Expanding business operations across multiple companies is an increasingly common strategy among entrepreneurs. Whether through a holding company, an operating company, or a real estate entity, this setup helps structure growth and secure specific assets. However, a key question quickly arises: how should money move between these various companies?
In practice, a group of companies functions as a coherent economic unit. To maintain this cohesion, various mechanisms exist to finance, support, and organize internal financial flows—both between a holding company and its subsidiaries, and among the subsidiaries themselves.
I/ Financing a company within the group: intra-group debt instruments
Debt is the primary method of financing between companies within the same group. It allows for the provision of liquidity without altering the distribution of equity.
The most common mechanism is the “shareholder current account” advance. One company—often the holding company—makes funds available to another entity within the group, with minimal formal requirements. The major advantage of this approach is its simplicity; it provides a quick response to cash flow needs, whether for funding operations, covering expenses, or launching a new project. For instance, a holding company might advance €50,000 to one of its subsidiaries to finance the purchase of equipment. This amount is recorded in the holding company’s current account; the holding company thus becomes a creditor to its subsidiary and can, in principle, demand repayment at any time.
For a more structured approach, companies within the same group can also enter into formal loan agreements. These intra-group loans function like standard credit arrangements: they specify a principal amount, a term, an interest rate, and repayment terms. These arrangements make it possible, among other things, to leverage the resources of a profitable company to fund the development of another business activity within the group. However, the interest rates applied must remain in line with market rates; otherwise, the tax authorities may disallow the deduction of such interest. Furthermore, if the interest rates are set too low for the lender or too high for the borrower, the arrangement could even be classified as an “abuse of corporate assets” (*abus de bien social*).
Some corporate structures choose to formalize their financing arrangements further by issuing bonds. In practical terms, a company within a group that requires funding may decide to borrow not from a bank, but from another company within the same group.
To achieve this, the borrowing company issues bonds—essentially debt securities—which are then subscribed to by the other group company. In practice, the lending company provides the funds, and the borrowing company commits to repaying them by a specified maturity date, with interest rates determined in advance.
II/ Supporting and organizing financial flows: complementary mechanisms
Beyond direct financing, corporate groups implement tools designed to support their constituent companies and structure financial flows. Intra-group guarantees are a common example of this. It is frequent for a parent company to act as a guarantor for a subsidiary’s obligations—particularly in relation to banking institutions—thereby facilitating access to credit and bolstering the credibility of the company receiving the funding.
When certain entities encounter difficulties, other mechanisms may be employed. For instance, a company may decide to waive a claim (a debt) it holds against a subsidiary. By relinquishing its right to repayment, the company enables the subsidiary to ease its financial burden and continue its operations.
However, such a mechanism is only permissible if it serves the interests of the company granting the waiver. In the absence of an economic justification, the transaction could be challenged on the grounds of an “abnormal act of management” (*acte anormal de gestion*) and/or “misuse of corporate assets” (*abus de bien social*).
Within a corporate group, this requirement is relaxed under case law established by the *Rozenblum* ruling, which permits financial support provided that it is part of a common policy, includes a counterparty (even an indirect one), and remains proportionate to the financial capacity of the company providing the support.
From a tax perspective, the waiver of a receivable is only deductible in specific circumstances: while generally permitted when it is of a commercial nature, it is strictly regulated when it is of a financial nature—for instance, when it is intended to cover a subsidiary’s losses.
A “return to better fortune” clause (*clause de retour à meilleure fortune*) allows for more precise regulation of a debt waiver. It stipulates that the beneficiary company commits to repaying all or part of the waived amount should its financial situation improve in subsequent years. In practical terms, companies with surplus cash contribute to a common pool, while those with funding needs can draw the necessary resources from it.
This mechanism can take two forms. In some cases, financial flows involve the actual transfer of funds between companies. In others, they rely solely on accounting entries, with no physical movement of cash. In both scenarios, the objective remains the same: to make the best possible use of the resources available within the group and to limit reliance on external financing, which is often more expensive.
IV/ Structuring group activity: the role of contractual relationships
Beyond financial flows, the organization of a group of companies also relies on contractual relationships that help structure activities between the various entities. This dimension is essential, particularly in sectors such as hospitality, where ownership can be separated from operations and management.
In many groups, the parent company holds strategic intangible assets—most notably the brand and know-how. Subsidiaries that operate the establishments can enter into franchise agreements to gain access to this brand and its associated know-how. This mechanism ensures consistency in the image and operations of the different entities, while allowing each one to retain its own legal autonomy. In return, the subsidiary pays a royalty to the company that owns the brand, which also plays a role in how financial flows are organized within the group.
Furthermore, the holding company plays a central role in managing the group by providing services to its subsidiaries. These relationships are governed by service agreements, which allow for the pooling of functions such as accounting, human resources, administrative management, and financial or commercial strategy. This organizational structure avoids the duplication of resources across individual companies and helps streamline costs, while ensuring more consistent management throughout the entire group.
When a group owns a business asset—such as a hotel, a restaurant, or any other type of operating business—it may be advantageous to separate ownership from day-to-day operations. This can be achieved through a management agreement, which entrusts the operation of the business to another entity within the group.
In practical terms, the company that owns the business asset (for example, a holding company or a real estate entity) does not operate the business itself. Instead, it makes the asset available to another group entity, known as the “manager” (or managing entity). This managing entity handles the actual day-to-day operations: it manages the establishment, enters into contracts with clients and suppliers, collects revenue, and covers expenses—including payroll. It also bears any losses should the business become unprofitable. In exchange, the owning company receives a fee, without being directly involved in the operations.
Furthermore, in the hospitality sector, it is common to use hotel management agreements. Under this arrangement, the company that owns the property entrusts its management to a third party—which may be part of the same group or an external entity. This managing company takes charge of daily operations, marketing, and staff management, in return for compensation that is often linked to the establishment’s performance.
Given the technical complexity of these mechanisms, their implementation requires rigorous oversight. Engaging a business lawyer helps secure financial flows and intra-group relationships, anticipate legal and tax risks, and tailor the chosen structures to the specific needs and objectives of the group.