Tax Liability of SARL Managers pursuant to French Law

The liability of managers of sociétés à responsabilité limitée (SARL) in France is not limited to civil law. In certain circumstances, they may also be personally exposed to the payment of the company’s tax debts. French law, through the Livre des procédures fiscales (LPF) (French Tax Procedures Code) and the Code général des impôts (CGI) (French Tax Code), has established mechanisms enabling the administration to engage the personal responsibility of SARL managers (“gérants“) where breaches of fiscal obligations have compromised the Treasury’s rights.

1. Article L. 267 LPF and the Tax Liability Regime of SARL Managers

Article L. 267 LPF provides that where the director of a company has committed fraudulent maneuvers or engaged in the serious and repeated non-observance of tax obligations, making the recovery of taxes and penalties impossible, he may be declared jointly and severally liable for the payment of the company’s tax debts.

This liability applies broadly: it concerns not only de jure directors but also any person exercising the effective management of the company, directly or indirectly, including majority and minority shareholder managers of SARLs, as well as non-shareholder managers (Cass. com., 11 Feb. 1992, n° 89-21525).

The conditions of liability under Article L. 267 are alternative rather than cumulative and are independent from those provided under commercial law for mismanagement. They do not require proof of intentional conduct or bad faith (Cass. com., 15 Feb. 1994, n° 92-12214; Cass. com., 19 May 1992, n° 89-21084; Cass. com., 31 Oct. 2006, n° 05-15302; Cass. com., 24 June 2020, n° 17-12497).

2. Procedural Conditions for Engaging the SARL Manager’s Tax Liability

Before pursuing the manager personally, the administration must show that all actions against the company have been undertaken (Cass. com., 3 June 2003, n° 00-13734).

The judge evaluates the causal link between the repeated non-observance of obligations and the impossibility of recovery, by reference to the probability that the Treasury would have succeeded in recovering the amounts had the declarations been made in due time and without omissions.

The procedure requires the intervention of the president of the judicial tribunal, seized by the competent DGFiP accountant, who alone can declare the manager jointly liable on his personal assets (BOFiP-REC-SOLID-10-10-30-§ 1-19/08/2020; Cass. com., 5 June 2019, n° 17-22647).

3. Judicial Applications of SARL Manager’s Joint & Several Tax Liability for Company Debts

Case law illustrates the contours of fiscal liability:

• Proof of breaches. Liability cannot be presumed solely from the existence of significant debts and liquidation for insufficiency of assets; courts must concretely establish the manager’s personal responsibility during his mandate (Cass. com., 19 Jan. 2022, n° 19-2588).
• Statute of Limitation. Actions may be pursued so long as collection proceedings themselves are not time-barred (Cass. com., 5 Dec. 2000, n° 98-11593).
• Absence of accounting. The lack of accounting records alone does not suffice if it is not the direct cause of non-recovery (Cass. com., 19 Nov. 2002, n° 99-15491).
• VAT declarations. Late filings without payment, using VAT as a source of liquidity, constitute serious and repeated breaches justifying liability, regardless of the financial difficulties of the company (Cass. com., 4 May 2010, n° 09-14054; 5 June 2019, n° 17-15598; 6 Oct. 2015, n° 14-20352).
• Late insolvency filing. The maintenance of an artificially prolonged activity, preventing recovery, engages liability, which transfers to heirs upon death (Cass. com., 5 Nov. 2002, n° 00-20331).
• Administrative diligence. Where the administration failed to conduct its own checks, liability of the manager cannot be the exclusive cause of non-recovery (Cass. com., 27 June 2019, n° 17-22326).
• Payment plans. Courts must verify that the manager was informed of the risk of personal pursuit in case of breach of agreed payment terms (Cass. com., 25 Feb. 2003, n° 00-12070).
• Period of mandate. Liability can only extend to taxes linked to breaches committed during the director’s term (Cass. com., 24 Nov. 2021, n° 18-25864).
• Plurality of managers. The liability of co-managers must be individually characterised; solidarity cannot be automatic (Cass. com., 21 Jan. 2004, n° 02-13860).
• Delegation of powers. A valid delegation to a competent officer, such as a financial director, excludes liability under Article L. 267 (Cass. com., 19 Nov. 1991, n° 90-10725; 3 Mar. 2004, n° 02-14882).

4. Criminal Dimension: Tax Fraud

Separate from Article L. 267 LPF, Article 1745 CGI provides that in case of criminal conviction for fraud fiscale, the manager may be held jointly liable with the company for the payment of the evaded tax and penalties.

Fraudulent conduct is punished criminally by fines and imprisonment (CGI arts. 1741, 1743). In addition, since the 2023 Finance Law, taxpayers convicted of aggravated fraud, concealment, or laundering may be deprived of eligibility for income tax reductions and credits or for real estate wealth tax relief (Law n° 2023-1322 of 29 Dec. 2023, art. 114).

Remedies available against the judgment do not prevent the Treasury from taking conservatory measures to secure its claim.

Conclusion

The fiscal liability of SARL managers illustrates the determination of French law to ensure the effectiveness of tax collection. The mechanism of Article L. 267 LPF, combined with the provisions of the CGI on tax fraud, creates a dual risk: civil solidarity for the company’s tax debts and personal criminal liability.

For managers, vigilance in tax compliance is essential. Courts have demonstrated both the breadth of their scrutiny and the requirement of a precise causal link. Failure to meet obligations, even without fraudulent intent, can lead to significant personal consequences.

At frenchco.lawyer, we assist managers, shareholders, and companies in navigating the complexities of fiscal responsibility and in defending against proceedings that may engage personal liability.