In the entrepreneurial ecosystem, financial support between companies may appear as a natural step, aimed at facilitating operations or overcoming economic challenges. However, behind this apparent simplicity lies a notably complex legal framework in France. Legislation rigorously regulates credit operations, entrusting this activity to a strict monopoly held by credit institutions and financing companies. While exceptions exist for inter-company loans, provided notably by Article L. 511-6 of the French Monetary and Financial Code (Code monetaire et financier), these are subject to precise criteria, such as the existence of a genuine and justified economic link between the parties or specific duration requirements. A fundamental nuance, often misunderstood, concerns the consequences of a loan that fails to meet these conditions: its unlawfulness does not, in principle, entail its nullification. This distinction has concrete implications, maintaining the borrower’s obligation to repay the amounts owed, even though the lender may face other risks.
The Banking Monopoly: A Protective Principle
In France, the habitual activity of lending is, except in specific cases, the exclusive domain of credit institutions and financing companies. This “banking monopoly” aims to protect the public and ensure the stability of the financial system. Article L. 511-5 of the French Monetary and Financial Code prohibits any person other than a credit institution or a financing company from carrying out banking operations on a habitual basis. A credit operation is defined as any act by which a person, for consideration, makes or promises to make funds available to another person, or takes a commitment by signature in the interest of that person.
However, exceptions to this monopoly exist, such as payment delays or advances between clients and suppliers, salary advances, or crowdfunding. And, more recently, inter-company loans.
Inter-Company Loans: A Strictly Defined Framework
The possibility for companies to grant treasury loans to each other was introduced by Article 167 of Law No. 2015-990 of August 6, 2015, known as the “Macron Law”. This mechanism aims to strengthen ties and solidarity between economic partners, by allowing companies with surplus cash to help those lacking liquidity. This can be done notably to ensure the sustainability of a strategic partner, thereby securing its supply chain or commercial outlets.
However, these loans are strictly regulated and subject to precise conditions under Article L. 511-6 3 bis of the French Monetary and Financial Code and Decree No. 2016-501:
- Eligible company types (lender): Initially, only joint-stock companies (SA, SAS) or limited liability companies (SARL) whose accounts were certified by a statutory auditor were eligible. Law No. 2019-486 of May 22, 2019 (PACTE Law) extended this possibility to any commercial company.
- Ancillary activity: The loan must be granted “as an ancillary activity to their main business.”
- Loan duration: Initially “less than two years.” The PACTE Law extended this potential duration to less than three years.
- Nature of borrowers: Beneficiaries must be micro-enterprises, small and medium-sized enterprises (SMEs), or mid-tier enterprises (ETI). Their thresholds are defined by the number of employees and turnover or total balance sheet.
- Justified economic link: This is a crucial point, specified by Article R 511-2-1-1 of the French Monetary and Financial Code. This link may result from various situations:
- Membership in the same group or project, for example an economic interest grouping (GIE), a consortium awarded a public or private contract, or a project that has received a public subsidy involving both parties.
- The borrowing company is a subcontractor of the lending company.
- The lending company is a significant client of the borrower, with annual purchases of at least 500,000 euros or representing at least 5% of the borrower’s turnover.
- An indirect link through a third company of which both are significant clients or suppliers, with the same thresholds.
- The lending company has granted a license concession (patent, trademark, franchise) or a management lease to the borrowing company.
- “Good financial health” of the lender: The lender must meet financial conditions over the last two fiscal years, namely having equity greater than share capital, gross operating surplus greater than 0, and net cash position greater than 0.
- Loan amount: All loans granted must be subject to an annual attestation by the lending company’s statutory auditor. The amount must not exceed 50% of net cash (or 10% at the consolidated group level), with caps of up to 10 million euros for SMEs, 50 million euros for mid-tier enterprises, and 100 million euros for large enterprises. Limits are also set for all loans granted to a single company.
- Other limitations: Granting such a loan may not impose payment terms that do not comply with legal caps. The transfer of risk through assignment of the loan is not permitted, particularly to a securitization vehicle. The loan must not create a situation of economic dependence for the borrower.
This mechanism offers an alternative to bank financing but is not intended to replace traditional credit and must be used with caution to avoid any excessive dependency relationship.
The Crucial Distinction: Unlawfulness of the Loan and Nullity of the Contract
This is one of the most important and often misunderstood aspects of this regime. A lending operation carried out in breach of Articles L. 511-5 and L. 511-6 of the CMF is considered unlawful. However, and this is a fundamental legal nuance, this unlawfulness is not, by itself, sufficient to entail the nullity of the loan contract.
Several court decisions have clearly established this:
- The French Court of Cassation ruling of June 15, 2022 (Cass. com., June 15, 2022, No. 20-22.160, Published in the bulletin, Fuchs Lubrifiant France company):
- In this case, the company Fuchs had granted an “advance on rebates” (a loan) to the company Back to Bike, which undertook to purchase lubricants. The Paris Court of Appeal had annulled the portion relating to the loan.
- The Court of Cassation, although it ultimately quashed the ruling on a procedural ground (the failure to join the liquidator of the principal debtor as a party), restated an essential principle: “The mere fact that a credit operation was concluded in breach of this prohibition does not by its nature entail its annulment.” The Court of Appeal had violated Article L. 511-5 CMF by declaring the nullity solely on that basis. This means that even if the company Fuchs habitually engaged in such loans outside the banking monopoly, rendering the operation unlawful, this did not justify the nullity of the contract itself.
- The Riom Court of Appeal ruling of January 15, 2025 (CA Riom, Jan. 15, 2025, No. 24/00111, Selarl Pharmacie du [Adresse 2] v. SAS BHG Conseils):
- Selarl Pharmacie du [Adresse 2] appealed a judgment ordering it to repay a loan of 150,000 euros granted by SAS BHG Conseils, seeking nullity of the contract on the grounds that there was no sufficient economic link and that the legal duration had not been respected. The Pharmacy had stopped making installment payments.
- The Riom Court of Appeal confirmed that the loan was unlawful under Article L. 511-5 of the CMF. It held that the simple monthly service relationship (875 euros excluding VAT) was insufficient to establish the economic link justifying a loan of 150,000 euros, and that the duration (more than 2 years) had not been respected at the time of the facts.
- Nevertheless, the Court of Appeal expressly held that this unlawfulness did not entail the nullity of the loan contract.
- Consequently, Selarl Pharmacie du [Adresse 2] was ordered to repay the 150,000 euros plus interest, as well as additional costs.
In essence: even if a loan is granted outside the legal conditions and is therefore deemed unlawful, the borrower remains bound to repay the principal and agreed interest. The unlawfulness of the loan may give rise to penalties (criminal, disciplinary) for the lender who fails to comply with the banking monopoly, but it does not release the borrower from its contractual obligations.
However, it should be noted that the unlawfulness of the loan may give rise to criminal penalties: breach of the banking monopoly is punishable by three years’ imprisonment and a fine of 375,000 euros (Article L 571-3 of the French Monetary and Financial Code).
Implications for Your Business
Caution is advised for any inter-company lending operation:
- For the lender: It is imperative to scrupulously comply with all conditions set by Article L. 511-6 3 bis of the CMF (economic link, duration, characteristics of the parties, amounts, etc.). An unlawful operation exposes you to risks and criminal penalties, even if the loan remains valid and must be repaid.
- For the borrower: Bear in mind that even if the loan you receive does not meet all legal conditions (for example, if the economic link is not clearly established or if the duration is inappropriate), you remain legally bound to repay the principal and interest. The unlawfulness of the loan does not constitute an escape from your financial obligations. Be also aware that lending activity is not without risk, and that the lender is not necessarily a professional equipped with creditworthiness assessment tools.
Conclusion
The legal framework for inter-company loans in France strikes a delicate balance between the need to protect the banking monopoly and the desire to facilitate financial exchanges within the entrepreneurial ecosystem. Exceptions are possible, but they are surrounded by rigorous conditions. The key lesson from recent court decisions is clear: the unlawfulness of a loan does not, in principle, entail its nullity.
FAQ: Inter-Company Loans in France
What is an inter-company loan and is it legal in France?
An inter-company loan is a transaction in which one company lends cash to another. In France, the habitual lending activity is normally reserved for banks (the banking monopoly). However, the Macron Law of 2015 introduced a specific exception for loans between companies, making them legal under very strict conditions.
What are the key conditions for a loan between companies to comply with the law? For an inter-company loan to comply with Article L. 511-6 of the French Monetary and Financial Code, several criteria are essential:
- It must be ancillary to the main business of the lender.
- Its duration must not exceed three years.
- Borrowers must be micro-enterprises, SMEs, or mid-tier enterprises.
- A justified economic link is crucial between the parties (e.g., subcontracting, significant client, membership in the same group or project).
- The lender must demonstrate good financial health over the last two fiscal years (equity > share capital, gross operating surplus > 0, net cash > 0).
- The loan amount is subject to caps and must be annually attested by the statutory auditor.
Is an inter-company loan that does not comply with the rules automatically annulled?
No, and this is a fundamental and often misunderstood legal point. If an inter-company loan is granted in breach of the legal conditions, it is deemed unlawful. However, this unlawfulness does not, in principle, entail the nullity of the loan contract. Court decisions, such as the Court of Cassation ruling of June 15, 2022, have clearly established this: the mere fact that a credit operation was concluded in breach of the banking monopoly is not sufficient to entail its annulment.
What are the risks and penalties for the lending company if the loan is unlawful?
Even though the borrower must repay the loan (see Q3), the lending company faces significant risks and criminal penalties if the loan is deemed unlawful. Breach of the banking monopoly is punishable by three years’ imprisonment and a fine of 375,000 euros (Article L. 571-3 of the French Monetary and Financial Code). It is therefore imperative for the lender to scrupulously comply with all conditions set by law to avoid these serious consequences.
