What is the remuneration of the manager of an SARL?

The function of manager of SARL is not automatically remunerated.

In the absence of a legal provision imposing a payment, it is up to the shareholders (or to the manager himself if he is sole shareholder) to decide whether the mandate will be unpaid or paid. But beware: the absence of clear formalization may lead to costly disputes.

How is determined the remuneration of a manager (“gérant”) of a SARL

1. The principle: the remuneration of the manager of SARL is freely fixed

Contrary to the employment contract, the functions of manager of SARL:

• may be exercised on an unpaid basis,

• or give rise to remuneration, freely fixed.

No provision of the Commercial Code imposes the payment of remuneration to the manager of an SARL.

The remuneration of the manager may be determined:

• In the articles of association (clause provided from the incorporation),

• By a collective decision of the shareholders (often by simple majority),

• By separate act, annexed to the articles of association or appearing in minutes.

It is recommended to indicate:

• The amount (fixed, variable or mixed),

• The terms of payment (monthly, annual, conditional on results…),

• Any accessory remuneration (benefits in kind, bonuses, dividends as remuneration…).

In the absence of specific legal provision, the fixing of the remuneration of the manager of SARL arises either from the articles of association, or from a collective decision of the shareholders. This principle has been clearly confirmed by case law:
📚 Com. Cass., 25 Sept. 2012, n° 11-22.754: the remuneration of the manager is freely determined by the shareholders or provided for statutorily.

In practice, the remuneration of the manager is fixed by the general assembly of the shareholders. Indeed, to fix the remuneration of the manager in the articles of association of the SARL may turn out to be a false good idea. Certainly, the fixing of the remuneration of the manager in the articles of association confers a certain legal security insofar as it avoids any doubt on the existence or not of a remuneration. Nevertheless, it entails a constraining rigidity insofar as any modification of the amount requires a modification of the articles of association, entailing:

• Drafting costs (statutory modification by notarial act or by lawyer),

• Mandatory legal publication (BODACC + Clerk’s office),

• An administrative step (forms M3 + fees).

It is therefore inadvisable to indicate the exact amount of the remuneration in the articles of association. It is preferable to indicate that the remuneration “will be fixed by collective decision of the shareholders.”

Also, in practice, the remuneration of the manager is often fixed by decision of ordinary general assembly. Indeed, this does not modify the articles of association and may be adapted freely according to the financial years.

Two modalities are possible:

1. Vote in ordinary general assembly (the most frequent modality),

2. Written consultation of the shareholders (if this procedure is authorized by the articles of association),

3. Act signed by all the shareholders (simplified form, but valid only if all the shareholders sign).

📚 Article L 223-27, paragraph 1 of the Commercial Code: decisions may be taken “by written consultation or by unanimous act, unless contrary clause of the articles of association.”

It should be noted that the judge cannot substitute himself for the shareholders in the fixing of the remuneration of the manager.
If the manager obtains no decision of the shareholders on his remuneration, he cannot seize the judge to unilaterally fix the amount of his fees. Even if the refusal of the shareholders is abusive, the judge is incompetent to decide this type of request:
📚 Com. Cass., 14 Nov. 2006 n° 1244; 31 March 2009 n° 08-11.860; 17 Dec. 2013 n° 12-27.213: even in case of deadlock, it does not fall to the judge to fix the remuneration.

When a statutory clause provides that the remuneration of the manager must be fixed by an ordinary collective decision of the shareholders, this requirement is fulfilled as soon as the remuneration is mentioned in a report signed by the shareholders, annexed to the minutes of the ordinary general assembly.
📚 Com. Cass., 15 March 2017, n° 14-17.873.

It is also admitted that the collective decision fixing the remuneration of the manager may intervene after this remuneration has been paid.
📚 Com. Cass., 18 Dec. 2019, n° 18-13.850
📚 Com. Cass., 9 Jan. 2019, n° 17-18.864 (manager shareholder of EURL).

2. Unpaid management: better to write it

If the functions are exercised on an unpaid basis, it is strongly advised to provide for it expressly:

• in the articles of association,

• or in a separate written and signed act.

In the absence of clear mention, a manager could retroactively claim remuneration, especially if he actively worked in the management of the company.

3. Waiver by the manager of SARL to the remuneration: conditions of validity

A manager may waive his remuneration, even if it is provided by the articles of association. However, this waiver:

• must be clear and unequivocal,

• must not be simply presumed or tacit.

The waiver can only be presumed if the manager has adopted consistent behavior prolonged over time.

4. Absence or illness: the remuneration remains due to the manager of SARL

Even if the manager can no longer exercise his functions, for example due to prolonged illness, he retains the right to his remuneration, as long as no decision expressly removes it.
📚 Com. Cass., 21 June 2017: a manager absent for illness does not automatically lose his right to remuneration.

5. Remuneration of the manager of SARL: maintenance of the right in case of paralysis or impediment

It is frequent, in practice, that a manager can no longer materially exercise his functions. This may result from:

• the appointment of a judicial administrator,

• a conflict with a majority shareholder which blocks access to the company’s tools or premises,

• or also from sick leave or a sidelining not formalized.

On this point, case law is consistent: the right to remuneration of the manager of SARL subsists as long as the status of manager is retained.

➤ Appointment of a judicial administrator

Even when the manager has been totally stripped of his functions by judicial decision, if he officially retains his corporate mandate, he keeps his right to remuneration as long as no decision of the shareholders puts an end to it.
📚 Com. Cass., 21 April 1992: the appointment of a judicial administrator does not deprive the manager of his remuneration if the latter retains his title.

➤ Refusal of access to the premises by the majority shareholder

A minority manager prevented from exercising his mandate due to a conflict with another shareholder (often majority) does not lose his right to remuneration, if he has not been validly revoked by the assembly.
📚 Com. Cass., 18 November 1997: a manager excluded from the premises without formal revocation remains entitled to receive his remuneration.

In summary: the manager is not remunerated for the work performed, but for his status as corporate officer. He retains this right as long as no contrary decision has been adopted in the forms provided by law or by the articles of association.

6. Remuneration of the manager of an SARL and seizure of compensation: no protection like an employee

Managers of an SARL do not benefit from the protective regime applicable to employees in matters of attachment (seizure) of remuneration.

Indeed, the Labor Code (articles L 3252-1 and following) provides ceilings of attachment on salaries, with progressive brackets and thresholds of non-attachability.

These rules do not apply to remuneration received under the social mandate of manager.

📚 Cass. soc., March 11, 1982: the remuneration of the manager of an SARL can be fully attached, unlike salaries paid to an employee.

Practical consequence:

• The manager exposes his personal assets more than an employee in case of debts or disputes.

• It is recommended, for managers of an SARL, to set up a personal protection (insurance contract, civil liability insurance of directors, etc.).

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7. Can one vote on his own remuneration as an associate manager of an SARL?

The associate manager can vote on his remuneration.

Contrary to what one might think, the fixing of the remuneration of the manager by the associates does not constitute a “regulated agreement” within the meaning of article L.223-19 of the Commercial Code.

📚Cass. com., May 4, 2010, n° 09-13.205
📚 Cass. com., October 4, 2011, n° 10-23.398

Consequently:

• The manager may legally take part in the vote, even if he is majority associate;

• This rule applies even if the remuneration consists of an exceptional bonus.

📚 Cass. com., March 31, 2021, n° 19-12.057

However, even if the manager can vote, the decision of fixing or increasing his remuneration must not constitute an abuse of majority.

An abuse of majority is characterized when:

1. The decision is contrary to the corporate interest,

2. And it is taken with the sole aim of favoring the majority associates to the detriment of the others.

Examples of non-abusive remunerations:

• Remuneration indexed on turnover or on gross operating surplus (EBE);

• Allocation conditioned on the economic performance of the company.

📚 Decisions: CA Paris 6-12-2007; Cass. com. 4-10-2011

8. The manager cannot set his own remuneration alone

It is strictly forbidden for the manager, even if he is an employee, to unilaterally grant himself remunerations, increases, or advantages, without decision of the associates when the articles of association so require.

The manager engages his liability when he:

• sets alone his remuneration whereas the articles of association provide for a decision of the associates;

• increases himself or pays himself a bonus without formal validation;

• deliberately conceals the subject before the general meeting.

📚 Cass. com. March 13, 1974; CA Rennes June 28, 2022; CA Chambéry November 27, 2001

Consequently:

• The civil liability of the manager of an SARL for violation of the articles of association or fault of management may be engaged.

• The manager having granted himself remuneration alone may be obliged to reimburse it, even in the absence of bad faith.

• In case of manifest excess, he may also be criminally prosecuted for misuse of corporate assets.

📚 Cass. crim. July 15, 1981; Cass. crim. December 13, 1988; CA Chambéry October 10, 2013

9. Forms of remuneration of the manager of an SARL: how to structure his pay in full security?

The remuneration of the manager of an SARL can take different forms: fixed, proportional, in kind, or mixed. Each modality presents its advantages… but also its risks. Here is a complete overview to choose the best configuration.

a. Fixed remuneration

This is a monthly or annual amount determined in advance, generally stable over time.

The advantages of fixed remuneration are the simplicity of management and a budgetary predictability.

Nevertheless, it can become obsolete in case of growth or inflation, and implies regular readjustments (often subject to decision of the general meeting).

It is therefore advisable to provide for an indexed remuneration.

b. Proportional remuneration (variable)

Concerning proportional remuneration of the manager, two main options are possible: a remuneration indexed on profit, and a remuneration indexed on turnover.

Participation in profits is the most equitable form, but also the most complex.

Its advantage lies in the fact that it motivates the manager to maximize the result.

But it must be defined in a sufficiently precise manner from a mathematical point of view, to avoid litigation (is it gross, net, fiscal profit?) and accounting manipulations (provisions, amortizations) which can distort the calculation.

That is why indexation on turnover, which is simpler to calculate and more difficult to manipulate, is often preferred in practice.

c. Benefits in kind

The manager may benefit from benefits in kind, such as company housing, company car, telephone expenses, subscriptions or professional equipment.

These elements must be fiscally valued (basis of social contributions) and mentioned in the minutes of the general meeting or in the mandate contract.

d. Reimbursement of professional expenses

As a principle, the manager is entitled to reimbursement of travel expenses, meals, and professional purchases incurred in the interest of the company.

To avoid any fiscal requalification, these expenses must be justified (expense reports, invoices).

Flat-rate reimbursements must be handled with caution due to the risk of fiscal requalification.

e. Bonuses, premiums and indemnities

The manager may benefit from an exceptional bonus granted at the end of the financial year according to objective criteria: attainment of thresholds, performance, commercial strategy.

A special indemnity may also be provided, in particular if the manager is founder or has long directed the company.

It is also possible to organize a supplementary pension (including reversible on the surviving spouse).

Tax regime of the remuneration of the manager of an SARL

The remuneration of the manager of an SARL is subject to a specific tax regime, largely modeled on that applicable to employees, but with several notable exceptions, in particular depending on whether the manager is majority, minority, or associate in a partnership-type SARL.

1. Taxation under salaries and wages

The remunerations paid to the manager (whether he is majority, equal, or minority) are subject to income tax in the category of salaries and wages. This means:

• Access to the standard deduction of 10% for professional expenses, within the limit of €14,171 for 2023 income;

• Or the possibility of deducting actual justified expenses (travel, equipment, etc.).

Majority managers cannot use a flat-rate valuation of benefits in kind (housing, vehicle, etc.). These must be valued at actual, which can increase the taxable base.

2. The tax administration may challenge the amount paid

Even if the meeting of associates has validated a remuneration, this does not bind the tax administration. Indeed, in case of an amount considered excessive, the administration may:

• Reject the deduction of the remuneration from the taxable result for corporate income tax (CIT);

• Reinstate the excess portion in the profits;

• Tax the manager personally on this portion as abnormal income.

This control concerns the economic normality of the remuneration, according to:

• The size and profitability of the company;

• The level of responsibility of the manager;

• The remunerations observed in comparable companies.

3. SARL having opted for the partnership regime: the remuneration of the manager is not deductible from the company profit

If your SARL has opted for the tax regime of partnerships (personal income tax instead of CIT), then the remuneration of the associate manager is not deductible from the company profit.

Such non-deductibility will have the following consequences:

• The remuneration will be considered as an advance on profit;

• It will therefore be attached to the share of result belonging to the associate manager;

• It will be taxed under income tax in the appropriate category: BIC, BNC, or BA depending on the activity.

4. Deduction of loan interest contracted to repurchase shares

Managers may deduct from their taxable income certain loan interests if they have contracted a loan to acquire or subscribe shares of the SARL in which they exercise their activity.

Conditions:

• The loan must have been contracted to exercise the main professional activity in the company;

• The associated costs (insurance, file fees) must be useful for the acquisition or preservation of the income;

• Deductible are the interests due on the fraction of the loan which does not exceed three times the remuneration allocated or expected at the date of subscription.

References:

• CGI (French Tax Code) art. 83, 3° last paragraph

• BOI-RSA-BASE-30-50-30-30
  

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