The inter-company loan: an unknown solution that deserves to be highlighted in this context of health crisis?

Introduced into the Monetary and Financial Code by Law No. 2015-990 of August 6, 2015 for growth, activity and equal economic opportunity (known as the Macron law), the inter-company loan allows a company to support financially another company with which it has economic links, by granting it a loan.

This system has been subject to several adjustments, the last of which took place in May 2019 (Pacte law n°2019-486 of May 22, 2019 and Ordinance n°2019-698 of July 3, 2019).

We suggest you find below a presentation of the inter-company loan system.

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L. 511-6, 3 bis, of the Monetary and Financial Code provides that the prohibition on credit transactions does not apply:

"To commercial companies whose accounts for the last closed financial year have been certified by an auditor or who have voluntarily appointed an auditor under the conditions defined in II of article L. 823-3 of the code of commerce and which grant, as ancillary to their main activity, loans for less than three years to microenterprises, small and medium-sized enterprises or to intermediate-sized enterprises with which they maintain economic links justifying it. The granting of a loan cannot have the effect of imposing payment terms on a commercial partner that do not comply with the legal ceilings defined in Articles L. 441-10 to L. 441-13 of the Commercial Code. A Conseil d'Etat decree sets the conditions and limits within which these companies may grant these loans”.

This article is supplemented by Decree No. 2016-501 of April 22, 2016 , amended by Decree No. 2018-1075 of December 3, 2018 which sets out the provisions of Articles R. 511-2-1-1 , R. 511- 2-1-2 and R. 511-2-1-3 of the same code.

The criteria to be met to use the inter-company loan:

• The terms of the loan

• The conditions to be a borrower

• Requirements to be a lender

• The economic links that must exist between the borrower and the lender

The terms of the inter-company loan

1. The duration of the inter-company loan is now limited to less than 3 years, whereas it was initially set at less than 2 years by the decree of April 22, 2016.
2. The amount of the loan, in principal, is doubly capped by article R. 511-2-1-2, 3°:

by an overall limit, the amount of all the loans granted during an accounting year not being able to exceed a ceiling equal to the lower of the following two amounts:

• 50% of the net cash or 10% of this amount calculated on a consolidated basis at the level of the group of companies to which the lending company belongs; Where
• 10 million euros, 50 million euros or 100 million euros for loans granted respectively by a small or medium-sized enterprise, an intermediate-sized enterprise or a large enterprise (the classification being defined by article 3 of the decree no. 2008-1354 of December 18, 2008);

by an individual limit, the amount of all the loans granted by the same company to another company during an accounting year cannot exceed the greater of the following two amounts:

• 5% of the ceiling defined in 3° above; Where
• 25% of the ceiling defined in 3° above, up to a limit of 10,000 euros.

3. Finally, the granting of the loan must respect a certain formalism materialized by:

• drawing up a loan contract;
• compliance with the regulated agreement procedure; and
• the statutory auditor is notified annually of the current loan contracts granted and certifies, in a declaration attached to the management report, for each contract, the initial amount and the outstanding capital of these loan contracts as well as compliance with the provisions which govern them.

The conditions to be a borrower

The identity of the borrower is only subject to a condition of size and manpower.

Thus, the borrower can fall under the category of microenterprises, small and medium-sized enterprises (SMEs) or intermediate-sized enterprises (ETIs). We can note here the exclusion of large companies which, by nature, should not be likely to claim such a loan.

As a reminder, the (cumulative) thresholds for classifying companies are as follows:

microenterprises are those that:

• employ less than 10 people; and
• have an annual turnover or a balance sheet total not exceeding 2 million euros;

small and medium-sized enterprises are those that:

• employ less than 250 people; and
• have an annual turnover not exceeding 50 million euros or a balance sheet total not exceeding 43 million euros;

mid-sized companies are those which do not belong to the category of small and medium-sized companies, and which:

• employ less than 5,000 people; and
• have an annual turnover not exceeding 1,500 million euros or a balance sheet total not exceeding 2,000 million euros;

large companies are those not classified in the previous categories.

Requirements to be a lender

All commercial companies (SAS, SASU, SARL, SCA, SA, etc.) can act as a lender within the meaning of an intercompany loan.

In addition, Articles L. 511-6 and R. 511-2-1-2 set 4 other conditions (in addition to the status of commercial company and the limitations linked to the amount of the loan) for a company to be eligible to grant a such loan:

1. the accounts for the last financial year must have been certified by an auditor;
2. the lending activity must remain ancillary to the main activity;
3. on the closing date of each of the two financial years preceding the date of granting the loan, the shareholders' equity must be greater than the amount of the share capital and the gross operating surplus must be positive; and
4. net cash, defined as the value of current financial assets at less than one year, less the value of current financial debts at less than one year, recorded at the closing date of each of the two accounting years preceding the date of granting of the loan must be positive.

The economic links between the borrower and the lender

The complex question of the economic links that must exist between the parties to the loan is regulated by article R. 511-2-1-1 of the Monetary and Financial Code.

Above all, it is important to specify here that these links can be identified between the lending company and the borrowing company but also between the lending company or a member of its group and the borrowing company or a member of its group. The concept of group is understood here as that used to determine the scope of consolidation of the accounts defined in Article L. 233-16 of the Commercial Code.

Thus, under the terms of this article, the economic links are, alternatively, identified:

by belonging to the same economic interest group (or group awarded a public procurement contract):

“The two companies are members of the same economic interest group mentioned in Title V of Book II of the Commercial Code or of the same group awarded a public procurement contract, mentioned in Article L. 1220 -1 of the public procurement code”;

by belonging to the same project on the occasion of which a public subsidy has been allocated (under certain specific conditions mentioned in I, 2°, a), b) and c) of the article cited above):

“One of the two companies has benefited during the last two financial years or is benefiting from a public subsidy within the framework of the same project associating the two companies and, where applicable, other entities”;

by the existence of a subcontracting relationship (the borrower taking on the role of subcontractor):

“The borrowing company or a member of its group is a direct or indirect subcontractor, within the meaning of law n° 75-1334 of December 31, 1975 relating to subcontracting, of the lending company or of a member of its group acting as prime contractor or subcontractor or owner. Any loan put in place in this context cannot affect or replace the obligations of the lending company or the member concerned of its group acting as main contractor, subcontractor or project owner in accordance with the terms of this law”;

by the existence of a concession by the lender to the borrower of a license to use a patent, trademark, franchise or lease-management contract:

“It has granted to the borrowing company or a member of its group a concession of patent exploitation license mentioned in article L. 613-8 of the intellectual property code, a concession of trademark exploitation license mentioned in Article L. 714-1 of the Intellectual Property Code, a franchise mentioned in Article L. 330-3 of the Commercial Code or a lease-management contract mentioned in Article L. 144-1 of the commercial code”;

when the lender is a major customer of the corporate borrower or a member of its group:

“She is a client of the borrowing company or of a member of its group. In this case, the total amount of goods and services acquired during the last closed financial year preceding the date of the loan or during the current financial year within the framework of a contractual relationship established on the date of the loan is at least 500,000 euros or represents at least 5% of the turnover of the borrowing company or the member of its group concerned during the same financial year”;

by the existence of an indirect link, when the parties are major customers or suppliers of the same third-party company:

“It is indirectly related to the borrowing company or a member of its group through a third party company, with which the lending company or a member of its group and the borrowing company or a member of its group, each, as far as they are concerned, have had a business relationship during the last closed financial year preceding the date of the loan or have a business relationship established on the date of the loan. Within the framework of this commercial relationship, the goods and services acquired by the customer from the supplier during the last closed financial year preceding the date of the loan or during the current financial year within the framework of a relationship established on the date of loan is at least 500,000 euros or represents at least 5% of the supplier's turnover“.

Please note that the granting of the loan cannot have the effect of placing the borrower in a state of economic dependence.