According to the theory of the abnormal act of management, loans without interest or write-offs of receivables granted by a company for the benefit of a third party do not, as a rule, come under normal commercial management, unless it appears that by granting such advantages, the company acted in its own interest.
The Nantes Administrative Court of Appeal, in a judgment n ° 19NT02801 of May 17, 2021, has just recalled that this rule applies even if the beneficiary of these advances is a subsidiary, except in the case where the situation of the two companies is such that the parent company can be regarded as having acted in its own interest by helping a subsidiary in difficulty.
The facts of which the Court had to know are as follows. The civil company West Invest is a holding company whose corporate purpose is the holding and management of participations in the capital of several companies. It was the subject of an accounting audit for the years ended 2012 to 2014. During this audit, the tax administration noted that it had granted to one of its subsidiaries, the company West Promotion, cash advances without charging the interest, the principle of which was included in the cash management agreement concluded with it.
It considered that West Invest had thus deprived itself of unrequited revenue and had therefore committed an abnormal act of management.
By a rectification proposal of September 18, 2015, it informed the company of its intention to reinstate in its results, for each of the years audited, the amount of interest to which it could have claimed.
The company asked the Administrative Court of Rennes to pronounce the discharge of the additional contributions of tax on the companies to which it was subject. By a judgment of May 15, 2019, the Administrative Court of Rennes rejected his request. The company appealed against this judgment.
The Nantes Administrative Court of Appeal upheld the first instance judgment. According to it, to the extent that the waiver of collecting interest constitutes an abnormal act of management, it is for West Invest to demonstrate that by behaving in this way, it acted in its own interest. To defend itself, the company West Invest argued in particular that this aid had helped to avoid the bankruptcy of its subsidiary and had thus enabled it to recover a cash advance of two million euros that it had granted to it.
However, the Court did not follow it, stressing “ even assuming that in the absence of this financial assistance, the subsidiary had filed for bankruptcy, the company West Invest does not provide any evidence that the bankruptcy of its subsidiary would have threatened its own survival or would have undermined to his fame or his credit. In addition … aThere is nothing to show that the company WP which, during the period, generated a positive net result, or very slightly negative, was not in a position to pay to the company WI the interest provided for by the agreement of Treasury. “
The Nantes Administrative Court of Appeal therefore ruled that West Invest had not provided the proof, which was incumbent on it, that it had acted in its own interest by granting its subsidiary an interest-free advance.