A shareholder’s current account is a common practice in business law. In most cases, it represents a cash advance provided by shareholders to enable the company to access financing that the bank refuses to grant. Alternatively, it facilitates a bank loan, the granting of which is contingent upon the company securing a supplementary source of funding.

Like any loan, its operation is generally governed by the company’s articles of association or an agreement (particularly regarding interest rates and repayment terms).

With rare exceptions, a shareholder in a limited liability company (SA, SAS, Sarl, etc.) can never be in arrears on a current account. Furthermore, according to the law, an overdraft on a current account granted by the company to a shareholder would be subject to cancellation.

On the other hand, with regard to companies (SCI, SCM, etc.), there is no prohibition on the creation of current accounts for debtor partners.

Contrary to a common misconception, when a shareholder who holds a current account transfers their shares (through sale or donation), they do not transfer their current account in any way, unless expressly stipulated in the contract. Therefore, the company must request reimbursement from the former shareholder for the outstanding balance on the current account. If the current account is in credit, the former shareholder, who would therefore still retain it, may request reimbursement from the company.

This debt, however, is subject to a five-year statute of limitations under common law, unless otherwise stipulated in separate contracts. However, this period begins on the date of the first repayment request (also subject to separate contractual stipulations). A repayment request (possibly including interest) first submitted more than five years after the date of the share transfer would be perfectly valid.

From a tax perspective, interest paid to creditors on current accounts will be deductible from the company’s profits up to a limit of an average rate defined by the tax authorities (1.47% for the 2018 calendar year). Naturally, interest paid to shareholders will be subject to tax.

However, with regard to current accounts of debit partners, if no repayment interest is provided, the loan granted may be reclassified by the administration as a distributed dividend, taxable as such.

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