ARTICLE · 20 MARCH 1995

Interests Not Booked At Their Normal Expiry Date

SG Archibald Andersen

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FranceEmployment and HR

In a decision dated June 23, 1994, the Administrative Court of Appeal of Lyon (C.A.A. Lyon, 2nd Ch., n° 93-488, SARL Solim) set the rules to be followed concerning the consequences of inter-companies gifts.

A company granted advances without interests to its subsidiary and forgot to book in the accounts the contractual interests on a loan granted to a third company.

As far as advances without interests are concerned, the Court confirms the previous case law and indicates that the granting of advances without interests to a third party does not follow the arm's length principle even though the beneficiary is a subsidiary.

The fact that the beneficiary subsidiary is a "transparent" company, i.e. the results of which are directly taxed from the parent company, has no consequence on the solution of the dispute.

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