bank or tax authority asks questions. A useful file contains the articles of association; the Kbis and RCS details; the closing date; the annual accounts or certified interim balance sheet; the accounting report; the reserve calculation; the shareholder resolution; the list of beneficiaries; proof of share ownership and beneficial ownership; tax-residence certificates; treaty forms; the 2777 filing and payment receipt; the bank payment order; and the ledger entries. If a foreign founder signs through an attorney, retain the power of attorney and the identity documents used to establish authority. If documents are translated, keep both the original and the translation.

Do not use a dividend to disguise another transaction. A salary or remuneration for a president or manager requires its own corporate decision, payroll treatment and social-security analysis. URSSAF, the French social-security collection body, may become relevant to employment or mandate remuneration; it is not a channel for turning capital into a dividend. A shareholder loan requires a real loan agreement, an identifiable lender, repayment terms and accounting entries. An expense reimbursement requires invoices and a business purpose. A reduction of capital requires a separate corporate procedure, creditor protections and filings. A distribution from a foreign parent may require transfer-pricing and treaty documentation. Each route needs its own legal and tax basis.

For an SAS president, dividends are not automatically a replacement for all remuneration analysis. A previous article on a French SAS president with no salary addresses the social-security question. This article addresses the corporate-law gate that comes first: if no distributable profit has been established, there is no dividend on which to perform a social or tax calculation. The same separation avoids confusion between a founder’s personal liquidity strategy and the company’s legal accounts.

The management-liability risk also continues after payment. The 19-23.669 decision shows that a manager can be criticised even where a shareholder meeting formally voted the distributions. The Court noted that the distributions deprived the company of reserves needed to record provisions and contributed to an insufficiency of assets. A foreign founder who is also the president, manager or controlling shareholder should ask whether the payment leaves enough cash for payroll, tax, social-security liabilities, suppliers, litigation reserves and the company’s stated business plan. The commercial purpose of the company is not protected by a resolution that knowingly strips its ability to pay creditors.

The decision no. 18-25.892 provides a practical evidence lesson for international groups. The Court accepted the importance of accounts that gave a faithful image of the company’s assets, financial position and result. The language quoted from the decision, “une image fidèle”, is a useful internal standard. A founder should not approve a dividend while an intercompany invoice, management fee, provision, customer credit note or tax liability is still being excluded from the accounts because recognising it would reduce the amount available. A complete set of accounts is more valuable than a short-term transfer.

If the business needs money before the first annual accounts, the board or manager should ask four questions. Is the money really a reimbursement of a documented expense? Is it a shareholder loan with a genuine repayment obligation? Is there a lawful remuneration arrangement for work actually performed? Or is the transaction a capital operation that needs its own procedure? If the answer is none of these, the company should wait. A short delay until the first accounts are closed is usually less costly than a fictitious-dividend allegation, a tax correction, a director-liability claim or a dispute with the bank.

A foreign founder should use the following decision sequence before authorising any transfer:

1. Confirm the legal form, financial-year closing date, shareholder register, articles and any shareholder agreement.

2. Classify the money in the company: paid-in capital, issue premium, retained earnings, revenue, loan, reimbursement or another item.

3. Obtain accounts that include depreciation, provisions, tax, payroll and prior losses. Do not use the bank balance as the profit figure.

4. Calculate the distributable profit and the legal or statutory reserves under Articles L. 232-10 and L. 232-11 of the Commercial Code.

5. Decide whether this is an ordinary dividend after approval of annual accounts or a genuinely available interim dividend under Article L. 232-12 and Article R. 232-17.

6. Obtain the required shareholder decision, CAC certification where required, minutes, payment date and accounting entries.

7. Identify the recipient’s tax residence, beneficial ownership, treaty relief, withholding rate and Form 2777-SD obligations.

8. Retain the evidence and verify that the payment leaves the French company able to meet its debts and continue its activity.

This sequence also helps a foreign founder explain the decision to a bank, an auditor, a French tax officer or a future investor. It demonstrates that the company did not simply move money to a foreign account because the founder requested it. It shows the legal basis, the accounting basis, the tax basis and the payment trail.

Conclusion

A new French company normally cannot pay an ordinary dividend before its first annual accounts have been closed, approved and allocated. The money in the company’s account may be capital, a loan or working capital, but it is not automatically distributable profit. An interim dividend is a narrow statutory mechanism requiring a reliable interim balance sheet, the required certification and a decision within the limits of the law. It should not be used as a shortcut around the first annual close.

For a foreign founder, the safest route is to separate corporate law, accounting, tax and cash-management decisions. Prepare the accounts, calculate the legal reserve and distributable profit, document the shareholder decision, test the recipient’s French and treaty tax position, file Form 2777-SD where required and preserve the evidence. If the business needs liquidity before that work is complete, assess a genuine loan, reimbursement, remuneration or capital transaction instead of calling the transfer a dividend.