1. Legal Basis and the PACTE Act Reform
French law prohibits any company other than a licensed credit institution from habitually receiving repayable funds from the public or providing banking services. Breach of this rule is a criminal offence punishable by three years’ imprisonment and a €375,000 fine for managers, or €1,875,000 for the company itself (Monetary and Financial Code, Arts. L. 511-5 and L. 571-3).
By way of exception, SARLs may receive funds from their shareholders or managers through what is known as a shareholder current account (compte courant d’associé). This mechanism provides internal financing flexibility without resorting to banks.
Before the PACTE Act (Law No. 2019-486 of 22 May 2019), only shareholders holding more than 5% of the capital could make current-account advances. The reform abolished this threshold, allowing any shareholder, regardless of participation level, to fund the company through this channel (Monetary and Financial Code, Art. L. 312-2).
2. Nature and Operation of Shareholder Current Accounts
A shareholder current account is a loan granted by a shareholder to the company. It differs from a contribution (apport), which increases share capital, as advances are recorded under liabilities. These deposits may consist of funds paid into the company’s account or sums that shareholders voluntarily leave at the company’s disposal (e.g. unpaid remuneration or dividends).
Shareholder current accounts strengthen the company’s treasury without altering capital structure or voting control. The articles of association often authorize such advances, and they can bear interest, subject to statutory limitations.
The advantages include:
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Reinforcement of liquidity without capital increase;
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Flexibility in withdrawal or repayment;
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Deductibility of interest under certain tax conditions;
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Possible lock-up commitments enhancing financial stability.
Funds deposited in shareholder current accounts remain debts owed by the company. If unsecured and not locked, they form part of available assets when assessing insolvency (Commercial Code, Art. L. 640-1).
3. Interest and Usury Limitations
Current accounts may be interest-bearing. However, managers and shareholders must ensure that such remuneration corresponds to actual financing needs and is not merely an advantage to themselves. In such cases, regulated-agreement procedures must be followed.
The applicable interest rate must not exceed the usury rate, defined as more than one-third above the average effective rate applied by banks for comparable transactions (Monetary and Financial Code, Art. L. 313-5-1).
In the absence of a written agreement, advances are presumed interest-free (Cass. civ., 26 Nov. 1991, No. 90-17169).
Our lawyers structure shareholder current accounts to comply with French commercial and tax law.
4. Legal Constraints and Prohibitions
4.1 Debit Balances Prohibited
Managers and individual shareholders are strictly prohibited from borrowing from the company or maintaining a debit balance in their current account (Commercial Code, Art. L. 223-21).
Violations may lead to civil nullity, dismissal of the manager, or, in aggravated cases, the offence of misuse of corporate assets (Cass. crim., 8 Jan. 2014; Cass. com., 27 May 2015). The liquidator may demand repayment of such debit balances within five years of the liquidation opening (Cass. com., 13 Mar. 2019).
4.2 Loans Prior to Appointment
A loan granted to an individual before their appointment as manager is not prohibited, provided its terms remain unchanged afterward (CNCC Bulletin, June 2003).
5. Repayment of Shareholder Current Accounts
Unless a lock-up clause or specific term is stipulated, shareholders may demand repayment at any time, regardless of the company’s financial situation (Cass. com., 8 Dec. 2009). Nevertheless, it is common to include a notice period or condition repayment on the company’s available treasury (Cass. com., 9 Oct. 2007).
When dividends are credited to a current account, the limitation period for repayment begins only upon the shareholder’s repayment request, not the distribution date (Cass. com., 18 Oct. 2017).
Locking current accounts requires the express consent of the shareholder concerned, as it increases their obligations (Cass. com., 24 June 1997).
A non-shareholder spouse, even under community property, has no right to demand repayment (Cass. civ., 9 Feb. 2011).
6. Insolvency and Management Liability
In insolvency proceedings (sauvegarde, redressement, or liquidation judiciaire), shareholders become ordinary creditors and must file a proof of claim (Commercial Code, Arts. L. 622-24 and L. 641-3). Repayment occurs only after privileged creditors, and most often remains unpaid.
Repayments made shortly before insolvency may be set aside as preferential (Cass. com., 20 Oct. 2021) and may constitute a management fault if made to the detriment of other creditors (Cass. com., 24 May 2018).
Managers who prioritize their own current-account repayment over other debts risk being held personally liable or declared personally bankrupt (Commercial Code, Arts. L. 653-4 and L. 653-5).
7. Tax Treatment
7.1 Deductibility for the Company
Interest on shareholder current accounts is deductible only if two conditions are met (General Tax Code, Art. 39, 1-3°):
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The share capital must be fully paid up.
Tolerance applies where a capital-increase deed provides for full payment within three years, but it is withdrawn if the deadline is not respected. -
The interest rate must not exceed the annual average rate applied by banks for variable-rate loans to businesses exceeding two years (known as the TMP). For FY 2023, this limit was approximately 5.57%.
The cap applies to each current account individually. Any excess interest is non-deductible and added back to taxable profit.
Interest paid, whether deductible or not, must be reported annually on Form 2561 (IFU) by 15 February.
We advise managers on the limits and safe operation of shareholder loans and repayments.
7.2 Taxation of Shareholders
For individual shareholders, interest constitutes income from claims, deposits, and current accounts (General Tax Code, Art. 12-4).
It is subject to the flat tax (PFU) at 12.8%, plus 17.2% social contributions, unless the taxpayer opts for the progressive income-tax scale.
For parent companies subject to corporate income tax, interest received is part of taxable income. If the subsidiary’s excess interest (beyond the deductibility cap) is added back to its taxable profit, the parent company may, under certain conditions, benefit from the participation exemption (régime mère-fille) (BOFiP-IS-BASE-10-10-20, 11 Mar. 2021).
8. Legal and Practical Importance
Shareholder current accounts remain a central instrument of internal financing in French private companies. They provide flexibility, fiscal deductibility, and a simple alternative to capital increases.
However, their use requires:
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Strict respect for legal prohibitions on debit balances;
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Careful drafting of lock-up or repayment clauses;
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Consistent monitoring to prevent requalification as disguised dividends or illicit financial assistance.
Advisory oversight by a lawyer and the company’s auditor is essential to ensure compliance and to limit personal liability for managers.
Ensure your shareholder current accounts comply with Article 39 CGI and avoid requalification risks.
9. Conclusion
The shareholder current account provides a vital financing channel for French SARLs, balancing flexibility with legal safeguards.
The PACTE reform broadened its accessibility, but the mechanism remains governed by stringent commercial, accounting, and tax rules.
A well-structured current-account policy strengthens the company’s liquidity while ensuring legal and fiscal security for both managers and shareholders.
