Corporate group lawyer in Paris: intragroup flows, conflicts of interest and parent liability.

The Commercial Code does not give the group legal personality: it defines the control of one company by another. Under Article L. 233-3 of the French Commercial Code, one company controls another in particular where it holds the majority of the voting rights, where it determines in fact, through the voting rights it holds, the decisions of the general meetings, or where, as a shareholder or member, it can appoint or remove the majority of the members of the administrative, management or supervisory bodies. Each controlled company remains a separate legal entity from its registration, as provided by Article 1842 of the Civil Code. It keeps its own assets, its own creditors, its own directors and its own corporate interest. This separation explains most of the practical difficulties. An advance granted by the holding company is a claim of the holding company, a service invoiced to the subsidiary must correspond to a real service, and a debt of the subsidiary does not automatically become the parent's. The firm therefore always begins by establishing the exact organisation chart, the control links and the list of common directors. This mapping then determines the procedures applicable to the agreements and the liability risks of each company.

Article L. 511-7, I, 3° of the French Monetary and Financial Code disapplies the prohibitions of Article L. 511-5 of the same code so as to allow a company to carry out cash management transactions with companies that have capital ties with it giving one of them actual control over the others. This provision does not require a written agreement for each advance, but an agreement records what the parties actually intended: direction of the flows, remuneration, duration, repayment conditions and the fate of the sums if a company leaves the group. Its scope remains limited. The Court of Cassation upheld a court of appeal which had held that, the agreement providing for the independence of the parties, “the existence of such a cash management agreement cannot constitute the legal basis for the transfer of a payment obligation” (our translation) (Cass. com., 12 March 2025, No. 23-23.961). A cash management agreement therefore organises flows; it does not transfer the debts of one group company to another. The firm also checks whether the agreement falls within the related-party agreements procedure in each of the signatory companies.

Where a subsidiary is placed in judicial reorganisation or judicial liquidation, the parent company that centralised the cash must file its claims like any other creditor. The question is then the exact nature of the sums made available and when they fell due. In a case decided by the Versailles Court of Appeal, the cash pooling agreement provided only for transfers between the parent company and its subsidiaries, with no horizontal flow between subsidiaries. The court inferred that the funds made available to the subsidiary “were necessarily recorded in that company's accounts as a shareholder current account and must be regarded as claims of the parent company on that basis” (our translation) (CA Versailles, ch. com. 3-2, 13 May 2025, No. 24/06303). As the later current account agreements provided for repayment in instalments over five years with interest, the court admitted the claims for interest accruing after the opening judgment that the supervising judge had rejected, applying the exception provided by Article L. 622-28 of the Commercial Code for loans of at least one year. This outcome depends on how the agreement is drafted and on the accounting entries. The firm therefore compares the contract, the current account statements and any amendments before filing or disputing the claim. The insolvency practitioner may, for its part, examine whether certain flows reveal abnormal financial relations.

Cash centralisation is lawful between companies linked by actual control, but it does not allow the holding company to drain its subsidiary. A director who uses the company's assets contrary to its interest in order to favour another company in which they have an interest is exposed to the offence of misuse of company assets provided by Article L. 241-3 for the SARL and Article L. 242-6 of the Commercial Code for the public limited company. The urgent applications judge in Strasbourg, seised by a minority shareholder of the subsidiary, noted that cash centralisation “must not result in creating an imbalance between the interests of the participating companies” (our translation) (TJ Strasbourg, réf. comm., 3 September 2025, No. 25/00745). The judge held that the abuse is established where no group interest can be shown, where the support has no consideration or where it exceeds the financial capacity of the company bearing it. The judge prohibited the holding company from drawing further advances, while declaring inadmissible the request for an expert assessment made in the same proceedings. Before each significant upstreaming, the firm therefore documents the common interest, the consideration and the subsidiary's cash position.

Management fees remunerate services provided by the holding company: finance, human resources, IT, legal or commercial support. The difficulty lies in the risk of duplication with the functions of the subsidiary's director, who is already remunerated for their office. The Paris Court of Appeal held that a services agreement entered into with an SAS by a company managed by its chairman fell within Article L. 227-10, and then found that it “covers management functions and therefore duplicates the functions of the company's corporate officer” (our translation) (CA Paris, pôle 5 ch. 9, 23 July 2024, No. 22/18075). The fees paid were added back to the result used to set the price of a shareholder's shares, who obtained compensation for the undervaluation of that price. The same court points out that in a public limited company, such agreements are void where the services overlap with the director's functions, whereas they may be valid in an SAS under conditions, in particular if the articles of association allow a management function to be entrusted to the service provider; absent such a clause, the court held this combination of functions void. A sound justification therefore rests on dated deliverables, time spent, a method for calculating the price and a clear distinction between what the holding company does and what the subsidiary's chairman does.

A subsidiary may challenge a services agreement that gives it no real consideration. Ruling on a 2015 agreement under former Article 1131 of the Civil Code, the Paris Court of Appeal states that “an agreement between two companies whose purpose is to organise and remunerate the performance of corporate management functions is void, for want of cause, for lack of real consideration” (our translation) (CA Paris, pôle 5 ch. 5, 19 September 2024, No. 21/13667). For a contract concluded since 1 October 2016, the basis is Article 1169 of the Civil Code, which annuls a contract for consideration where the consideration is illusory or derisory. The decision also shows the limit of the argument. In that case, the subsidiary had signed with its former parent company a repayment protocol acknowledging the debt arising from the fees, and had then paid part of it. Noting that the signatory of the protocol knew of the agreement and could assess its validity, the court inferred that the subsidiary had ratified the agreement and held that “it is therefore not entitled to claim its nullity” (our translation) (CA Paris, 19 September 2024, same judgment), ordering it to pay the balance. A protocol, a payment schedule or an acknowledgment of debt signed after the event can therefore close the route to nullity. Before signing such a document, the subsidiary must check that the services were actually provided, that the agreement was approved and the exact scope of its commitment. Conversely, the holding company claiming payment must be able to establish the services rendered during each invoiced period.

The answer depends on the form of each signatory company. In the public limited company (société anonyme), Article L. 225-38 of the Commercial Code subjects to the board's prior authorisation the agreements entered into with a director, a shareholder holding more than 10% of the voting rights, the company controlling that shareholder, or an undertaking one of whose directors is also a director of the company. Article L. 225-39 disapplies this procedure for ordinary transactions entered into on normal terms and for agreements between a company and its wholly owned subsidiary. Articles L. 227-11 and L. 223-20 likewise exclude ordinary transactions entered into on normal terms in the SAS and the SARL. In the SAS, Article L. 227-10 provides for a report on which the shareholders vote, and a simple entry in the register where the company has a sole shareholder. In the SARL, Article L. 223-19 requires a report to the meeting and deprives the interested party of the right to vote on that decision. A cash management, services or guarantee agreement between two companies with the same chairman often falls within these provisions. The firm characterises each agreement in each of the companies concerned, because the same transaction may be unrestricted on one side and regulated on the other.

The sanction varies with the company form, but the interested director remains exposed. In the SAS, unapproved agreements take effect, but the interested party and, where applicable, the directors must bear the consequences that are harmful to the company (Article L. 227-10 of the Commercial Code). The Paris Court of Appeal thus ordered an interested company to bear the harmful consequences, for a shareholder, of an unapproved agreement (CA Paris, pôle 5 ch. 9, 23 July 2024, No. 22/18075). In the public limited company, an agreement entered into without prior authorisation may be annulled if it had consequences harmful to the company; the action is subject to a three-year limitation period from the agreement, or from its disclosure if it was concealed (Article L. 225-42). The director's personal liability is also engaged more easily than one might think. The Court of Cassation holds that “failure to follow the procedure for related-party agreements constitutes, in itself, a breach of the statutory provisions applicable in this area and a fault within the meaning of Article L. 225-251” (our translation) (Cass. com., 17 September 2025, No. 23-20.052). It quashed the judgment that required concealment in order to find this fault. In a group, regularising the procedure before any dispute remains the safest response.

As a rule, no. The subsidiary is a separate legal entity and a contract creates obligations only between the parties (Article 1199 of the Civil Code). The parent may of course commit itself, through a surety, a guarantee or a letter of intent, whose terms must then be read. Absent any commitment, the Court of Cassation holds the parent liable only if its interference in the subsidiary's contractual relations created, for the counterparty, a misleading appearance enabling it legitimately to believe that the parent was also its counterparty (Cass. com., 16 September 2026, No. 25-18.854). In that judgment, emails from the parent referring to the subsidiary's cash difficulties and proposing a payment schedule were not enough: the judgment against the parent was quashed. Likewise, partial payment by the parent of a debt which its subsidiary had been formally put on notice to pay “cannot, on its own, characterise an interference” (our translation) of this kind (Cass. com., 9 November 2022, No. 20-22.063). These judgments are unfavourable to creditors who relied on the solvency of the group. The creditor must therefore gather specific evidence showing that the parent presented itself as a party to the contract, and not merely that it was monitoring its subsidiary's situation.

Article L. 621-2 of the Commercial Code allows proceedings opened against one debtor to be extended to another person where their assets are commingled or the legal entity is a sham. Belonging to the same group, having common directors or the existence of flows is not enough. The Court of Cassation set aside an extension based on an unexplained claim between two companies with the same director and sole shareholder, holding those grounds “unsuited to establish the existence of abnormal financial relations between the Dardy companies, amounting to a commingling of their assets” (our translation) (Cass. com., 30 April 2025, No. 24-14.053). This decision is unfavourable to the liquidator who sought the extension. Conversely, the Montpellier Court of Appeal upheld an extension, noting unjustified flows, a transfer of assets without consideration and a systematic pattern, and held that “the three cumulative conditions of a commingling of assets are met in this case” (our translation) (CA Montpellier, ch. com., 30 June 2026, No. 26/00151). The debate therefore concerns proof of abnormal financial relations. A parent company under threat must be able to link each flow to an agreement, an invoice or an identifiable consideration.

A holding company is often chairman or director of its subsidiaries. It is then a de jure manager and may be targeted by the action for liability for shortfall in assets under Article L. 651-2 of the Commercial Code, in the event of a management fault that contributed to the shortfall, mere negligence being excluded by the provision. The Court of Cassation has held, for a public limited company administered by a legal entity, that “the management fault capable of engaging the liability of that manager for shortfall in assets may be established indifferently as regards the manager itself or its permanent representative” (our translation) (Cass. com., 8 January 2020, No. 18-15.027). The individual representing the holding company therefore does not remove the risk for the holding company itself. The same provision covers de facto managers: a parent without a mandate may be pursued if the liquidator shows that it actually managed the subsidiary. The firm examines the decisions actually taken, the delegations of powers and the flows decided by the holding company before responding to the liquidator.

An employee's employer is the company that hired them. The parent company may nonetheless be characterised as a joint employer, absent any relationship of subordination, on the basis of Article L. 1221-1 of the Labour Code. The Court of Cassation accepts this where there is, beyond the normal coordination of the group and the economic domination it entails, “a permanent interference by that company in the economic and social management of the employer company, leading to the total loss of the latter's autonomy of action” (our translation) (Cass. soc., 21 October 2026, No. 24-19.406). In that judgment, the parent directed the subsidiary's employment management and approved its pay rises and pay negotiations, but also gave instructions on its contracts, its prices and its payments; it was this total loss of economic and social autonomy that justified the finding of joint employment. The protection of employees also has its limits. The Court of Cassation holds that “no provision or principle requires a parent company, when it sells the shares it holds in the share capital of a subsidiary in a state of cessation of payments, to ensure, before the sale, that the buyer has a takeover plan guaranteeing the economic and financial viability of that subsidiary” (our translation) (Cass. com., 1 March 2023, No. 21-14.787). This outcome is unfavourable to employees who relied on such an obligation.