Management fees and indirect remuneration of managers: Marseille Administrative Court of Appeal strengthens evidentiary requirements

The Administrative Court of Appeal of Marseille refines the conditions under which a company may validly remunerate its manager indirectly through a service agreement.

In a judgment of April 3, 2025 (No. 23MA02484), delivered on referral following the “Sté Collectivision” decision of the French Conseil d’État, the 3rd Chamber of the Administrative Court of Appeal of Marseille clarified the conditions under which a company may validly remunerate its manager indirectly via a service agreement. In this case, due to the absence of evidence of an explicit corporate decision and a real counterpart for the company, the payment of fees was reclassified as an abnormal act of management. The court rigorously applies the interpretative framework set out by the Conseil d’État and reiterates the requirement for robust justification, both in form and substance, to avoid the characterization of unjustified impoverishment.

The judgment clearly illustrates the very strict requirements imposed by the administrative judge regarding indirect remuneration of managers through intercompany service agreements. While such structuring remains legally possible, it requires:

• An explicit resolution by the shareholders or the board of directors, formally recorded;
• Documented proof of specific services unrelated to the duties inherent to the corporate mandate;
• Particular vigilance in case of conflicts of interest or common management.

Failing this, the company faces the risk of corporate income tax reassessments, penalties, and potentially VAT adjustments.

The company Collectivision, an SARL managed by Mr. A., entered into a service agreement in June 2013 with the company Sonely, of which Mr. A. was also co-manager and shareholder. This agreement provided for a wide range of administrative, financial, and strategic missions (updating management tools, operational coordination, group development…).

However, these services were actually performed by the manager himself, through Sonely. For the tax authorities, the fees paid to Sonely corresponded in reality to indirect remuneration of Mr. A., not properly decided by the competent corporate bodies, and without consideration distinct from his duties as manager. The administration therefore reintegrated these expenses for the 2013 fiscal year as an abnormal act of management (AAM).

The company challenged this reassessment, first before the administrative tribunal, then before the Administrative Court of Appeal of Marseille, following partial annulment by the Conseil d’État (Sté Collectivision, CE, Oct. 4, 2023, No. 466887). According to the Conseil d’État, a company may, by agreement, indirectly remunerate its manager via another company, without this being per se an AAM. However, such indirect remuneration is only permissible if the competent corporate bodies expressly intended to remunerate the manager by this means and if the company can demonstrate an actual consideration, i.e., services distinct from the duties attached to the corporate mandate.

Otherwise, the payment is deemed unjustified impoverishment for the company and constitutes an act unrelated to normal commercial management (Articles 38 and 209 of the French Tax Code).

In this case, the CAA of Marseille found, on referral from the Conseil d’État, that:

• No evidence of a valid corporate decision was provided. The mere management report mentioning the existence of the agreement, the amounts paid, and the shared ownership is not enough to demonstrate a collective decision by the shareholders approving indirect remuneration of the manager. Reference to Article L. 223-19 of the French Commercial Code is deemed insufficient.
• No specific technical service was established. The content of the agreement is considered generic, and nothing proves that Mr. A. acted other than within the scope of his duties as manager of the SARL, whose powers were not otherwise restricted by the bylaws.
• Assertions of more effective management linked to a second co-manager of Sonely were deemed too general and unsubstantiated. The administration had, moreover, allowed the deduction of fees corresponding to this co-manager.

The court upheld the reassessment: the fees paid to Sonely proportionate to Mr. A.’s remuneration are reclassified as an abnormal act of management, due to lack of evidence of actual consideration and formal validation by the competent corporate bodies.