{"id":2121533,"date":"2026-09-15T01:55:26","date_gmt":"2026-09-14T23:55:26","guid":{"rendered":"https:\/\/kohenavocats.fr\/2026\/09\/15\/foreign-parent-loan-french-subsidiary-recover-interest-audit-abroad\/"},"modified":"2026-09-15T01:55:26","modified_gmt":"2026-09-14T23:55:26","slug":"foreign-parent-loan-french-subsidiary-recover-interest-audit-abroad","status":"publish","type":"post","link":"https:\/\/kohenavocats.fr\/en\/2026\/09\/15\/foreign-parent-loan-french-subsidiary-recover-interest-audit-abroad\/","title":{"rendered":"Your Foreign Parent Lent Money to Its French Subsidiary: Recovering Your Shareholder Loan, Charging Interest and Surviving a Tax Audit"},"content":{"rendered":"

You wired 400,000 euros from London, New York or Dubai to get your French subsidiary through its first two years. Your accountant booked the transfer as an apport en compte courant d’associ\u00e9<\/em> \u2014 a shareholder current-account advance, the everyday French tool that lets a shareholder leave cash at the company’s disposal. Now the company is profitable, or you simply need the money back home, and the questions start piling up. Can you demand repayment tomorrow, or can the French manager tell you to wait? Must you charge interest, and at what rate? Will the French tax inspector reclassify the whole arrangement, disallow the interest and tax you on money you thought was a simple loan repayment? This article answers those three questions in order. It is written for the foreign parent company and the foreign founder behind it, entirely under French law as it stands, with the court decisions and statute extracts that actually decide these disputes.<\/p>\n

I. Can a foreign parent demand repayment of its shareholder loan to a French company at any time?<\/h2>\n

A. The default answer is yes: without a written clause to the contrary, the advance is repayable on demand, and the books prove the debt<\/h3>\n

French law treats a shareholder current-account advance as a loan. The official business portal of the French administration puts it plainly: the current account of a shareholder is analysed as a loan that gives the lending shareholder the status of creditor of the company, and its terms \u2014 payment, duration, repayment \u2014 are set by the articles of association or by a written current-account agreement between the company and the shareholder. The first consequence is reassuring for a foreign parent: leaving money in the current account of a French subsidiary is not a capital contribution. It does not increase the share capital, it does not require a notary or a capital increase filed with the greffe<\/em> \u2014 the clerk’s office of the commercial court that keeps the RCS<\/em>, the French trade and companies register \u2014 and it does not produce a new Kbis<\/em>, the official extract that proves a French company exists and who runs it. It creates an ordinary debt owed by the company to whoever left the funds at its disposal.<\/p>\n

The second consequence is the one foreign owners most often discover too late, and it works in their favour. Where neither the articles nor a written agreement restricts repayment, the advance is repayable at any time, the moment the lender asks. A recent judgment of the Lorient court states the rule in one sentence (Tribunal judiciaire de Lorient, 3 June 2026, RG 23\/02097<\/a>): \u00ab Sauf clause conventionnelle ou statutaire contraire, l’avance en compte courant consentie par un associ\u00e9 pour une dur\u00e9e ind\u00e9termin\u00e9e, est remboursable \u00e0 tout moment. \u00bb In plain terms, unless otherwise agreed by contract or in the articles, a current-account advance granted by a shareholder for an indefinite period is repayable at any time. The court ordered a company to pay its former shareholder 173,835.10 euros plus interest running from the formal demand. The Paris Court of Appeal says exactly the same thing in a dispute between two companies: (Cour d’appel de Paris, P\u00f4le 5, Chambre 8, 28 November 2023, RG 21\/11984<\/a>): \u00ab Les comptes courants d’associ\u00e9s ont pour caract\u00e9ristique essentielle, en l’absence de convention particuli\u00e8re ou statutaire les r\u00e9gissant, d’\u00eatre remboursables \u00e0 tout moment. \u00bb In plain terms, the essential characteristic of shareholder current accounts, absent any specific agreement or articles governing them, is that they are repayable at any time. That ruling condemned the borrowing company to pay 1,331,914 euros of principal and contractual interest to the lending company. The civil law foundation is unsurprising: article 1103 of the Civil Code<\/a> provides: \u00ab Les contrats l\u00e9galement form\u00e9s tiennent lieu de loi \u00e0 ceux qui les ont faits. \u00bb In plain terms, lawfully formed contracts stand as law between those who made them. Article 1342 of the Civil Code<\/a> adds: \u00ab Le paiement est l’ex\u00e9cution volontaire de la prestation due. Il doit \u00eatre fait sit\u00f4t que la dette devient exigible. \u00bb In plain terms, payment is the voluntary performance of what is owed and must be made as soon as the debt becomes due. A debt with no agreed maturity is due when the creditor calls it.<\/p>\n

For a foreign parent, this means the evidentiary file matters more than any legal theory. French courts treat the company’s own books as the decisive proof: in the Paris case, the court noted that the lender’s current account appeared for 1,317,039.41 euros of principal and interest in the borrower’s general ledger, and neither the amount of the advances nor the interest due was disputed \u2014 only whether the money was due yet. Keep therefore, from day one, four documents. First, the bank wire slips showing the funds travelling from the parent’s account to the subsidiary’s account, with a payment reference mentioning compte courant<\/em>. Second, the subsidiary’s ledger entries recording each advance in the current-account sub-ledger. Third, the shareholders’ minutes acknowledging the advances, which also serve the regulated-agreements procedure described below. Fourth, a signed current-account agreement, even a short one, fixing the interest rate in writing \u2014 because without a written rate, no contractual interest can be claimed at all, as Part II explains. With that file, a formal demand letter (mise en demeure<\/em>) sent from abroad starts interest running and fixes the date from which a judge will count. Without it, the French manager can plausibly answer that nobody knows whether the transfer was a loan, a gift, or an informal top-up of equity \u2014 and informal top-ups of equity are precisely what French tax inspectors love to reclassify.<\/p>\n

Two preliminary filters must be cleared before any demand, and both concern who lent to whom. French company law strictly forbids the reverse flow \u2014 the company lending to its own managers or individual shareholders through a debit current account. Article L.223-21 of the Commercial Code<\/a> provides, for the SARL<\/em> (the French limited liability company run by a g\u00e9rant<\/em>, a manager): \u00ab A peine de nullit\u00e9 du contrat, il est interdit aux g\u00e9rants ou associ\u00e9s autres que les personnes morales de contracter, sous quelque forme que ce soit, des emprunts aupr\u00e8s de la soci\u00e9t\u00e9, de se faire consentir par elle un d\u00e9couvert, en compte courant ou autrement, ainsi que de faire cautionner ou avaliser par elle leurs engagements envers les tiers. \u00bb In plain terms, on pain of nullity of the contract, managers and shareholders other than legal entities may not borrow from the company or have it grant them a current-account overdraft. Article L.225-43 of the Commercial Code<\/a> extends the same prohibition to directors and general managers of the SA<\/em> (the public limited company). The key phrase for a foreign reader is autres que les personnes morales \u2014 that is, other than legal entities. A foreign parent company, which is a legal entity, lending money to<\/em> its French subsidiary through a credit current account is the normal, lawful direction. The prohibition bites only if the French company funds the private needs of an individual manager or shareholder. Keep the flow in the right direction, from parent to subsidiary, with a credit balance on the parent’s account, and this whole prohibition stays out of the picture.<\/p>\n

The second filter is the French banking monopoly. Only licensed banks may lend as a habitual business \u2014 but the Monetary and Financial Code expressly carves out intra-group cash operations. Article L.511-7 of the Monetary and Financial Code<\/a> states that the banking-monopoly prohibitions do not prevent cash-pooling operations and lists, at item 3: \u00ab Proc\u00e9der \u00e0 des op\u00e9rations de tr\u00e9sorerie avec des soci\u00e9t\u00e9s ayant avec elle, directement ou indirectement, des liens de capital conf\u00e9rant \u00e0 l’une des entreprises li\u00e9es un pouvoir de contr\u00f4le effectif sur les autres \u00bb. In plain terms, a company may carry out treasury operations with companies with which it has capital links giving one of them effective control over the others. A foreign parent that controls its French subsidiary \u2014 typically by holding more than half of the capital or voting rights \u2014 may therefore lawfully fund it through current-account advances. Document the control link in the loan agreement by stating the parent’s shareholding percentage. If the lender is not a shareholder but a sister company or an individual founder with no capital link, have a lawyer check the exception before wiring large or repeated amounts.<\/p>\n

B. When the French company can lawfully make the foreign parent wait: blocking agreements, financial-capability clauses and the judge’s grace periods<\/h3>\n

The default rule of repayment on demand yields to what the parties wrote. French practice knows three brakes, and the Paris 2023 decision illustrates how courts read each of them strictly.<\/p>\n

The first brake is the blocking agreement, the convention de blocage<\/em>. By it, the shareholder agrees that the company no longer has to repay the funds, which then behave like permanent capital \u2014 banks often require such an agreement before lending to a thinly capitalised company, because the blocked advance serves as a guarantee. The administration’s business portal confirms the mechanics: blocking is decided either unanimously by the shareholders or in a blocking agreement signed between the company and the shareholder, and while blocked, the company is no longer obliged to repay. For a foreign parent, the warning is blunt: never sign a blocking agreement without an end date and a release clause tied to the bank loan it secures. An open-ended block signed in a hurry to unlock a French overdraft can freeze several hundred thousand euros for years, and only another unanimous decision or the expiry of the agreed term will free them.<\/p>\n

The second brake is a repayment clause tied to the company’s financial capacity. In the Paris case, the current-account agreement signed on 12 September 2016 provided in its article 3: that repayment of the current-account contributions and of the interest produced would follow the borrowing company’s financial capacity, without any due date being demandable except on a transfer of shares to third parties or an early dissolution. The borrowing company argued that this clause covered every advance, past and future, and that its finances \u2014 strained by the health crisis and a failed property sale \u2014 justified refusing repayment. The Court of Appeal rejected both limbs with reasoning every foreign drafter should memorise. The agreement, written entirely in the future tense, with a preamble and three articles describing advances the shareholders would<\/em> make, contained no reference to the two advances already paid months earlier and no retroactivity clause; and where contractual terms are unambiguous, the court recalled, it is not for the judge to reinterpret the contract. The agreement therefore applied only to advances made after its signature. The earlier advances, totalling one million euros, were repayable at any time. The lesson for a foreign parent is symmetrical and practical. If you want the company to be able to schedule repayment, write the restriction into the agreement before<\/em> wiring the money, state expressly that it covers all advances past and future, define the trigger with numbers rather than adjectives \u2014 for example a minimum cash balance or a debt-to-equity ratio \u2014 and set a long-stop date. A clause that merely says repayment follows financial capacity invites exactly the litigation the Paris borrower lost.<\/p>\n

The third brake belongs to the judge, not to the contract. Article 1343-5 of the Civil Code<\/a> provides: \u00ab Le juge peut, compte tenu de la situation du d\u00e9biteur et en consid\u00e9ration des besoins du cr\u00e9ancier, reporter ou \u00e9chelonner, dans la limite de deux ann\u00e9es, le paiement des sommes dues. \u00bb In plain terms, the court may defer or spread payment over up to two years, weighing the situation of the debtor against the needs of the creditor. Borrowers in difficulty routinely request these grace periods, and the Paris borrower did. The Court of Appeal refused (same ruling of 28 November 2023<\/a>): \u00ab D\u00e9boute la soci\u00e9t\u00e9 Messillac Investissements de sa demande de d\u00e9lais de paiement \u00bb \u2014 that is, it dismissed the company’s request for payment delays \u2014 while condemning it to pay the full 1,331,914 euros plus later interest. Deferral is discretionary, capped at two years, and weighed against the creditor’s own needs \u2014 a foreign parent that shows it needs the cash for its own payroll, tax bills or group commitments is far harder to defer than an absent shareholder with no documented use for the money. State the use of the funds in the demand letter.<\/p>\n

One final timing point favours diligence. The administration’s business portal notes that once the shareholder demands repayment, the claim is subject to a five-year limitation period running from the demand: a parent that waits more than five years after calling the loan can lose the right to enforce it. The practical sequence from abroad is therefore simple. Send the formal demand by tracked means, allow a short deadline \u2014 thirty days is the market standard and matches the Paris case \u2014 and if nothing arrives, move to the fast recovery routes: the European payment order or the French injonction de payer<\/em> before the competent commercial court for an undisputed book debt, or a full summons if the company contests the due date. The Paris lender had even secured, from the enforcement judge, authorisation to register a provisional mortgage on the borrower’s building lots while the case ran \u2014 proof that French law gives an unpaid shareholder real interim weapons, provided the underlying book debt is documented.<\/p>\n

II. What interest can a French company pay its foreign parent, and what does the tax inspector check during an audit?<\/h2>\n

A. The interest must be written, capped at the TMP for full deductibility, and approved by the shareholders<\/h3>\n

Interest on a shareholder current account is never automatic. Article 1907 of the Civil Code<\/a> states: \u00ab L’int\u00e9r\u00eat est l\u00e9gal ou conventionnel. L’int\u00e9r\u00eat l\u00e9gal est fix\u00e9 par la loi. L’int\u00e9r\u00eat conventionnel peut exc\u00e9der celui de la loi, toutes les fois que la loi ne le prohibe pas. Le taux de l’int\u00e9r\u00eat conventionnel doit \u00eatre fix\u00e9 par \u00e9crit. \u00bb In plain terms, interest is either set by statute or agreed by contract, and any contractual rate must be fixed in writing. No written rate, no contractual interest: the Paris court awarded 81,914 euros of contractual interest only because a written agreement and subsequent shareholder decisions fixed the rate and the computation. A foreign parent that leaves its advances interest-free for years and then claims market-rate interest retroactively will recover principal at best. Fix the rate in the agreement before or with the first advance, state whether interest capitalises \u2014 the Paris agreement expressly said it did not \u2014 and have each year’s interest computation attached to the annual accounts file.<\/p>\n

The rate itself is constrained by the corporate tax ceiling. Article 212-I of the General Tax Code<\/a> provides: \u00ab Les int\u00e9r\u00eats aff\u00e9rents aux sommes laiss\u00e9es ou mises \u00e0 disposition d’une entreprise par une entreprise qui est son associ\u00e9e ou par une entreprise li\u00e9e, directement ou indirectement, au sens du 12 de l’article 39, sont d\u00e9ductibles \u00bb subject to \u00ab Dans la limite de ceux calcul\u00e9s d’apr\u00e8s le taux pr\u00e9vu au premier alin\u00e9a du 3\u00b0 du 1 du m\u00eame article 39 ou, s’ils sont sup\u00e9rieurs, d’apr\u00e8s le taux que cette entreprise emprunteuse aurait pu obtenir d’\u00e9tablissements ou d’organismes financiers ind\u00e9pendants dans des conditions analogues \u00bb. In plain terms, interest on sums made available by a shareholder company is deductible only up to the statutory rate, or a higher rate if the borrower proves it could have borrowed at that rate from an independent bank. In plain English, the French subsidiary deducts the interest it pays its foreign parent only up to the TMP<\/em> \u2014 the taux moyen pratiqu\u00e9<\/em>, the average rate on variable-rate corporate loans published quarterly by the tax administration in the BOFiP<\/em>, the official online tax commentary \u2014 unless the subsidiary proves it could have borrowed at a higher rate from an independent bank. Any excess over the cap is added back to taxable profit. Two further ceilings can bite large groups: the general cap on net financial charges, which article 212 bis of the General Tax Code<\/a> limits to the higher of three million euros or 30% of adjusted earnings, and the transfer-pricing rules if the agreed rate looks off-market for the documented risk. The drafting reflex is therefore to set the contractual rate by reference to the TMP in force at each computation date \u2014 for example a clause pointing to the TMP for the calendar quarter preceding the closing, as published in the BOFiP \u2014 and to keep the quarterly BOFiP printout with the accounts. A fixed 8% written into a 2021 agreement looks aggressive when the TMP of the relevant quarters was a fraction of that, and the excess becomes non-deductible while remaining fully taxable in the parent’s hands.<\/p>\n

On the parent’s side, the interest is income. A non-resident parent receiving French-source interest faces French withholding tax, reduced or eliminated only by the applicable double tax treaty and its beneficial-ownership and documentation conditions. Never promise a treaty rate in the agreement itself; write that interest is paid net of any withholding required by French law, with a gross-up or treaty-reclaim procedure to be handled with the tax advisers of both sides, and collect the treaty residence certificate before the first payment. The current-account agreement should also state who bears a reassessed withholding if the treaty form was missing on payment day \u2014 disputes between parent and subsidiary over a 25% withholding on five years of interest destroy more value than the underlying tax.<\/p>\n

Corporate housekeeping completes the shield. In a SAS<\/em> \u2014 the simplified joint-stock company most foreign founders choose \u2014 article L.227-10 of the Commercial Code<\/a> requires the statutory auditor, or the president if there is none, to report on agreements between the company and a shareholder holding more than 10% of voting rights or controlling the company, with the shareholders voting on that report; unapproved agreements still stand but the interested party bears any harmful consequences for the company. In a single-shareholder company, mention in the decision register suffices. The foreign parent’s advance, being an agreement with its controlling shareholder, falls squarely in this procedure: put the current-account agreement and each year’s interest on the agenda, record the vote, and file the accounts through the guichet unique<\/em> run by the INPI<\/em>, the national industrial property institute that now operates France’s single online filing portal, so that the BODACC<\/em> \u2014 the official gazette publishing company notices \u2014 and the greffe<\/em> show a clean chain. A tax inspector who finds the loan reported, approved and published has little left to attack on form.<\/p>\n

B. The audit file that lets a foreign owner prove the loan, defend the rate and collect from abroad<\/h3>\n

French tax audits of shareholder loans follow a predictable script, and each scene has a document that closes it. The audit typically opens with an on-site verification of the accounts: article L.13 of the Book of Tax Procedures<\/a> provides: \u00ab Les agents de l’administration des imp\u00f4ts v\u00e9rifient sur place, en suivant les r\u00e8gles pr\u00e9vues par le pr\u00e9sent livre, la comptabilit\u00e9 des contribuables astreints \u00e0 tenir et \u00e0 pr\u00e9senter des documents comptables. \u00bb In plain terms, tax officers verify on the premises the accounts of taxpayers required to keep and present accounting records. The inspector will ask for the loan agreement, the wires, the ledger, the minutes approving the agreement and the interest computation. Companies that produce this file within days signal substance; companies that reconstruct it over months invite the inspector to dig into transfer pricing, beneficial ownership and the personal tax position of the founder.<\/p>\n

The inspector’s three substantive attacks are well known, and each has a prepared answer. First, reclassification: was this really a loan, or a hidden capital contribution whose repayment is actually a dividend? The answer is the file described in Part I \u2014 wires labelled as current-account advances, ledger entries, shareholder minutes, and actual repayments flowing back through the bank with the same label. Real loans get repaid; contributions do not. Second, the rate: is the deducted interest within the TMP cap of article 212-I of the General Tax Code<\/a>, and could the subsidiary have borrowed at that rate independently? The answer is the written TMP-linked clause plus the quarterly BOFiP printouts, and, for above-TMP rates, a bank term sheet or an independent valuation showing the subsidiary’s standalone borrowing cost given its thin equity. Third, the cross-border layer: withholding on the interest, treaty entitlement, and \u2014 for groups \u2014 the overall financial-charge caps and transfer-pricing documentation. The answer is the residence certificate, the treaty analysis memo, and a short transfer-pricing note benchmarking the rate against comparable intra-group loans. None of this requires the foreign owner to fly to Paris: a French accountant with a signed engagement letter, a scanned mandate, and read access to the bank statements can run the entire audit correspondence, with the owner joining the closing meeting by video.<\/p>\n

If the company will not or cannot repay, the foreign parent enforces like any creditor, from abroad. The demand letter starts the clock and the interest. The undisputed book balance supports a payment-order application before the commercial court of the company’s seat \u2014 fast, largely paper-based, and enforceable. If the due date is contested under a capability clause or an alleged blocking agreement, a full summons follows, and the Paris and Lorient rulings show that courts decide these cases on the documents: unambiguous written terms win, reconstructed oral understandings lose. Interim protection exists while the case runs \u2014 the Paris lender’s provisional mortgage, authorised by the enforcement judge on the borrower’s property, is the template: ask the enforcement judge for a provisional security as soon as the claim looks seriously threatened. Throughout, keep every euro of principal and interest flowing through identified bank transfers between the parent’s account and the subsidiary’s account. Cash movements, netting against invoices without paperwork, or repayments routed through the founder’s personal account turn a clean loan file into an evidentiary puzzle that no judge or inspector will solve in the parent’s favour.<\/p>\n

Conclusion<\/h2>\n

A shareholder loan from a foreign parent to a French subsidiary is one of the most flexible tools in French company practice \u2014 deductible interest for the subsidiary, no capital increase, repayment on demand as a default \u2014 but every advantage depends on paper signed before the money moves. Write the current-account agreement first, with a written TMP-linked interest rate, an express repayment calendar or a precisely defined capability clause with a long-stop date, and a stated control link that secures the intra-group treasury exception. Approve the agreement and each year’s interest under the regulated-agreements procedure, publish clean accounts, and keep the wires, ledger and minutes in one file. Then, when the day comes to bring the money home, the demand letter is a formality, the tax inspector finds a documented loan rather than a disguised dividend, and the only remaining discussion is the transfer date. Companies that skip these steps discover, like the borrowers in the Paris and Lorient cases, that French courts enforce what the documents say \u2014 and add up the interest to the euro.<\/p>\n

Need a quick opinion on your case<\/h2>\n

Our firm offers a telephone consultation within 48 hours with a lawyer of the firm, to review your shareholder loan, your repayment options and your audit exposure.
Call +33 6 46 60 58 22<\/a> or write via our contact page<\/a> with your loan agreement and your latest company accounts.<\/p>\n","protected":false},"excerpt":{"rendered":"

A foreign parent that funded its French subsidiary through a shareholder current account can demand repayment at any time unless the agreement says otherwise, charge written interest within the French tax cap, and prove the loan in a tax audit. 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