A foreign founder, investment fund or international group can finance the purchase of a French company in several ways. The difficulty begins when the target company itself is asked to provide the cash, the loan or the guarantee that makes the purchase possible. In that situation, the transaction may fall within the French prohibition on financial assistance. The nationality of the buyer does not remove the risk. The decisive questions are what is being acquired, which company provides the support, what form the support takes, and whether the support was given in order to enable the purchase of that company\u2019s own shares.<\/p>\n
The central provision is Article L. 225-216 of the French Commercial Code. It covers an advance of funds, a loan and a security granted for a third party\u2019s subscription or purchase of the company\u2019s own shares. The rule also matters in a leveraged buyout, or LBO, where a new holding company borrows to acquire a target and the parties later expect the target\u2019s cash flow to service the debt. A properly documented holding-company structure can be lawful; a target guarantee signed at closing may create a very different problem.<\/p>\n
This guide is written for foreign businesses considering an acquisition in France. It distinguishes the statutory prohibition from ordinary group financing, explains the special position of a SAS (soci\u00e9t\u00e9 par actions simplifi\u00e9e, or simplified joint-stock company), and gives a practical closing checklist. It does not address an individual\u2019s move to France or a property purchase. For the broader corporate-formation and cross-border company-law framework, see the firm\u2019s French companies and international business-law hub<\/a>. The analysis should be completed before the term sheet becomes an unconditional commitment.<\/p>\n Article L. 225-216 of the French Commercial Code is short, but its consequences are substantial. It provides: Three forms of assistance are therefore expressly identified:<\/p>\n The phrase \u201cin order to\u201d is the practical centre of the analysis. A lawyer reviewing the file will not look only at the label placed on a transfer. The review normally follows the funds, the timing and the contractual purpose. A payment made shortly before completion, a guarantee included in the acquisition facility, a pledge over target assets, or a side letter linking a target loan to the sale may reveal the prohibited purpose. The same analysis can apply where the buyer is a foreign parent, a French subsidiary, a newly incorporated holding company or an acquisition vehicle controlled by the foreign group.<\/p>\n The prohibition is not a general rule that prevents a French company from doing business with a shareholder, a parent company or an overseas group. Ordinary trading terms, a genuine working-capital facility and a properly priced service agreement must be examined under their own rules. The difficulty is the connection with the acquisition of the target\u2019s own shares. If the target\u2019s cash or credit is the bridge that permits the buyer to pay the seller, the arrangement deserves immediate escalation.<\/p>\n The distinction between a real statutory trigger and a merely suspicious sequence of events appears in Cass. com., 12 June 2019, no. 16-25.025<\/a>. The Cour de cassation, France\u2019s highest court for private and commercial matters, stated in the case before it that the transaction A Paris Court of Appeal order also reproduced the statutory wording in CA Paris, 7 September 2023, no. 23\/00045<\/a>, in a dispute involving a contested dividend and a proposed conservatory seizure. The court quoted Article L. 225-216 and then examined whether the alleged claim and the causal link were sufficiently established. That procedural decision is not a substitute for a transaction opinion, but it illustrates why a party cannot simply assert \u201cfinancial assistance\u201d and skip the evidence: the purpose, the company\u2019s act and the resulting loss must all be connected.<\/p>\n For a foreign buyer, the safest early test is a four-column funds-flow table:<\/p>\n If the target appears in the third column as guarantor of the debt used to purchase its own shares, or in the first two columns as lender or payer, the structure should be stopped for legal review. Calling the payment an \u201cintercompany advance\u201d, \u201cvendor support\u201d, \u201ccompletion facility\u201d or \u201cmanagement fee\u201d does not change the economic purpose if the amount is being used to buy the target\u2019s shares.<\/p>\n The corporate form must be checked before the acquisition documents are drafted. A SAS<\/em> is a soci\u00e9t\u00e9 par actions simplifi\u00e9e, a flexible French joint-stock company commonly used by foreign groups. Article L. 227-1 of the Commercial Code makes compatible rules governing soci\u00e9t\u00e9s anonymes, or SAs (public limited companies), applicable to a SAS, while listing specific exclusions. The current SAS chapter on L\u00e9gifrance<\/a> places Article L. 225-216 outside the listed exclusion for Articles L. 225-17 to L. 225-126. The resulting application to a SAS is a legal inference from the statutory cross-reference, and the precise transaction should still be checked against the current text and the company\u2019s documents.<\/p>\n The SAS\u2019s internal governance does not disappear because the president can sign for the company. Under Article L. 227-5<\/a>, the articles of association determine how the SAS is managed. Under Article L. 227-6<\/a>, the company is represented toward third parties by its president, who has extensive powers to act in the company\u2019s name within the corporate purpose. That external representation rule does not make an unlawful transaction lawful internally. The board-equivalent approval, shareholder decision, committee consent or financial limit required by the articles must be identified and documented.<\/p>\n Article L. 227-8<\/a> adds an important risk layer: the rules governing the civil liability of SA board members and members of a management board apply to the president and directors of a SAS. The statutory text is direct: An SA has a different internal approval framework. Article L. 225-35<\/a> requires the board of directors to determine the company\u2019s business policy in accordance with its corporate interest and provides a specific authorization regime for guarantees, sureties and similar commitments. For a group guarantee, the board may in some circumstances authorize guarantees for controlled companies on an annual or global basis. That power is not a blank cheque for the target to guarantee the acquisition of its own shares. The acquisition-purpose prohibition remains a separate question.<\/p>\n A SARL is different again. A SARL<\/em> is a soci\u00e9t\u00e9 \u00e0 responsabilit\u00e9 limit\u00e9e, or private limited-liability company. Its equity is divided into parts sociales rather than the \u201cactions\u201d referred to in Article L. 225-216. That does not mean every SARL financing structure is safe. Article L. 223-21<\/a> provides, on pain of contractual nullity, that managers and individual members cannot borrow from the company or have the company guarantee their commitments to third parties, subject to the statutory financial-business exception. The purpose of the acquisition, the identity of the borrower and the relationship between the buyer and the SARL must therefore be analysed under the SARL rules, corporate-interest rules and general contract law.<\/p>\n The buyer\u2019s foreign nationality is not the legal dividing line. The relevant questions are the target\u2019s corporate form, the location and governing law of the target\u2019s acts, the identity of the borrower and the purpose of the support. A US fund, a UK parent, a Singapore acquisition vehicle and a French holding company can all be \u201cthird parties\u201d for the purpose of the target\u2019s own-share purchase. The same is true if the target is a subsidiary of a foreign group. The group chart should therefore identify direct and indirect control using the tests in Article L. 233-3 of the Commercial Code<\/a>, including majority voting rights, voting agreements, de facto control and the power to appoint or remove management.<\/p>\n Control and group membership also bring corporate-interest questions. Article 1833 of the French Civil Code<\/a> requires a company to be managed in its corporate interest while taking social and environmental issues into account. A target may expect a long-term benefit from joining an international group, but that expectation should be supported by evidence: a commercially priced service, an identifiable operational advantage, a documented integration plan or a proportionate guarantee. A bare statement that \u201cthe parent owns us\u201d is not a substitute for the target\u2019s own interest.<\/p>\n The 2026 decision of the Agen Court of Appeal shows how a cross-border group payment can become a personal-liability issue even outside a classic acquisition guarantee. In CA Agen, 11 March 2026, no. 24\/00590<\/a>, the court described an intercompany cash advance in these terms: Article L. 225-216 contains two express exceptions. It does not apply to the ordinary business operations of credit institutions and financing companies. It also excludes transactions intended to allow employees to acquire shares in the company, a subsidiary or a company within a group savings plan. The current text sets out both exceptions immediately after the prohibition. Neither exception is a normal route for a foreign founder or an overseas investment fund acquiring a French business. A target that is not itself carrying on regulated lending as an ordinary activity should not rely on the banking exception.<\/p>\n The most practical alternative is to separate the acquisition finance from the target. A buyer or a newly created holding company borrows from the bank, receives equity from the foreign investors and purchases the target\u2019s shares. The target does not pay the seller, lend the purchase price or guarantee the acquisition facility at completion. This is the structure described in the official Service Public Entreprendre guide to the legal structure of a business takeover<\/a>: a holding company can contract the borrowing needed for the acquisition, while dividends from the acquired company may later help service that debt. The guide also distinguishes a purchase of shares from a purchase of a business or assets.<\/p>\n This separation needs to be real, not cosmetic. The acquisition facility should identify the holding company as borrower. The buyer\u2019s equity contribution should be traceable. Security should normally be taken over the buyer\u2019s or holding company\u2019s assets, including shares already owned by that entity where legally and contractually appropriate, rather than over the target\u2019s operating assets for the purpose of buying the target. The seller may negotiate a vendor loan, deferred consideration, escrow or a warranty package with the buyer. Those arrangements must be reviewed for their own legal and tax consequences, but they do not turn the target into the financier of its own sale.<\/p>\n After completion, the target may distribute dividends to its shareholder if the statutory conditions are met. That is not an automatic route around Article L. 225-216. Article L. 232-11 of the Commercial Code<\/a> defines distributable profit, permits certain distributions from available reserves and prohibits a distribution that would reduce equity below the capital and non-distributable reserves. Article L. 232-12<\/a> requires approval of the annual accounts and a finding that distributable sums exist before the general meeting determines the dividend; it also regulates interim dividends.<\/p>\n The legal distinction is therefore between a lawful dividend decided after completion and a payment engineered in advance to fund the purchase price. The documents, meeting minutes, balance sheet and cash-flow forecast should support the first description. A dividend that is only a label for a pre-arranged transfer can create a dividend, corporate-interest or financial-assistance challenge. In the 2023 Paris case cited above, the court examined the connection between a large dividend, the purchase price and the alleged loss rather than treating the label \u201cdividend\u201d as conclusive.<\/p>\n Other post-completion group transactions can be considered when they have a separate business purpose. A target may provide services to its parent, receive services from the group, make an ordinary sale or grant working-capital support to an affiliate. The file should show market terms, a business need, credit analysis, repayment terms, adequate security where appropriate and a benefit to the target. It should also show that the transaction was not agreed as part of the purchase-price funding. The more closely the transfer follows completion and the more directly it repays acquisition debt, the more carefully the purpose and sequence must be documented.<\/p>\n Related-party approval is a separate safeguard. For a SAS, Article L. 227-10<\/a> requires a report on certain agreements made directly or through an intermediary with the president, a director, a shareholder holding more than 10% of voting rights or a controlling company. The associates decide on that report, and the provision states that an unapproved agreement may still produce effects while the interested person, president and other directors may bear the damaging consequences for the company. This procedure does not cure a transaction that is prohibited by Article L. 225-216. It helps expose the conflict and preserve an approval trail; it is not a legalization mechanism.<\/p>\n The articles of association and authority chain must be checked in parallel with the statutory prohibition. In CA Paris, 25 June 2025, no. 24\/12067<\/a>, concerning a guarantee granted by an SA with a management board, the court stated: Tax planning cannot replace the corporate analysis. The official BOFiP guidance on participation income and parent-subsidiary treatment<\/a>, published through the French tax administration, addresses eligibility and conditions for participation income. It does not authorize a target to fund its own sale. A foreign group should model withholding tax, corporate income tax, interest limitation, transfer pricing and treaty questions separately, and then confirm that the chosen tax result rests on a transaction that is valid under company law.<\/p>\n For the acquisition vehicle itself, the legal and tax file should be consistent with the funding documents. The official Service Public page on the French LBO structure<\/a> explains that a holding company is created to borrow and acquire the target, and that cash flow may later move through dividends. That description is a starting point, not a substitute for a funds-flow opinion. It should be tested against the target\u2019s articles, solvency, distributable reserves, existing debt covenants, employee rights and any regulated activity.<\/p>\n The consequences must be described with care because several legal routes can overlap. A transaction may be challenged as a breach of an imperative company-law provision, as a contract that does not satisfy the conditions of validity, as a management fault or as a criminal offence applicable to the relevant company and officer. The post-2025 reform of French company-law nullities also matters. Article 1844-10 of the Civil Code<\/a>, in force since 1 October 2025, provides that the nullity of social decisions may result from the violation of an imperative company-law provision or a general contractual ground, while a breach of the articles is not, unless the law provides otherwise, by itself a ground for nullity.<\/p>\n For the underlying contract, Article 1178 of the Civil Code<\/a> provides that a contract that does not satisfy the conditions required for validity is null, that the judge generally pronounces the nullity unless the parties agree, and that an annulled contract is treated as never having existed. It also provides for restitution of performed obligations and preserves a possible damages claim for the injured party. The result in a particular financial-assistance dispute depends on the legal basis pleaded, the date of the acts, the type of entity, the parties\u2019 knowledge and the transitional rules. A transaction should not be described as automatically void without that analysis.<\/p>\n There can also be a direct criminal risk for officers of an SA. Article L. 242-24 of the Commercial Code<\/a> states that the president, directors or general managers of an SA who carry out, in the company\u2019s name, operations prohibited by the first paragraph of Article L. 225-216 are liable to the same 150,000-euro fine specified in that article. The provision is expressly drafted for an SA; a SAS or SARL requires a separate check of the applicable criminal text and any other offence. That qualification is important for a foreign group whose French operating company is not an SA.<\/p>\n Personal civil liability is a separate concern. Article L. 225-251 makes SA directors and the general manager responsible, individually or jointly according to the circumstances, for statutory breaches, breaches of the articles and management faults. Through Article L. 227-8, the same responsibility framework reaches the president and directors of a SAS. The Cass. com., 25 March 2020, no. 18-11.684<\/a> decision is a useful reminder that a group-support allegation still requires proof of causation. The Cour de cassation held that the reasons relied upon were In a live deal, the buyer, lender, seller, target and directors should therefore ask four consequence questions:<\/p>\n Third-party good faith is not a complete insurance policy. The 2025 Paris decision illustrates the tension: the court examined whether the bank was in good faith and whether it could rely on the company\u2019s apparent authority, while also discussing the missing internal decision. A lender should not assume that a signature by the French president eliminates every challenge. It should request the articles, corporate approvals, delegation, legal opinion and evidence that the target is not guaranteeing its own acquisition debt.<\/p>\n A foreign investor should complete the following checklist before signing or drawing the acquisition facility:<\/p>\n The formalities after a share purchase also require planning. The official Service Public page on signing a final business-transfer deed<\/a> explains that a transfer of shares can involve registration with the tax service and that the deed should allocate responsibility for the applicable registration duty. The foreign buyer should also coordinate updates to the company\u2019s registry information, beneficial-owner declarations and bank mandates. The INPI\u2019s RNE information page<\/a> explains that the register is fed through the one-stop shop for business formalities and that company events such as changes and cessation are declared there. None of those filings replaces the substantive review of the acquisition funding, but inconsistent filings can make a later dispute harder to defend.<\/p>\n Finally, the wording of the legal opinion should match the facts. It should not say merely that the target is \u201cpart of the group\u201d or that the foreign buyer is \u201cindependent\u201d. It should identify the target\u2019s acts, the acquisition purpose, the corporate approvals, the source of repayment, the intended security package and the reasons the structure falls outside or complies with Article L. 225-216. If the answer depends on a dividend, the opinion should verify distributable sums under Articles L. 232-11 and L. 232-12. If it depends on a guarantee, it should verify both substantive corporate benefit and signing authority.<\/p>\n A French company should not finance a foreign buyer\u2019s purchase of its own shares by advancing the price, lending to the acquisition vehicle or guaranteeing the acquisition debt. Article L. 225-216 is drafted around the company\u2019s own shares and applies by its terms without a nationality exception. For a SAS, the statutory cross-reference in Article L. 227-1 generally brings the rule into the analysis, while the articles, the president\u2019s authority and the director-liability regime remain critical. For a SARL, different prohibitions and corporate-interest rules must be applied to parts sociales.<\/p>\n The workable route is usually a genuine separation: the buyer or a holding company raises the acquisition financing, completes the purchase and later receives only lawful, properly approved distributions or services. The target\u2019s cash flow can be relevant to the economic model, but it cannot be used as a substitute for a target-level guarantee or loan at closing. Before signing, a foreign founder or group should obtain a funds-flow review, registry and liability checks, a corporate-authority opinion and a tax analysis that does not assume corporate-law validity.<\/p>\n The legal sources checked for this guide include the current versions of Articles L. 225-216, L. 227-1, L. 227-5, L. 227-6, L. 227-8, L. 227-10, L. 223-21, L. 232-11, L. 232-12, L. 242-24, Articles 1833, 1178 and 1844-10 of the Civil Code, and the cited decisions of the Cour de cassation and courts of appeal. The rules should be rechecked if the transaction is signed after a legislative change or if the target enters financial distress.<\/p>\n A telephone consultation within 48 hours with a lawyer from the firm can help you test the acquisition funds flow, target guarantee and corporate approvals.<\/p>\n Call Ma\u00eetre Reda Kohen at +33 6 46 60 58 22<\/a> or use the firm\u2019s contact form<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" A foreign buyer cannot assume that a French target may fund its own acquisition. This English guide explains Article L. 225-216, SAS and SARL distinctions, lawful holding-company structures, dividends, guarantees, nullity and a cross-border closing checklist.<\/p>\n","protected":false},"author":251031309,"featured_media":16499,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kj_source_type":"","_kj_official_id":"","_kj_official_url":"","_kj_judilibre_id":"","_kj_jur":"","_kj_lieu":"","_kj_chambre":"","_kj_rg":"","_kj_date":"","activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"federated","footnotes":""},"categories":[80314,80313],"tags":[],"class_list":["post-2113769","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-decryptage","category-doing-business-in-france"],"yoast_head":"\nI. Can a French company finance a foreign buyer\u2019s acquisition of its shares?<\/h2>\n
A. What does the French financial-assistance prohibition cover?<\/h3>\n
Une soci\u00e9t\u00e9 ne peut avancer des fonds, accorder des pr\u00eats ou consentir une s\u00fbret\u00e9 en vue de la souscription ou de l’achat de ses propres actions par un tiers.<\/q> In English, a company cannot advance funds, grant a loan or give security in order to enable a third party to subscribe for or purchase its own shares. The text is linked here in its current version on L\u00e9gifrance, Article L. 225-216<\/a>.<\/p>\n
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ne constituait pas une avance de fonds faite par la soci\u00e9t\u00e9 R\u00e9sid\u00e9a, ni un pr\u00eat par elle accord\u00e9 en vue de la souscription ou de l’achat de ses propres actions, de sorte qu’elle ne pouvait, \u00e0 ce titre, constituer une faute de gestion<\/a> commise par M. Q…, en qualit\u00e9 de dirigeant de la soci\u00e9t\u00e9 R\u00e9sid\u00e9a<\/q>. The decision is useful because it prevents overreach: a transaction cannot be treated as financial assistance without identifying an actual advance or loan by the relevant company and the required acquisition purpose.<\/p>\n
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B. Does the rule apply to a SAS, a subsidiary or a foreign buyer?<\/h3>\n
Les r\u00e8gles fixant la responsabilit\u00e9 des membres du conseil d’administration et du directoire des soci\u00e9t\u00e9s anonymes sont applicables au pr\u00e9sident et aux dirigeants de la soci\u00e9t\u00e9 par actions simplifi\u00e9e.<\/q> A foreign group cannot assume that the use of a flexible SAS eliminates personal exposure for a manager who signs an unsupported guarantee or cash transfer.<\/p>\n
Une avance de tr\u00e9sorerie d\u00e9signe un pr\u00eat, ou une avance de fonds, qu’une soci\u00e9t\u00e9 accorde \u00e0 une autre soci\u00e9t\u00e9, g\u00e9n\u00e9ralement appartenant au m\u00eame groupe, afin de lui permettre de faire face \u00e0 un manque temporaire de liquidit\u00e9s.<\/q> It then held, on the facts and evidence before it, that the manager was personally liable for the unpaid balance:
Par cons\u00e9quent, il est personnellement d\u00e9biteur de la somme restant due, soit 5 688,30 Euros, ind\u00e9pendamment du fait que c’est la soci\u00e9t\u00e9 [3] qui a b\u00e9n\u00e9fici\u00e9 des avances.<\/q> A foreign destination and a group relationship did not replace authorization, accounting evidence or repayment discipline.<\/p>\n
II. What can a foreign investor do when the target offers financing or guarantees?<\/h2>\n
A. Which exceptions and alternative structures can be documented?<\/h3>\n
Il en r\u00e9sulte que si le pr\u00e9sident du directoire a le pouvoir d’ex\u00e9cuter une d\u00e9cision prise par le directoire, le cas \u00e9ch\u00e9ant, pour certains actes au nombre desquels le cautionnement, en vertu d’une autorisation donn\u00e9e au directoire par le conseil de surveillance, il ne peut, en l’absence d’une telle d\u00e9cision, d\u00e9cider par lui-m\u00eame de consentir un engagement de caution<\/a> au nom de la soci\u00e9t\u00e9 que s’il a re\u00e7u du directoire d\u00e9l\u00e9gation pour ce faire.<\/q> The court later added:
Il s’ensuit que le cautionnement litigieux est entach\u00e9 de nullit\u00e9.<\/q> The same decision also considered the protection of a good-faith bank under the rules applicable to the dispute. The practical lesson is that authority, corporate purpose, third-party reliance and the substantive prohibition must be reviewed separately.<\/p>\n
B. What are the consequences of an unlawful loan or guarantee?<\/h3>\n
impropres \u00e0 caract\u00e9riser le lien de causalit\u00e9 devant exister entre la faute de gestion retenue et l’insuffisance d’actif<\/q>. That does not make group support safe; it means that the claimant must establish the management fault and the loss link instead of relying on a general accusation.<\/p>\n
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Conclusion<\/h2>\n
Need a quick opinion on your case.<\/h2>\n