All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

When experiencing cash flow difficulties, rather than turning to third parties, the company may prefer to rely on the solidarity of its partners and request contributions to shareholder current accounts to finance its activities . The provision of funds by the partners can be compensated by interest, dividend distributions, etc. However, one should not be misled by the terminology used. Far from constituting true contributions, shareholder current accounts are better analyzed as advances, or even loans, which confer upon the partner the status of a corporate creditor .

However, not all sums paid to the company by the partners qualify as advances in current accounts. In the event of a dispute regarding the nature of the sums contributed, the judge must ascertain the parties' intent. Thus, the mere entry of a salary claim on a partner's account, which does not have the characteristics of a current account, does not result in either the novation of this claim or the waiver by the employee/partner to obtain its payment . Similarly, payments made to the bank account of an SAS, pursuant to a clause in a share transfer agreement stipulating that the transferors undertake to “credit a certain amount to the current account,” are not sufficient to establish the existence of a partner's advance in a current account . Finally, the financial relations that an agricultural cooperative company maintains with its cooperative members cannot be considered as organized in the form of a current account, despite the use of this term, when each of the claims in question remains perfectly individualized and never loses its distinct character, and all are accompanied by distinct interest rates . Conversely, payments made by partners to cover the company's losses must, when recorded as “debts,” be considered as advances in current accounts .

The unique feature of current accounts is their simplified formal requirements . However, to prevent misuse of the mechanism, the court analyzes current account agreements as regulated agreements, subject to control .

Cass. 3e civ., 21 September 2022, LawLex202200010205JBJ, specifying that the financing of the acquisition of real estate by an SCI through an associate's current account does not establish the fictitious nature of the company.

Cass. 3e civ., 3 February 1999, LawLex202200003189JBJ. See also Cass. com., 18 November 1986, LawLex202200008939JBJ, considering that the term “repurchase” of the company cannot obscure the true nature of the transaction, recorded in accounting as an “advance in current account,” that is, a loan granted to the company.

Cass. soc., 29 June 1995, LawLex202200003187JBJ; 1 October 2003, LawLex202200003186JBJ. Also see Cass. soc., 23 February 2005, LawLex202200008931JBJ, specifying that the entry of a wage claim in a current account is equivalent to a payment that causes it to lose its individuality and transforms it into a simple item of the account, of which only the balance can constitute an enforceable claim between the parties, provided that the deposits have received the express agreement of the employee/associate.

Cass. com., 3 March 2021, LawLex202200003185JBJ.

Cass. 1re civ., 15 March 2005, LawLex202200008878JBJ.

CA Paris, 18 June 2015, LawLex202200009179JBJ.

See - setting aside the formal requirements applicable to guarantees - Cass. com., 25 October 2011, LawLex202200003184JBJ.

Cass. com., 21 April 2022, LawLex202200003955JBJ, holding that the conclusion of a partners current account agreement, which is a regulated agreement, constitutes a “management operation” within the meaning of Article L. 223-37 of the Commercial Code, and may therefore be subject to an expert assessment.

57. Particularities.