Repayment of a partner's current account: remedies in case of refusal

A partner who has advanced money to the company, to finance an acquisition, cover a cash requirement or avoid a bank overdraft, can find themselves in a difficult position: they ask for the money back and the company, or its manager, is slow to pay, cites difficulties, or simply refuses. This situation is common in SARLs (French private limited companies) and in family SCIs (French property holding companies), where advances between relatives pile up without formality. The central question is simple: can the partner demand their money immediately, and what can be done if the request is refused? This guide sets out the principle of repayment at any time, its real limits, the practical remedies available and the specific features of the family SCI.

Understanding what a partner's current account is

A partner's current account (compte courant d'associé) is neither a share nor a contribution to the share capital. It is a sum of money that the partner leaves at the company's disposal, either by paying in funds or by temporarily waiving a claim (remuneration, a dividend, reimbursement of an expense the partner has advanced). Legally, it is a loan granted by the partner to the company.

This distinction is fundamental and poorly understood. A capital contribution becomes the company's property definitively: the partner cannot freely take it back and must wait for a capital reduction, a sale of their shares or the liquidation. By contrast, the current account remains the property of the lending partner. It appears in the liabilities side of the balance sheet among the company's debts, and not in equity.

Take a simple illustration. A partner in a SARL holds 30% of the share capital, representing an initial contribution worth a few thousand euros. To enable the company to buy equipment, the partner also pays a sum into the company's bank account, recording it as a current account. These two sums are not subject to the same regime: the first is locked in the share capital, the second is a claim that the partner can in principle demand.

The legal framework of the partner's current account

The very existence of partners' current accounts rests on an exception to the banking monopoly. In principle, only a bank may receive repayable funds from the public. Article L.312-2 of the French Monetary and Financial Code excludes this characterisation for funds left in the company's account by partners and managers, subject to certain conditions relating in particular to holding a fraction of the share capital or performing management functions. It is this provision that makes the partner's current account lawful in a SARL, a SAS, an SCI and the other corporate forms.

As to evidence, no written document is legally required for a current account to exist. It is proved by the company's accounts, bank statements and general ledger entries. A written current account agreement is nonetheless strongly recommended: it sets the treatment of interest, the repayment terms and, where applicable, any lock-in clause.

The principle: repayment due at any time

This is the cardinal rule, and it protects the partner. In the absence of a contrary stipulation, the partner's current account is a loan of indefinite duration. A loan of indefinite duration is repayable on the lender's first demand.

The case law of the Cour de cassation is settled on this point: unless a particular agreement fixes a term or provides for notice, the partner may demand repayment of their current account at any time, without having to give a reason and without the company being able to rely on its cash position. Repayment is not subject to the existence of profits, to a decision of the general meeting or to the manager's agreement.

A consequence managers often underestimate

Many managers reason as if the current account formed part of the company's cash, available at their discretion. That is a mistake. The funds belong to the partner, who remains an ordinary creditor. A manager who refuses to repay on the ground that "the company needs it" or that "this is not the right time" is exposed to a judgment against the company, including in summary proceedings (référé).

Consider a minority partner in a SARL, in conflict with the majority manager. The partner holds a current account built up over the years through cash advances. Exasperated by the atmosphere, the partner asks for repayment. The manager refuses, relying on the corporate interest. Unless a lock-in clause has been validly stipulated, this refusal is legally fragile: the partner may well succeed. The rights of a minority partner in a SARL and the remedies against abuse of majority are set out in our article on that situation.

The starting point of repayability

The current account becomes repayable as soon as the request for repayment is sent to the company. There is no statutory notice period. A formal request, ideally by registered letter with acknowledgement of receipt, fixes the date from which the company is in default and, where applicable, from which default interest runs.

The limits to the principle of immediate repayment

The principle is powerful, but it is not absolute. Three sets of limits may defeat or defer repayment.

The lock-in agreement

This is the most frequent and most effective limit. The parties may agree that the current account will be locked in for a fixed period, or subject to notice, or subject to certain conditions. Such a lock-in agreement is perfectly valid and binds the partner.

These clauses are common when the company seeks bank financing: the lending institution requires the partners to lock in their current accounts for the duration of the loan, in order to strengthen the borrower's financial stability. The lock-in then takes the form of a written undertaking, sometimes given directly in favour of the bank.

As long as the clause is effective, the partner cannot demand repayment. When the term expires or the condition is lifted, the principle of free repayment resumes. One point of caution: a lock-in agreement must result from a clear agreement. A mere accounting entry or past tolerance is not enough to show a lock-in undertaking.

Financial difficulties and insolvency proceedings

The principle of repayment at any time applies where the company is in bonis, that is, outside any insolvency proceedings. The position changes radically when the company is in serious difficulty.

If the company is subject to safeguard proceedings, administration (redressement) or compulsory liquidation, repayment of the current account is subject to the collective regime. The partner becomes a creditor required to file a proof of debt, and individual payment runs up against the prohibition on paying pre-opening debts. In practice, the partner is then very often an unsecured creditor, paid after the preferred creditors, and therefore rarely paid in full.

More delicate still: a repayment made shortly before the opening of insolvency proceedings, when the company was already insolvent (cessation des paiements), may be set aside under the suspect period (période suspecte). A partner who obtained repayment in a hurry, sensing that the company was sinking, risks having to return the sums received. Caution therefore dictates not rushing when the company's health is compromised.

Abuse of right and performance in good faith

The request for repayment must be made in good faith. A partner cannot divert this right from its purpose in order to harm the company or the other partners deliberately. The case law accepts that the exercise of a right, even a discretionary one, may degenerate into abuse. This safeguard is nonetheless applied only exceptionally: the mere fact that repayment strains the company's cash is not enough to establish abuse, otherwise the principle itself would be emptied of its substance.

The partner's remedies in the face of a refusal to repay

Where the company refuses or is slow to repay a current account that is due, the partner has a graduated set of means, from an amicable approach to court action.

First step: the formal notice

Before any litigation, the partner should formalise the request by a formal notice (mise en demeure) sent to the company, represented by its manager or chairman. This registered letter with acknowledgement of receipt states the amount of the current account, its nature as a loan of indefinite duration and the absence of a lock-in clause, and demands repayment within a reasonable time.

The formal notice has two functions: it starts the running of default interest at the statutory rate (Article 1344-1 of the French Civil Code) and it is an essential item in the future court file. It does not interrupt the limitation period, which is interrupted only by the debtor's acknowledgement, a claim brought before a court, even in summary proceedings, or a protective measure or enforcement step (Articles 2240, 2241 and 2244 of the French Civil Code). Repayment obtained at this stage avoids the costs and delays of a trial.

Second step: summary proceedings for an interim payment

This is the fastest route and often the most effective. Since the partner's current account is, in the absence of a serious dispute, a certain claim, the partner may apply to the summary proceedings judge (juge des référés) for an interim payment (provision) covering the whole of the claim.

Before the commercial court (tribunal de commerce), which has jurisdiction over commercial companies such as the SARL, the procedure is based on Article 873 of the French Code of Civil Procedure, which allows the judge to award an interim payment to the creditor where the obligation is not seriously open to challenge. Before the judicial court (tribunal judiciaire), which has jurisdiction over civil companies such as the SCI, the basis is Article 835 of the same code.

The advantage of summary proceedings is speed: a decision can be obtained within a few weeks. The claim must still not be "seriously disputable". If the company relies on a plausible lock-in agreement, a set-off against a debt owed by the partner, or disputes the amount on the basis of contested accounting entries, the summary proceedings judge may decline jurisdiction and refer the matter to the merits. The notion of serious dispute and the conduct of interim payment proceedings are analysed in our article on quick payment of a claim that is not seriously disputable.

Third step: the action on the merits

Where there is a genuine dispute, the partner must bring an action on the merits before the competent court to have the dispute decided and obtain an enforceable title. The procedure is longer but allows all difficulties to be resolved: existence and amount of the current account, scope of any lock-in clause, the company's counterclaims.

In both cases, the partner may claim, in addition to the principal, default interest from the formal notice and, if able to show a separate loss, damages for abusive resistance.

The limitation period to watch

An action for repayment is time-barred after five years under Article 2224 of the French Civil Code. The starting point deserves attention: for a current account of indefinite duration, time runs only from the request for repayment, since it is that request which makes the claim due. In other words, as long as the partner has not made a demand, limitation does not run against them. Once the demand has been made, the partner has five years in which to act.

The special case of the family SCI

The société civile immobilière (SCI) is the natural home of partners' current accounts, and disputes there are particularly sensitive because they often set members of the same family against each other.

Why the current account is ubiquitous in an SCI

In a family SCI, it is common for one partner to finance, alone or for the most part, the acquisition of a property or renovation works, or to advance loan instalments during a period of vacancy. These advances feed the partner's current account. The partner's current account in an SCI is moreover often preferred to a capital contribution, precisely because it leaves the partner the ability to recover the funds more flexibly than from fixed capital.

Take a familiar example. Two brothers and a sister set up an SCI to hold the family home. One of them, having cash available, advances the funds needed for major roof works and bringing the property up to standard, all recorded in a current account in that partner's name. For years, nobody gives it a thought. Then, on the occasion of a divorce or a falling out, that partner asks for repayment of the current account. The others discover that the partner holds a substantial claim against the SCI.

The principle of repayment applies in full

The family nature of the SCI changes nothing in the legal regime. The current account of an SCI partner is, as elsewhere, a loan repayable at any time in the absence of a lock-in clause. Family ties create no presumption of waiver of repayment, nor of tacit lock-in. A partner does not lose the right to repayment on the ground that "it is a family matter" or that "nobody ever asked to be paid".

This reality is a source of painful conflicts, because the family SCI rarely has available cash: its assets are tied up in a property. If the partner demands repayment and the SCI cannot pay, the situation may lead to a forced sale of the property or to a breakdown in relations between partners that may justify a judicial winding up. The solutions available in the event of a dispute between partners, from expulsion to dissolution, are examined in our article on expulsion and disputes between partners.

Anticipating through the drafting of the articles of association and an agreement

Prevention is decisive here. A well-advised family SCI organises the treatment of current accounts from the outset: lock-in agreement for a fixed period, repayment schedule, notice, treatment of accounts on the death of a partner or the transfer of shares. These stipulations prevent a partner from destabilising the structure overnight by demanding all of their funds.

In the absence of such an arrangement, repayment of a current account can become a formidable lever of pressure in family conflicts, which is not the purpose of an SCI intended to preserve family assets.

Key points and how to protect yourself

The partner's current account follows a clear principle favourable to the lender: unless there is a lock-in clause or insolvency proceedings, it is repayable at any time, without any reason having to be given and without the company's cash position being an admissible argument. Faced with a refusal, the partner is not without means: formal notice, summary proceedings for an interim payment based on Article 873 or Article 835 of the French Code of Civil Procedure, then an action on the merits make it possible to succeed where the claim is not seriously disputable.

The stance of this guide is to recall that this right, however solid, must be exercised with discernment. Claiming repayment from a fragile company exposes the partner to the setting aside of the payment under the suspect period or to simple impossibility of recovery. And in a family SCI, the bluntness of a demand can destroy both the assets and the relationships.

Two practical recommendations. If you are a lending partner, systematically formalise your advances in a written agreement and keep the accounting and bank evidence; this is the key to recovering your funds. If you are a manager or a partner in a family SCI, have the current accounts audited and organise their treatment by a lock-in agreement before a conflict arises. In both cases, a prior review of the agreement and of the company's financial position by a business law professional avoids costly and irreversible decisions.

Frequently asked questions

Does repayment of a partner's current account require the approval of the general meeting?

No. Repayment of a current account requires neither a general meeting decision, nor distributable profits, nor the manager's agreement. It is the repayment of a loan, not a distribution. Unless there is a lock-in agreement, the partner can demand it alone, at any time. A collective decision is required only if the articles of association or an agreement expressly so provide.

Can repayment of a current account be refused if the company lacks cash?

In principle no, as long as the company is in bonis. A lack of cash is not a valid legal ground for refusing repayment that is due. The summary proceedings judge may order the company to pay despite its difficulties. The position changes only in the event of insolvency proceedings (safeguard, administration, liquidation), which suspend individual payments and require the partner to file a proof of debt.

Which court should be seized to obtain repayment of a partner's current account in a SARL or an SCI?

For a SARL, a commercial company, the commercial court has jurisdiction, with the possibility of summary proceedings for an interim payment on the basis of Article 873 of the French Code of Civil Procedure. For an SCI, a civil company, jurisdiction lies with the judicial court, summary proceedings then being based on Article 835 of the same code. In both cases, a prior formal notice is strongly advised.

Is a lock-in clause on the current account valid and enforceable?

Yes. The lock-in agreement is lawful and binds the partner for its duration. It is common when a bank finances the company and requires current accounts to remain stable. It must result from a clear written agreement: mere past tolerance or an accounting entry is not enough to establish a lock-in undertaking. When the term expires, repayment again becomes due at any time.

In a family SCI, can a partner really claim their current account overnight?

Yes, the regime is identical to that of other companies. Family ties create no waiver or implied lock-in. In the absence of a lock-in agreement, the partner may demand immediate repayment, which may force the SCI, whose assets are property, to sell the property for lack of cash. This is why it is prudent to organise the treatment of current accounts when the company is formed.

What is the time limit for bringing an action for repayment of a partner's current account?

The action is time-barred after five years under Article 2224 of the French Civil Code. For a current account of indefinite duration, this period runs only from the request for repayment, since it is that request which makes the claim due. As long as no request has been made, limitation does not run; once the request has been sent, the partner has five years in which to apply to the court.

Can a repayment obtained just before a liquidation be challenged?

Yes. A repayment made when the company was already insolvent may be set aside under the suspect period when insolvency proceedings are opened. The partner may then be required to return the sums received. It is therefore risky to obtain urgent repayment when the company is manifestly in difficulty; it is better to act while it is still solvent.