Your French subsidiary has signed its first lease, hired its first employee and now needs cash before revenue arrives. The foreign parent is ready to wire the money, and the wire itself takes minutes. The legal question takes longer: should the money come as a capital increase or as a shareholder loan, known in France as an avance en compte courant d’associ\u00e9, an advance booked on the shareholder’s current account with the company? Most foreign groups choose the loan for speed and flexibility, then discover that French law taxes, polices and sometimes requalifies that loan with great attention.<\/p>\n
This guide is written for foreign founders, finance directors and groups funding a French SAS, SASU, SARL or EURL from abroad. It explains in plain English how a parent-to-subsidiary loan works, what paperwork French registries and auditors expect, where the tax office draws the line on interest rates, and how the money comes back. Every French acronym is explained, every decisive rule is quoted from the official text, and the two most useful recent court decisions, one from the Cour de cassation and one from the Conseil d’Etat, are analysed from their actual reasoning. A companion guide covers setting up the French company itself, from bank account and Kbis company ID to VAT and first hire<\/a>, and a second companion explains increasing the share capital of a French company in cash<\/a>, which is the equity alternative to everything described below.<\/p>\n Part I sets out the mechanics of lending: who is allowed to lend, which documents to sign, and what the tax administration accepts as deductible interest. Part II follows the money back out: repayment on demand or on term, disputes between shareholder and company, and how to choose between debt and equity when the Paris operation needs its next round of funding.<\/p>\n French law starts from a prohibition and then carves out exactly the situation of a foreign group funding its subsidiary. Only banks may lend as a business, yet loans between companies of the same group are expressly permitted. The documents follow the money: a written loan or current-account agreement, a shareholder approval where the company form requires it, and accounting entries that match the contract. Get these three right and the loan is a normal treasury operation; neglect them and the same wire looks like disguised equity, a hidden distribution or an abnormal management decision, each with its own tax price.<\/p>\n Yes, and the permission sits in the Monetary and Financial Code. Article L511-7 of that Code provides, in the wording in force on the date of writing: “I. \u2013 Les interdictions d\u00e9finies \u00e0 l’article L. 511-5 ne font pas obstacle \u00e0 ce qu’une entreprise, quelle que soit sa nature, puisse : 1. Dans l’exercice de son activit\u00e9 professionnelle consentir \u00e0 ses contractants des d\u00e9lais ou avances de paiement ; 2. Conclure des contrats de location de logements assortis d’une option d’achat ; 3. 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”<\/a>. The banking monopoly of Article L511-5 therefore does not prevent treasury operations between companies linked by capital ties giving one of them effective control over the others, which is precisely a foreign parent and its French subsidiary. No banking licence is needed for the parent to lend; the group relationship itself is the legal basis.<\/p>\n Company law adds a second filter that foreign founders often discover late, and it works in the parent’s favour. In a SARL, managers and individual shareholders are forbidden from borrowing from the company on pain of nullity of the contract: “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.”<\/a> Read carefully, the prohibition of Article L223-21 of the Commercial Code targets managers and shareholders other than legal persons, plus their families and intermediaries. A foreign parent company, being itself a personne morale, a legal person, falls outside the prohibition. The parent can therefore lend to its French SARL, and receive the subsidiary’s money back as loan repayment, without facing the nullity that would strike the same operation mounted by an individual manager for personal purposes.<\/p>\n In a SAS, the vehicle most foreign groups choose because a single shareholder can hold everything and losses are limited to contributions, loans from the parent pass through the related-party agreements procedure. Article L227-10 of the Commercial Code states: “Le commissaire aux comptes ou, s’il n’en a pas \u00e9t\u00e9 d\u00e9sign\u00e9, le pr\u00e9sident de la soci\u00e9t\u00e9 pr\u00e9sente aux associ\u00e9s un rapport sur les conventions intervenues directement ou par personne interpos\u00e9e entre la soci\u00e9t\u00e9 et son pr\u00e9sident, l’un de ses dirigeants, l’un de ses actionnaires disposant d’une fraction des droits de vote sup\u00e9rieure \u00e0 10 % ou, s’il s’agit d’une soci\u00e9t\u00e9 actionnaire, la soci\u00e9t\u00e9 la contr\u00f4lant au sens de l’article L. 233-3. Les associ\u00e9s statuent sur ce rapport.”<\/a> A shareholder loan from a parent holding more than ten percent of the votes is therefore disclosed in a report prepared by the statutory auditor, or by the president where no auditor has been appointed, and the shareholders vote on it. Unapproved agreements still take effect, but the interested party bears any harmful consequences for the company, since the same article continues: “Les conventions non approuv\u00e9es, produisent n\u00e9anmoins leurs effets, \u00e0 charge pour la personne int\u00e9ress\u00e9e et \u00e9ventuellement pour le pr\u00e9sident et les autres dirigeants d’en supporter les cons\u00e9quences dommageables pour la soci\u00e9t\u00e9.”<\/a> In a single-shareholder SASU the formality is lighter but the paper trail matters just as much at a tax audit.<\/p>\n The contract itself, usually titled convention de compte courant or convention de pr\u00eat intra-groupe, should state the amount made available, whether the line is a one-off advance or a revolving facility, the interest rate or the expressly interest-free character of the advance, the term or the absence of one, and the repayment mechanics. French practice distinguishes sharply between an open-ended advance and a blocked one, and the Cour de cassation has confirmed why the distinction matters. Where a shareholder’s advance is an open-ended loan, the shareholder can demand its money back at any time: “sauf stipulation contraire, tout associ\u00e9 \u00e9tait en droit d’exiger \u00e0 tout moment et peu important les motifs de sa demande le remboursement du solde de son compte courant, d\u00e8s lors que l’avance ainsi consentie constituait un pr\u00eat \u00e0 dur\u00e9e ind\u00e9termin\u00e9e”<\/a> (Cass. com., 12 February 2025, no. 23-17.483). The phrase sauf stipulation contraire, unless otherwise agreed, is the whole lesson: parties that want stability must write a fixed term or a lock-up clause, called a convention de blocage, into the agreement. Without it, the subsidiary’s cash shown on the balance sheet as a shareholder credit can walk out the door on simple demand, which banks reviewing the subsidiary’s accounts know perfectly well and treat accordingly when they assess liquidity.<\/p>\n For the foreign parent, the subsidiary’s separate legal personality frames the entire operation. Commercial companies enjoy legal personality from RCS registration, and the SAS and SARL confine shareholder losses to contributions, as the official texts confirm: “Les soci\u00e9t\u00e9s commerciales jouissent de la personnalit\u00e9 morale \u00e0 dater de leur immatriculation au registre du commerce et des soci\u00e9t\u00e9s.”<\/a> And in the SAS most groups use, “Une soci\u00e9t\u00e9 par actions simplifi\u00e9e peut \u00eatre institu\u00e9e par une ou plusieurs personnes qui ne supportent les pertes qu’\u00e0 concurrence de leur apport.”<\/a> The loan therefore moves between two distinct patrimonies: the parent’s claim sits as an asset on its books and as a liability on the subsidiary’s, interest accrues where the contract provides for it, and the subsidiary’s creditors cannot seize the parent’s accounts, just as the parent’s creditors cannot seize the subsidiary’s, outside guarantees and abuse situations. Where losses deepen to the point that insolvency threatens, the separate question of directors’ personal exposure for letting a company trade while insolvent arises, a risk examined in our guide to directors’ personal liability in French insolvency proceedings<\/a>.<\/p>\n Interest is deductible for the French subsidiary only within a statutory ceiling, and the ceiling has two layers that foreign groups must apply in order. The first layer sits in Article 39 of the General Tax Code. Interest paid to shareholders on sums they leave at the company’s disposal beyond their capital share is deductible “dans la limite de ceux calcul\u00e9s \u00e0 un taux \u00e9gal \u00e0 la moyenne annuelle des taux effectifs moyens pratiqu\u00e9s par les \u00e9tablissements de cr\u00e9dit et les soci\u00e9t\u00e9s de financement pour des pr\u00eats \u00e0 taux variable aux entreprises, d’une dur\u00e9e initiale sup\u00e9rieure \u00e0 deux ans”<\/a>, within the limit of interest computed at a rate equal to the annual average of the average effective rates charged by banks and finance companies for variable-rate business loans with an initial term above two years. This reference rate is published periodically from banking statistics, and the subsidiary’s accountant applies the rate of the relevant period to the average outstanding advance. The same provision adds a condition that surprises groups whose French capital was never fully paid up: “Cette d\u00e9duction est subordonn\u00e9e \u00e0 la condition que le capital ait \u00e9t\u00e9 enti\u00e8rement lib\u00e9r\u00e9.”<\/a> No fully paid-up capital, no interest deduction at all. Founders who incorporated with partly unpaid capital and then funded the company by loan should complete the capital payment first; it is the cheapest tax reform available to them.<\/p>\n The second layer, Article 212, I of the same Code, extends the cap to sums made available by a shareholder company or a related company: “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 : a) 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”<\/a>. Two routes therefore exist: the statutory average rate, or, where it is higher, the rate the borrowing company could itself have obtained from independent banks in comparable conditions. The second route is a transfer-pricing-style demonstration requiring evidence, bank term sheets declined or granted, the subsidiary’s standalone credit profile, the loan’s amount, maturity and security. Groups that simply copy the rate charged between two foreign affiliates without showing what a bank would have charged the French subsidiary itself walk into the adjustment this provision was written to allow.<\/p>\n Beyond the ceiling, the administration can attack excessive interest as an abnormal management decision, an acte anormal de gestion, meaning an expense the company would never have accepted in its own interest. The Conseil d’Etat reset the rules of that game in a March 2025 decision every group treasurer should read. A property-dealing company had funded a building purchase with a bank loan, a current-account agreement with its parent for two point two five million euros, and a participative loan from another company paying ten point two percent plus half of the borrower’s pre-tax net profit up to a seventeen point five percent internal rate of return. The tax office reintegrated the interest exceeding an estimated market average of around two point four percent. The Conseil d’Etat quashed the appeal court’s approval of that reassessment, holding that the lower court had ruled “sans rechercher, d’une part, si l’absence d’une s\u00fbret\u00e9 de cette nature s’\u00e9cartait de la pratique du march\u00e9, appr\u00e9ci\u00e9e au regard des conditions dans lesquelles un pr\u00eateur ind\u00e9pendant aurait consenti \u00e0 une soci\u00e9t\u00e9 pr\u00e9sentant un risque de solvabilit\u00e9 similaire un pr\u00eat analogue par son objet, son montant, son \u00e9ch\u00e9ance et ses modalit\u00e9s de remboursement et, d’autre part, sauf \u00e0 ce que soit \u00e9tablie l’existence de relations d’int\u00e9r\u00eats entre la soci\u00e9t\u00e9 Malakoff Paris 16 et la soci\u00e9t\u00e9 HPI, si, en s’abstenant de constituer une telle s\u00fbret\u00e9, la premi\u00e8re s’\u00e9tait d\u00e9lib\u00e9r\u00e9ment appauvrie \u00e0 des fins \u00e9trang\u00e8res \u00e0 son int\u00e9r\u00eat”<\/a>, without checking whether the absence of security departed from market practice for a borrower of similar risk and an analogous loan, nor whether the company had deliberately impoverished itself for purposes foreign to its interest (CE, 12 March 2025, no. 474279, Malakoff Paris 16). The decision protects borrowers on method, but its message for lenders is symmetrical: an interest rate far above market needs a documented justification, security package, subordination, risk profile, and maturity all weigh in the comparison, and a rate of ten percent where banks charge two will be dissected line by line.<\/p>\n Some groups sidestep the entire rate debate by lending interest-free. Where no interest is charged, no deduction is claimed and none is at stake, which removes the rate-cap litigation at the cost of leaving the parent unremunerated for the risk. The advance must still be documented as a loan, reported in the accounts as a shareholder credit and approved under the related-party procedure where required; informality helps no one at an audit. Whether interest-bearing or free, the advance should also be consistent with the subsidiary’s equity: a company kept alive for years on shareholder debt while its equity stays at the legal minimum invites closer scrutiny of every cross-border flow than a company whose parent also maintains serious capital.<\/p>\n A loan is only good funding if the exit works. French law makes shareholder advances repayable on simple demand unless the contract says otherwise, which is a strength for a parent that may need its cash and a weakness for a subsidiary presenting its balance sheet to a bank. The funding rounds that follow, second loan, blocked advance, capital increase or dividend upstream, each carry their own approvals and tax logic. Paris practice adds one local layer: the bankers, auditors and registries that process these operations handle foreign shareholders daily, but they apply French checklists without exception.<\/p>\nI. Lending to your French subsidiary from abroad: permission, paperwork and tax<\/h2>\n
A. Can a foreign parent company lend to its French subsidiary, and what must be signed?<\/h3>\n
B. Will the French tax office accept the interest? Rate caps and abnormal management<\/h3>\n
II. Getting the money back and choosing the next funding round from abroad<\/h2>\n
A. How does the parent recover its advance: demand, blocking clauses and disputes?<\/h3>\n