Your French subsidiary needs 80,000 euros to fit out a Paris office, cover a late customer payment or reassure a new bank, and you run the group from London, New York or Dubai. Raising the subsidiary’s share capital from abroad means an extraordinary meeting, a fresh certificate of deposit, a registry filing and weeks of delay. A loan from the foreign parent company to the French subsidiary, wired in a day and recorded in a written intragroup agreement, puts the cash to work the next morning. French practice gives this mechanism a familiar name when the lender is an individual, the compte courant d’associe, or shareholder current account, and treats advances from a parent company under the same loan logic with stricter tax ceilings. The lender becomes a creditor of the French company, with interest rights, a repayment claim and a rank in any future insolvency.

Speed does not mean informality. The French bank receiving the wire will ask where the money comes from, the statutory auditor will ask at which rate interest runs, the tax office will test whether the interest is deductible and whether the annual loan declaration was filed, and a French bank that later lends to the subsidiary will very often demand that the parent’s advance be locked, meaning blocked, for several years as security. Each checkpoint has a precise answer in French statute and case law, and a wrong answer turns flexible group funding into a reassessment, a frozen repayment claim or a dispute with minority shareholders. This guide explains, for a group headed outside France, how a foreign parent can lawfully fund a French SAS (societe par actions simplifiee, the simplified joint-stock company most foreign groups choose) or SARL (societe a responsabilite limitee, the limited-liability company), what the written agreement must contain, how interest is capped and taxed on both sides of the border, and how the parent gets its money back, including when a bank has required a lock-up. Every French acronym met along the way, from the Kbis (the official company identity certificate issued by the greffe, the commercial court registry) to the BODACC (the official bulletin publishing company events), the INPI (the National Institute of Industrial Property, which runs the company formalities portal) and the IS (impot sur les societes, French corporate income tax), is explained on first use.

I. How a Foreign Parent Company Can Lend to Its French Subsidiary Without a Capital Increase

A. A Real Loan Contract Open to Foreign Lenders, Within Two Hard Boundaries

French civil law defines the mechanism without any residence condition. Article 1892 of the Civil Code states that “Le prêt de consommation est un contrat par lequel l’une des parties livre à l’autre une certaine quantité de choses qui se consomment par l’usage, à la charge par cette dernière de lui en rendre autant de même espèce et qualité” (A loan for consumption is a contract by which one party delivers to the other a quantity of things that are consumed by use, on condition that the borrower returns as much of the same kind and quality). Money is the classic consumable thing, and article 1902 of the Civil Code adds that “L’emprunteur est tenu de rendre les choses prêtées, en même quantité et qualité, et au terme convenu” (The borrower must return the things lent, in the same quantity and quality, at the agreed term). Charging interest is expressly lawful: article 1905 of the Civil Code provides that “Il est permis de stipuler des intérêts pour simple prêt soit d’argent, soit de denrées, ou autres choses mobilières” (Interest may be stipulated for an ordinary loan of money, foodstuffs or other movables). A parent company established abroad lends under exactly the same provisions as a founder living in Paris, and nothing requires the lender to hold a French account or to be present when the funds arrive.

Two boundaries frame this freedom. The first is the banking monopoly: article L. 511-5 of the Monetary and Financial Code states that “Il est interdit à toute personne autre qu’un établissement de crédit ou une société de financement d’effectuer des opérations de crédit à titre habituel” (No person other than a credit institution or a financing company may carry out credit transactions on a habitual basis). A parent that funds its own subsidiary on an occasional basis does not carry out credit transactions on a habitual basis, so the advance is lawful, while a foreign company systematically lending to unrelated French businesses would cross into the monopoly. The second boundary runs in the opposite direction and traps unwary groups: the French company is generally forbidden from lending back to the individuals who run it. In a SARL, article L. 223-21 of the Commercial Code provides that “A peine de nullité du contrat, il est interdit aux gérants ou associés autres que les personnes morales de contracter, sous quelque forme que ce soit, des emprunts auprès de la société, de se faire consentir par elle un découvert, en compte courant ou autrement, ainsi que de faire cautionner ou avaliser par elle leurs engagements envers les tiers” (On pain of nullity of the contract, managers and shareholders other than legal entities are forbidden from contracting loans of any kind from the company, from having it grant them an overdraft, in a current account or otherwise, and from having it guarantee their commitments to third parties). The equivalent prohibition for public limited companies sits in article L. 225-43 of the Commercial Code, and article L. 227-12 of the Commercial Code extends it to the SAS by stating that “Les interdictions prévues à l’article L. 225-43 s’appliquent, dans les conditions déterminées par cet article, au président et aux dirigeants de la société” (The prohibitions laid down in article L. 225-43 apply, under the conditions set by that article, to the president and the managers of the company). In group terms, money must flow from parent to subsidiary, and an individual manager’s account must never be left in debit, because a debit balance is treated as a loan from the company to that person and falls under the nullity rule. Only a shareholder that is itself a company may carry a debit balance, which is routine inside groups with cash-pooling arrangements.

For the foreign group, the entry checklist is therefore short: lend downstream from parent to subsidiary, document the lender as the foreign legal entity rather than the individual founder where that is the true source of funds, never let an individual’s account go into debit, and keep the intragroup nature of the advance visible from day one, because interest received by a company is taxed as business income while interest received by an individual follows the investment-income regime, as explained in Part II.

B. The Written Agreement and the Yearly Paper Trail Banks and Auditors Expect

The most useful document in this area is a written intragroup loan agreement, the equivalent for companies of the shareholder loan agreement used between an individual and the business. French administrative guidance indicates that the conditions of such an advance, including payment, interest, term and repayment, belong in the articles of association or in a dedicated contract signed between the company and the lender, and every institution the group will meet behaves as if a signed contract were compulsory. The agreement should identify the foreign parent and the French subsidiary with full registration details, state the amount, currency, date and means of payment, fix the interest rate or record expressly that the advance bears no interest, set the term or the open-ended nature of the facility, organise repayment and any lock-up period required by a bank, and carry both signatures. Where the subsidiary has minority shareholders, the advance should be disclosed to them, because it alters the creditor ranking and can trigger the regulated-agreement procedure in some company forms. Founders who followed the standard formation path described in this guide to setting up a company in France as a foreign founder already hold the Kbis certificate and the company bank details that anchor this paper trail; the intragroup loan file simply extends the same discipline from formation into funding.

The funds should travel by bank transfer bearing an explicit reference to the intragroup advance, and the transfer slip stays stapled to the agreement. Unexplained wires from abroad are the fastest route to a compliance freeze at the receiving bank, particularly where the branch has never met the group. A file containing the signed agreement, a matching transfer and the lender’s incorporation documents answers most first-level anti-money-laundering questions in a single round. Each year, the French subsidiary must then report outstanding shareholder and intragroup borrowing through the loan-agreement return, form Cerfa number 10142, filed no later than the annual results return, a return the French accountant normally prepares alongside the accounts. Interest paid to the lender is additionally reported through the annual investment-income return so the recipient’s taxation can be traced. A group headed abroad should confirm with its French accountant every closing that both returns were filed, because information-return penalties apply even where the loan is genuine and the rate is modest. Where the subsidiary’s registered office, called the siege social, sits in Paris, filings pass through the Paris commercial court registry, and governance events appear in the BODACC; keeping the loan file with the Paris accountant means it can be produced within days whenever a bank, an auditor or the tax office asks.

II. Interest Caps, Cross-Border Tax and Getting the Money Home From Abroad

A. The Two Rate Ceilings, the Price of Interest-Free Loans and the Tax on Both Sides

An individual founder may lend at zero percent, and many do in the first months. A parent company should think twice before doing the same: an interest-free advance from a company to another company can be challenged by the French tax office as an abnormal management decision, because a business is expected to earn a return on funds it places at another entity’s disposal. Whatever the chosen rate, it must be fixed in advance in the articles or the loan agreement, and two separate tax questions follow: how much interest the French subsidiary can deduct, and how the foreign parent is taxed on what it receives.

For the subsidiary, deduction obeys two cumulative conditions under domestic guidance: the share capital must be fully paid up, and the rate applied must not exceed a published maximum reference rate derived from average bank lending rates to businesses. The statute behind this test is article 39, 1-3 of the General Tax Code, which permits deduction of “Les intérêts servis aux associés à raison des sommes qu’ils laissent ou mettent à la disposition de la société, en sus de leur part du capital, quelle que soit la forme de la société, dans la limite de ceux calculés à un taux égal à la moyenne annuelle des taux effectifs moyens pratiqués par les établissements de crédit et les sociétés de financement pour des prêts à taux variable aux entreprises, d’une durée initiale supérieure à deux ans” (Interest paid to shareholders on sums they leave at or place at the disposal of the company, in addition to their share of capital, whatever the form of the company, up to the amount calculated at a rate equal to the annual average of the average effective rates charged by credit institutions and financing companies for variable-rate loans to businesses with an initial term of more than two years). The tax office publishes this ceiling for each closing period, recently moving around four to five percent depending on the year-end, and any excess over the ceiling is permanently non-deductible, assessed separately for each lender account with no offset between accounts. A second, stricter ceiling applies where the lender is a related company and borrowing is heavy relative to equity: article 212 of the General Tax Code allows deduction only “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” (Up to the amount calculated by reference to the rate laid down in the first paragraph of 3 of 1 of the same article 39 or, where higher, by reference to the rate the borrowing company could have obtained from independent financial institutions or bodies under similar conditions). Groups should therefore have the accountant test both ceilings before booking the charge, and keep evidence that the agreed rate matches what an independent bank would have offered the subsidiary, since that file answers both the article 212 test and any transfer-pricing question in one stroke.

For the foreign parent receiving the interest, French domestic law imposes a flat-rate withholding at payment: article 125 A of the General Tax Code states that “Le taux du prélèvement est fixé à 12,8 %” (The rate of the withholding is set at 12.8 percent). The applicable tax treaty between France and the parent’s home state may then reduce, exempt or reallocate that taxation, with the parent declaring the income at home and claiming a credit or refund of the French levy under the treaty procedure. The French subsidiary must still report the payment through the investment-income return so the chain stays traceable. In practice, the document that most often delays a first interest payment abroad is the foreign residence certificate the parent must obtain from its home tax office to secure the treaty rate, so it belongs on the closing checklist at signature, not in a drawer discovered at year-end. The loan agreement should state the gross rate before tax, identify the beneficial owner of the interest and allow the treaty-reduced rate to be applied once the certificate is supplied.

B. Calling the Loan Home: Repayment on Demand, Bank Lock-Ups and Insolvency Rank

The default rule favours the lender: an open-ended advance is repayable on demand. The Paris Court of Appeal expressed the principle in these terms: “Il est de principe que la qualification de prêt autorise l’associé ayant consenti une avance en compte-courant à décider librement du moment où il entend en réclamer le remboursement” (It is settled that the characterisation as a loan allows a shareholder who has made a current-account advance freely to decide when to demand repayment). The ruling, handed down by the Paris Court of Appeal, Pôle 5, Chambre 9, on 15 May 2025 under general register number 24/05837 (see the official record of decision 24/05837), concerned a company whose shareholders had frozen their advances at a bank’s request, and it shows both the strength and the limits of the default rule. A company that pleads an empty account does not extinguish the claim; at most it can ask a judge for time.

The limit that matters most to groups is the lock-up agreement, called a convention de blocage, often paired with a pledge of the advance to the bank. Lenders financing the French subsidiary routinely require the parent to freeze its advance for the life of the bank loan, commonly three to five years, so the group cannot drain the cash the bank counts on, and a blocked account means the company is no longer obliged to repay the frozen funds while the freeze lasts. The Paris decision enforced exactly such an arrangement: the court recalled that a valid blocking agreement with clearly expressed terms keeps the funds tied up in the company for a fixed period (blocking agreement held enforceable as written) then rejected the former shareholder’s early repayment claim even though he had since left the company, because the bank had confirmed that every advance had to remain frozen until the agreed date and neither the bank nor the company had consented to an early release. Three lessons follow for a parent abroad. First, read the bank’s standard lock-up before signing, noting duration, scope and release conditions, and keep a countersigned copy outside France as well as at the subsidiary. Second, a lock-up given to a bank survives a change at the top, a share sale or a resignation, so negotiate the exit mechanics, who may authorise early release, in which form and with what notice, at signature. Third, where several group entities freeze advances together, record each amount separately, because the bank enforces each commitment individually.

Outside a valid lock-up, a subsidiary that cannot pay at once has only narrow defences. It may petition the civil judge for a grace period, and article 1343-5 of the Civil Code allows the court to intervene: “Le juge peut, compte tenu de la situation du débiteur et en considération des besoins du créancier, reporter ou échelonner, dans la limite de deux années, le paiement des sommes dues” (The court may, having regard to the debtor’s situation and the creditor’s needs, defer or spread payment of the sums due, up to a limit of two years). That is a delay, not a cancellation. From abroad, the parent should call the loan by a provable means, ideally a registered letter with acknowledgment of receipt to the registered office or a notice served by a French judicial officer, called a commissaire de justice, stating the amount, the payment account and a deadline, since limitation periods and late-payment interest both run from traceable dates. If the subsidiary enters safeguard, administration or liquidation, the regime changes completely: from the opening judgment the company may no longer repay the advance, and the parent must declare its claim like any other creditor. Article L. 622-24 of the Commercial Code organises this collective discipline by requiring creditors whose claims arose before the opening judgment to send their proof of claim to the court-appointed receiver within the regulatory time limit. In liquidation the intragroup lender ranks after preferential creditors and recovers only if funds remain, so the group should monitor the subsidiary’s accounts, heed auditor warnings and avoid topping up the advance once insolvency looks likely without advice. A documented advance declared on time preserves whatever recovery rights exist, while an undocumented wire risks recharacterisation or omission from the claims process.

Conclusion

An intragroup loan lets a group headed abroad fund its French subsidiary in days: a wire from the parent, a signed agreement fixing amount, rate and repayment terms, a matching entry in the subsidiary’s books, and the annual loan-agreement return filed with the subsidiary’s results. Interest stays deductible only where capital is fully paid up and both the published reference ceiling and the related-party test are respected, with an interest-free loan from a company inviting challenge as an abnormal management decision. The foreign parent suffers the domestic withholding on interest subject to treaty reduction, secured in practice by an early residence certificate. Repayment remains available on demand unless a valid bank lock-up says otherwise, and the Paris courts enforce such freezes strictly, even against lenders who have since exited. The subsidiary cannot defeat the claim by pleading hardship, though a judge may grant it up to two years to pay, and in insolvency the parent joins the creditors’ queue. Keep the agreement, the transfer slips, the residence certificate and the yearly returns in one file, review every lock-up before each new bank loan, and the parent-to-subsidiary advance remains what it should be: the fastest honest bridge between group money abroad and business in France.