The partner’s current account is a common financial instrument in simplified joint stock companies. When this account goes into debit, the situation raises specific legal and tax issues. You need to understand the implications to avoid sanctions and optimize your company’s legal structure. This configuration calls for particular vigilance in the keeping of annual accounts, and the use of qualified professional accounting services.

What is a current account in SAS?

A partner’s current account becomes in debit when the partner withdraws more money from the company than he has contributed. In practice, this means that the partner owes money to his own SAS. This situation differs fundamentally from a credit current account, where the partner lends funds to the company.

In a SAS, this configuration creates a debt owed by the partner to the company. The amount owed appears on the assets side of the company’s balance sheet as a receivable. This practice is governed by strict rules to protect the interests of the company and the other partners.

Distinction from Other Social Forms

The rules applicable to special articles of association vary considerably depending on the legal form chosen. In a SARL, the prohibition on debit current accounts is absolute for majority managers, in accordance with Article L.223-21 of the French Commercial Code. The SAS, on the other hand, offers far greater flexibility, although legal and tax precautions must be taken.

This fundamental difference is explained by the contractual nature of the SAS, which gives associates considerable autonomy. The Articles of Association can lay down specific arrangements for advances and withdrawals by the partners, offering considerable flexibility in the management of financial flows. However, this statutory freedom in no way removes the tax and accounting obligations that apply to all commercial companies.

Legal framework and limits of the current account in debit

The French Commercial Code strictly regulates advances granted by a company to its directors and associates. Article L.227-12 of the Commercial Code prohibits unauthorized regulated agreements. A current account in debit may constitute such an agreement, if not provided for in the articles of association. For example, when the Chairman of an SAS company withdraws 50,000 euros from the company’s account to finance a personal project without prior formalization, this transaction constitutes a regulated agreement subject to authorization.

The prior authorization procedure becomes compulsory when the transaction is of a significant nature for the company. Contrary to popular belief, the French Commercial Code does not set a precise monetary threshold that automatically triggers this obligation. The assessment is made on a case-by-case basis, according to the size of the company, its sales and the relative importance of the amount owed. The Chairman of the SAS must inform the partners at the Annual General Meeting and submit the agreement for their approval. Failure to comply with these formalities may result in civil and criminal penalties, in accordance with Articles L.227-12 and L.242-6 of the French Commercial Code.

Conditions of validity

For a debit current account to be valid, several conditions must be met. The SAS Articles of Association must explicitly authorize this possibility. A formal loan agreement must govern the debt, specifying the interest rate, repayment terms and any guarantees.

The interest rate applied must comply with the usury rate set by the Banque de France. For example, for personal loans of over €75,000, this rate is generally around 5 to 6%, depending on the period. If the rate is too low or zero, the tax authorities may classify the loan as a hidden benefit, with the corresponding social security contributions and taxes. The duration of the loan must also be reasonable: beyond 24 months, the tax authorities will scrutinize its consistency with the partner’s actual repayment capacity, and the risk of requalification increases significantly.

Tax consequences of a debit current account

The tax authorities keep a close eye on current accounts in debit. These situations can conceal undeclared profit distributions. If the account remains in debit for a long time, without any economic justification, the risk of tax requalification increases considerably.

Reclassification generally occurs when several conditions are met: absence of a formal loan agreement, excessive duration of the debit (generally beyond one accounting period), absence of interest or manifestly insufficient rate, and inability of the partner to demonstrate an intention to repay. In these circumstances, the sums debited may be reclassified as distributed income.

The tax consequences of this requalification are far-reaching. You will be subject to the progressive income tax scale, plus the 17.2% social security deduction. The company, for its part, may be refused the deduction of interest paid if the arrangement is deemed artificial.

Example: A partner maintains a debit current account of €50,000 for two financial years, without a loan agreement. In the event of reclassification as distributed income, and assuming a marginal tax bracket of 30%, the tax cost amounts to : (€50,000 × 30%) + (€50,000 × 17.2%) = €15,000 + €8,600 = €23,600, i.e. almost half the amount withheld.

Interest Taxation

Interest paid by the partner to the company constitutes taxable financial income. The company must declare it in its results and pay corporate income tax at the rate of 25% (or 15% on the first €42,500 of profits for SMEs). The effective tax rate depends on the applicable tax regime. Let’s take a concrete example: on a debit account of €30,000 with an interest rate of 2%, the partner pays €600 in annual interest to the company. The company receives this financial income and pays around €150 in corporation tax (at 25%), giving a net gain of €450. For the debtor partner, the €600 of interest paid is not deductible from personal income, unlike interest on a conventional bank loan.

This tax asymmetry makes current account debits particularly costly: the partner pays non-deductible interest, while the company collects and taxes it. Faced with this twofold tax disadvantage, it is imperative that any manager assess the alternatives before opting for this solution, or risk incurring an avoidable financial burden and potentially a tax reassessment.

Risks and penalties

Maintaining an unauthorized overdraft current account exposes you to almost automatic civil penalties. In civil law, the agreement may be declared null and void by the court. In this case, the partner must immediately repay all sums debited, plus interest at the legal rate. In practice, repayment amounts vary considerably according to the duration and size of the debit, with average interest ranging from 5,000 to 50,000 euros for SMEs.

Penal sanctions, although provided for by law, remain exceptional and reserved for the most serious cases. In cases of blatant misuse of corporate assets, the maximum legal penalties are a fine of 375,000 euros and five years’ imprisonment. However, these ceilings are rarely applied: legal statistics show that less than 2% of current account debits give rise to criminal prosecution, and actual convictions mainly concern deliberate fraudulent schemes.

For a current account in debit to constitute misuse of corporate assets, several cumulative criteria must be met. Case law requires proof of the use of corporate assets contrary to the company’s interests, for personal gain and in bad faith. A large and prolonged debit account with no economic justification or formal agreement is a serious indication. The tax authorities may also initiate a tax reassessment if they consider that the sums deducted conceal undeclared distributed income.

Impact on payroll taxes

Amounts reclassified as remuneration may also lead to an adjustment of social security contributions. URSSAF may reinstate these amounts in the social security contributions base. Late payment surcharges, set at 5% per month of delay up to a limit of 10% for contributions due before January 1, 2015, and up to 5% for those due after this date, are then added to the contributions due, adding considerably to the bill.

This issue is of particular concern to SAS chairmen who are considered as employees, and are subject to an overall rate of social security contributions of between 65% and 82%, depending on their remuneration. The distinction between remuneration and advance payments becomes crucial in determining the basis for social security contributions. Rigorous documentation of transactions, including proof of business expenses and the terms of any loan agreement, is essential to justify their nature.

Let’s take a concrete example: the chairman of a simplified joint stock company (SAS) withdraws €50,000 from his current account, without any formality. During an audit, URSSAF reclassifies this sum as remuneration. The social security contributions due amount to around €37,500 (75% of €50,000). Added to this are late payment surcharges of 5%, i.e. a further €1,875. The total cost of the reassessment is therefore €39,375, to which late payment interest may be added. This situation illustrates the importance of rigorous management of financial flows between the partner and the company.

Alternatives and Best Practices

Instead of a debit current account, there are three safer alternatives: regular remuneration, dividend distribution or a personal bank loan. Each option has its own tax and social benefits, which need to be analyzed.

Dividends are a tax-advantaged option, but require sufficient taxable net profit after constitution of legal reserves (10% up to 10% of share capital) and approval by the Annual General Meeting. Remuneration offers greater tax visibility despite high social security charges. For a one-off cash-flow requirement, a personal bank loan (current average rate: 4 to 8%) avoids legal and tax complications, while preserving the separation of assets between you and your company.

Adjustment of an existing account receivable

When faced with a current account in debit, the priority depends on your situation. For urgent adjustments (discovered during a tax audit), immediate repayment is essential. If you have more time, it’s best to make the adjustment before the end of the financial year, to avoid any balance sheet entries. You can also formalize a loan contract that complies with legal rules, with a realistic repayment schedule spread over 12 to 24 months maximum.

A third option is to offset the debit account with receivables you have on the company: deferred remuneration, unpaid expenses or contributions to current account credit. After 6 months without adjustment, you are liable to late payment penalties at a rate of 0.20% per month (i.e. 2.4% per annum), plus tax surcharges of up to 40% in cases of bad faith. The speed with which you can take action considerably reduces the risk of adjustment and the associated costs.

Optimize the financial management of your SAS

Prevention remains your best ally in the face of the risks of a debit current account. Rigorous management of the financial flows between you and your company starts with systematic documentation: every movement deserves its supporting document, which must be kept for at least 6 years (10 years for accounting documents). Establishing a clear remuneration policy avoids the temptation of informal deductions. Define a fixed monthly amount, ideally representing 30 to 40% of projected sales, adapted to your needs and the company’s capacities. This approach simplifies your compulsory deductions and your personal budget management.

To secure your situation for the long term, adopt these best practices:

• Formalize any advances or loans between you and the company in writing
• Check your current account balance every month
• Always prefer bank transfers to cash withdrawals
• Set up an associate/company cash flow dashboard
• Anticipate your personal cash flow needs at the start of the year

The support of a chartered accountant specializing in bookkeeping and a tax lawyer ensures that your transactions comply with the legal framework. Top tip: carry out an audit of your current account now to identify any debit balance and regularize it before the end of the financial year.