MANAGEMENT FEES: THE CONSEIL D’ÉTAT EASES UP!

The Conseil d’État (France’s highest administrative court) very recently held, on 4 October, that management agreements do not necessarily constitute an abnormal act of management (acte anormal de gestion) where the paying entity intended, through that payment, to remunerate its director indirectly, even though the director is common to both companies.

The Conseil d’État added that a company’s failure to pay its director any remuneration during a financial year does not constitute a management decision binding on it (décision de gestion opposable), and that the payment of remuneration may therefore perfectly well be provided for, even retroactively, in particular through another company (a holding company in this case).

This very favourable decision should nevertheless be treated with caution, and particular attention must be paid to the drafting of the agreements. It is settled case law that management fees must remunerate genuine services, proportionate to the remuneration paid.

For further information:
Conseil d’État, 9th and 10th chambers combined, 04/10/2023, 466887