You built a company in France, you now live in London, New York, Dubai or Singapore, and you want your children to take over the French business one day. Selling to them would force them to finance a buyout and would trigger full capital-gains and registration tax; giving them the shares (donation de parts ou d’actions) is usually the better road, and French law rewards it with a powerful incentive: the Dutreil scheme (pacte Dutreil) wipes out 75% of the taxable value when the family commits to keep the shares. But three gates stand between your intention and a valid, tax-efficient gift. First, the gift itself must be executed as a notarial deed, and the company may have to approve your children as new shareholders. Second, the Dutreil relief demands a collective lock-up, an individual lock-up and an active management function, each measured in years, and any misstep claws the tax back with interest. Third, leaving France does not remove the French gift tax on French company shares, and the treaty with your country of residence must be checked before the deed is signed. This guide walks a non-resident owner through the whole transfer, for both the SARL (société à responsabilité limitée, whose parts sociales are non-negotiable units) and the SAS (société par actions simplifiée, whose actions are freely transferable shares), with every decisive rule quoted from the text in force and every court decision linked to its official publication. Readers who are still structuring their French presence should start with our complete guide to setting up a company in France as a foreign founder, from bank account to Kbis, VAT and first hire, which describes the vehicle you are now about to pass on.

I. Giving your shares legally: the notarial deed and the family’s entry into the company

A. Why your gift needs a notaire and sometimes the company’s consent

A gift of company shares cannot be handmade. Unlike a simple hand-to-hand present (don manuel) of cash or a watch, a donation of shares must be executed by notarial deed (acte notarié): the official guidance requires a notarial deed for share gifts and rules out hand-to-hand manual gifts See the administration’s English-language page on donating SARL shares. For a donor living abroad, this means the transaction runs through a French notaire (notaire, the public officer who authenticates deeds and collects registration duties), either by travelling to the office or by granting a special power of attorney (procuration authentique) received by a notaire in your country of residence and transmitted through the official channels. The deed identifies the shares precisely, states the charges and conditions attached to the gift, such as a reserved usufruct (usufruit réservé) letting you keep the dividends while giving away bare ownership (nue-propriété), and fixes the valuation that the tax office will use. Because the notarial deed is registered within one month, its date starts every tax clock, so never backdate discussions or sign a private promise presented as the gift itself.

The second formality is corporate: your children must be able to enter the company. In a SARL, family transfers are free by default. Article L. 223-13 of the Commercial Code provides that “Les parts sociales sont librement transmissibles par voie de succession ou en cas de liquidation de communauté de biens entre époux et librement cessibles entre conjoints et entre ascendants et descendants.” Shares pass freely on death and move freely between spouses and between parents and children. But the bylaws (statuts) may add an approval requirement (clause d’agrément) even for family members: “Toutefois, les statuts peuvent stipuler que le conjoint, un héritier, un ascendant ou un descendant ne peut devenir associé qu’après avoir été agréé dans les conditions prévues à l’article L. 223-14”. The statute caps the abuse: “A peine de nullité de la clause, les délais accordés à la société pour statuer sur l’agrément ne peuvent être plus longs que ceux prévus à l’article L. 223-14, et la majorité exigée ne peut être plus forte que celle prévue audit article.” Any clause imposing longer deadlines or a heavier majority is void. And a refusal does not strand the gift: “En cas de refus d’agrément, il est fait application des dispositions des troisième et quatrième alinéas de l’article L. 223-14. Si aucune des solutions prévues à ces alinéas n’intervient dans les délais impartis, l’agrément est réputé acquis.” On refusal, the forced-buyout machinery of article L. 223-14 applies, the remaining shareholders must buy the shares at an expert-fixed price, and if nothing happens in time, approval is deemed granted. Before instructing the notaire, read the bylaws for a family approval clause and, if one exists, notify the planned gift to the company and to each shareholder by provable means, because the three-month decision clock runs from the last notification.

In a SAS, everything again depends on the bylaws, which may subject any transfer, including a gift to your children, to prior approval, and breach means nullity. The practical file is therefore the same in both vehicles: current complete bylaws, any shareholders’ agreement (pacte d’associés) with its own consent or pre-emption mechanics, proof of notification, and the company’s written decision or proof its silence expired. Assemble these before the notarial appointment, not after, because a notaire who discovers an unresolved approval clause at signing will stop the deed, and flights, powers of attorney and tax timetables collapse with it.

B. The Dutreil scheme: two lock-ups and a management job that erase 75% of the taxable value

The Dutreil scheme is the reason most French business families give shares rather than sell them. Article 787 B of the General Tax Code opens with the reward: “Sont exonérées de droits de mutation à titre gratuit, à concurrence de 75 % de leur valeur, les parts ou les actions d’une société dont l’activité principale est industrielle, commerciale, au sens des articles 34 et 35, artisanale, agricole ou libérale transmises par décès, entre vifs ou, en pleine propriété, à un fonds de pérennité mentionné à l’article 177 de la loi n° 2019-486 du 22 mai 2019 relative à la croissance et la transformation des entreprises.” Shares in an operating industrial, commercial, craft, agricultural or liberal company, given away during your lifetime or passed on at death, are 75% exempt from gift and inheritance tax. Three boundaries matter immediately. Pure asset-management companies are excluded: “n’est pas considérée comme une activité industrielle, commerciale, artisanale, agricole ou libérale l’exercice par une société d’une activité de gestion de son propre patrimoine mobilier ou immobilier.” A company that merely manages its own property portfolio does not qualify. An animating holding company (holding animatrice) does, where it actively leads its group’s policy and renders internal support services to operating subsidiaries. And luxury assets held inside the company, hunting grounds, yachts, art, racehorses, wine cellars, residential property, are carved out of the relief for the fraction of value they represent unless genuinely assigned to the operating activity for at least three years. A donor whose SARL or SAS holds the family flat above the workshop must expect that fraction fully taxed.

The relief is earned by time, through two stacked commitments. First, a collective lock-up (engagement collectif de conservation) of at least two years, running on the day of the gift: The statute requires the shares to be covered, on the day of the gift, by a collective lock-up of at least two years signed by the donor with other shareholders for himself and his future donees; exceptionally, one person alone may sign it. The donor signs it with other shareholders for himself and his future donees; exceptionally one person alone may sign it. For unlisted companies, which covers almost every family SARL and SAS, the commitment must cover at least 17% of the financial rights and 34% of the voting rights, thresholds that must hold for the whole two years: For unlisted companies, which covers almost every family SARL and SAS, the commitment must cover at least 17% of the financial rights and 34% of the voting rights, instead of 10% and 20% for listed companies, thresholds that must hold for the whole two years. Shareholders inside the pact may sell or give shares among themselves and may admit a newcomer, provided the pact is renewed for at least two years, but the pact binds the tax office only from registration of the deed recording it: The pact binds the tax office only once the deed recording it has been registered. Sign the pact early and register it at once; an unregistered pact is invisible to the tax office. A donor who already meets the thresholds alone for two years with an active role may benefit from the so-called deemed collective commitment (engagement réputé acquis), which spares the family a formal pact but must be verified line by line before the gift.

Second, each donee signs an individual lock-up (engagement individuel de conservation) in the gift deed itself, running six years from the end of the collective period: Each heir, donee or legatee must promise, in the succession return or in the gift deed itself, for themselves and their own future gratuitous successors, to keep the transferred shares for six years running from the expiry of the collective period. Six years, not four: the duration was lengthened, and older memoranda still circulating the four-year figure will mislead a family signing today. Third, someone must actually run the business: Either a party to the collective pact or one of the heirs, donees or legatees must genuinely perform, in the company whose shares are locked, a main professional activity for partnerships or a listed management function for companies subject to corporate tax, throughout the collective commitment and the three years following the transfer date. A donor, a co-signatory or one of the donees must perform their main professional activity or a listed management function (manager, president, general director and equivalents) throughout the collective period and the three years after the gift. A family that gives the shares and immediately hires an outside manager while every donee lives off dividends fails this test and loses the relief. For a donor living abroad, the workable pattern is usually one child taking a genuine executive role in France while the collective pact runs, documented by appointment minutes, employment or mandate contracts, and actual presence.

The courts police each condition without mercy, and two recent rulings show where families lose. On animating holdings, the Cour de cassation confirmed that subsidiary shares must represent more than half of the holding’s total assets on the taxable-event date for the animation to count as the principal activity. In Cass. com., 25 May 2022, No. 19-25.513, the Court restated the mechanism, “les parts ou les actions d’une société ayant une activité industrielle, commerciale, artisanale, agricole ou libérale transmises par décès ou entre vifs sont, à condition qu’elles aient fait l’objet d’un engagement collectif de conservation présentant certaines caractéristiques, et d’un engagement individuel de conservation pendant une durée de quatre ans à compter de l’expiration de l’engagement collectif, exonérées de droits de mutation à titre gratuit, à concurrence de 75 % de leur valeur”, the four-year figure reflecting the 2009 wording then applicable, before endorsing the asset-majority test for holdings: “le caractère principal de son activité d’animation de groupe devant être retenu notamment lorsque la valeur vénale, au jour du fait générateur de l’imposition, des titres de ces filiales détenus par la société holding représente plus de la moitié de son actif total.” A family holding stuffed with cash, securities and a villa alongside the operating subsidiary fails at the first hurdle; clean the balance sheet before the gift, not after the reassessment. On lock-ups, the Court closed an elegant circumvention in Cass. com., 29 November 2023, No. 21-25.329: while parties to the collective pact may trade locked shares among themselves, “tel n’est pas le cas des héritiers, donataires ou légataires, s’agissant des titres pour lesquels ils ont souscrit un engagement individuel, quand bien même ils seraient par ailleurs ayants cause des parties à l’engagement collectif.” Donees may not dispose of individually locked shares even to fellow pact members. A child who receives shares under Dutreil and promptly swaps them with a sibling inside the pact triggers the clawback on the whole relief. The notarial profession’s national guidance on the Dutreil pact for family business transfers usefully summarises the timetable families must internalise before signing.

II. Paying only the tax you owe: gift-tax maths and the non-resident trap

A. Computing the bill: allowance, scale, Dutreil quarter and the clawback

Without Dutreil, a gift of shares to a child is taxed like any direct-line gift, and the numbers escalate fast on a valuable company. Each child enjoys a personal allowance (abattement) of 100,000 euros, renewable every fifteen years. Article 779 of the General Tax Code provides: “Pour la perception des droits de mutation à titre gratuit, il est effectué un abattement de 100 000 € sur la part de chacun des ascendants et sur la part de chacun des enfants vivants ou représentés par suite de prédécès ou de renonciation.” Above the allowance, article 777 applies the direct-line rate table: “Les droits de mutation à titre gratuit sont fixés aux taux indiqués dans les tableaux ci-après, pour la part nette revenant à chaque ayant droit”, running from 5% on the first 8,072 euros to 45% beyond 1,805,677 euros, with the 20% band already biting between 15,932 and 552,324 euros. A 600,000-euro block of shares given to one child therefore costs roughly 100,000 euros of gift tax before relief: 500,000 euros taxable, marginal rate 20%. With Dutreil, only 25% of the value enters the computation, so the same gift shows 150,000 euros gross, 50,000 euros after the allowance, taxed around 5,000 euros. The relief is worth about 95,000 euros on this example, which explains why the tax office audits its conditions so aggressively.

Valuation is the battlefield. Shares are taxed on their fair market value (valeur vénale) at the deed date, and the notaire’s stated value binds the return but not the administration, which may reassess within its powers. Support the deed value with a reasoned valuation file: restated net assets, earnings multiples from comparable transactions, discounted cash flow where the business justifies it, and explicit minority or illiquidity discounts with methodology, because an undocumented discount is the first line the auditor strikes. Where the donor keeps the usufruct and gives only bare ownership, the taxable base follows the statutory age scale of the usufructuary, a frequent and legitimate optimisation for founders in their sixties, but the Dutreil individual commitment must still cover the full shares and the management function must still be performed. Gifts between spouses and PACS partners follow their own allowance and rate tables, and gifts to grandchildren or nephews face thinner allowances and steeper scales, so the number of donees and the split between them is itself a tax decision: two children receiving 300,000 euros each use two 100,000-euro allowances where one child receiving 600,000 uses one.

The clawback (remise en cause) converts every broken commitment into additional duties plus late interest and penalties. Selling or giving away locked shares during either commitment, dropping below the thresholds, moving the company’s activity out of the eligible sector, or vacating the management function all unwind the 75% relief, in whole or through proportional reinstatement depending on the breach. The 21-25.329 ruling above shows that even intra-family rearrangements of individually locked shares trigger it. From abroad, the most dangerous breach is passive: the donor retires to another country, no donee takes a real executive function in France, and three years later the administration establishes that the management condition was never met. Diary the commitments as seriously as a loan covenant: collective pact expiry, six-year individual expiry per donee, management-function continuity, threshold maintenance at each capital event, and eligible-activity continuity including at subsidiary level for groups. Any planned capital increase, merger, contribution or partial sale during the lock-ups must be cleared with counsel first, because corporate operations routinely breach thresholds or transfer locked shares without anyone noticing until the audit.

B. Giving from abroad: French tax follows the shares, and the paperwork must travel

Leaving France does not move the shares out of the French gift tax. Article 750 ter of the General Tax Code casts a wide territorial net: “Sont soumis aux droits de mutation à titre gratuit : 1° Les biens meubles et immeubles situés en France ou hors de France, et notamment les fonds publics, parts d’intérêts, biens ou droits composant un trust défini à l’article 792-0 bis et produits qui y sont capitalisés, créances et généralement toutes les valeurs mobilières françaises ou étrangères de quelque nature qu’elles soient, lorsque le donateur ou le défunt a son domicile fiscal en France au sens de l’article 4 B”. Where the donor remains French tax-resident, worldwide securities are caught; where donor and donees are all non-resident, French-situs assets, including shares in a French company, remain taxable in France. In practice, a non-resident donor giving SARL or SAS shares almost always faces French gift tax on the transfer, with the Dutreil relief available on identical terms since the statute does not reserve it to residents. The second question is whether the country of residence also taxes the gift and whether a treaty allocates or eliminates the double charge. France’s gift-tax treaty network is far thinner than its income-tax network, and several major residence countries have no gift-tax treaty with France at all, so the foreign tax credit, if any, must be verified in the other state’s domestic law before the deed date. Never assume symmetry with income tax: a treaty that elegantly spares your dividends may say nothing about your gift.

The cross-border file also has a practical choreography that should be settled weeks before the notarial appointment. First, the power of attorney: if you cannot attend, the foreign-executed proxy must satisfy the French notaire’s requirements for an authentic gift, including identification, capacity and, where applicable, translation by a sworn translator (traducteur assermenté) and legalisation or apostille under the Hague Convention for the issuing country. Confirm the exact chain with the notaire’s office in writing before paying for any stamp. Second, financing of the duties: French gift tax on the deed is payable on registration, and the donees, who legally owe it unless the donor assumes it (donation aux frais du donateur, itself a further gift to quantify), must fund a French-tax payment from abroad within days; align bank transfer times with the registration appointment so the deed is not held up. Third, the company’s records after the gift: update the shareholder ledger and, for a SARL, the bylaws’ shareholder list, file the change through the online one-stop shop (Guichet unique) with the commercial court clerk (greffe du tribunal de commerce), collect the updated Kbis extract, and refresh the beneficial-owner register (registre des bénéficiaires effectifs) where control shifts between natural persons. Fourth, keep one complete file for six years beyond the last commitment expiry: registered pact, gift deed, valuation report, approval decision or notification proofs, appointment minutes proving the management function, payroll or mandate evidence of effective activity, and every capital-operation document. When the audit letter arrives in year five, this file is the relief.

Conclusion

Passing your French company to your children from abroad works when the legal, corporate and tax sequences run in the right order. Confirm first that the bylaws let your children in, or run the article L. 223-14 approval procedure to its deemed consent or forced buyout before the notaire drafts anything. Sign the two-year collective pact early, register it, then execute the notarial gift with each donee’s six-year individual commitment inside the deed, and install a genuine executive function in France for the three post-gift years. Value the shares on a documented file, apply the 100,000-euro allowance per child and the direct-line scale to the Dutreil quarter, verify the residence country’s treatment where no gift-tax treaty exists, and close the file with updated registers, one-stop-shop filing, fresh Kbis and a complete six-year archive. Handled in that order, a gift signed from another continent transfers the business, keeps three-quarters of its value out of the tax base, and survives the audit that will eventually test it.