French SCI Accounting: Your Guide to Reporting, Profits, and Legal Obligations

You own the property. You have the keys. You have even navigated the initial setup. But now, a year has passed, and a quiet panic sets in. You have a shoebox full of receipts for roof repairs, a bank statement showing mortgage payments, and a vague memory that someone mentioned an “Annual Assembly.”

For the British investor, accustomed to the rigorous filing demands of Companies House, the French Société Civile (Civil Company) can seem deceptively relaxed. There is no public filing of accounts for most SCIs. No angry letters from the taxman demanding a balance sheet by return of post (usually).

But do not be fooled. Beneath this veneer of informality lies a rigid skeleton of civil code obligations. Ignore them, and you risk not just administrative headaches, but personal liability, tax audits, and even “fictitious company” accusations.

Based on the latest JurisClasseur legal guidelines (updated September 2020), this comprehensive guide pulls back the curtain on the accounting life of your French company. We will cover the “Invisible Ledger,” the mandatory annual rituals, the distribution of profits (and losses), and why a simple Excel spreadsheet might not be enough.

Part 1: The Myth of “No Accounting”

Let us address the biggest myth immediately: “I don’t need to do accounts for my SCI because it’s not a commercial company.”

Technically, this is true—but legally, it is a trap.

The Legal Void (and Why You Should Ignore It)

It is a quirk of French law that no specific text explicitly commands the Manager (Gérant) of a standard Société Civile to keep books. Unlike a SARL or SAS (commercial companies), you are not bound by the strict commercial code to produce a formal Balance Sheet (Bilan) and P&L (Compte de Résultat) unless you hit specific, high thresholds.

However, operating in this “legal void” is dangerous for three reasons.

1. The Taxman is Watching While civil law is vague, tax law is ruthless. Article L. 94 A of the Book of Tax Procedures states clearly: if the administration asks, you must present “accounting documents and other pieces of receipts and expenses”. If you cannot prove your expenses with a dated, organized accounting trail, the taxman can simply reject them. Suddenly, your deductible roof repair is not deductible, your taxable profit jumps, and you are facing penalties. Furthermore, if you ever sell the property, you will want to calculate capital gains tax (plus-value). Proper accounts allow you to determine the “mathematical value” of the shares and prove the value of works done, potentially saving you thousands in tax.

2. The “Fictitious Company” Risk A company must have a life of its own. If you treat the company bank account as your personal piggy bank, mixing expenses and failing to track who paid for what, a judge can declare the company “fictitious.” This pierces the corporate veil, making your personal assets vulnerable to creditors.

3. The “Caisse” vs. “Engagement” Dilemma For small SCIs, a simple “Cash Accounting” (Comptabilité de trésorerie)—recording money in and money out—is often tolerated. However, experts strongly recommend “Commitment Accounting” (Comptabilité d’engagement). This records debts when they are incurred, not just when paid. Why? Because if you have a massive invoice dated December 30th but pay it January 2nd, cash accounting distorts your year-end result. Commitment accounting gives a true picture of the company’s health.

The English Investor Rule: Treat your SCI like a business, not a hobby. Open a dedicated bank account. Keep a ledger. If the numbers get complex, hire a French Expert-Comptable (Accountant). It is an insurance policy against future chaos.

Part 2: The Annual Ritual – The Manager’s Duty

Even if you don’t hire an accountant, the Manager (Gérant) has a non-negotiable duty to report to the owners. This is known as the Reddition de Comptes (Rendering of Accounts).

The “Report on Activity”

Once a year, the Manager must produce a Written Report (Rapport de Gérance). This is not just a polite email. It is a legal document mandated by Article 1856 of the Civil Code. It must contain:

• A summary of the company’s activity during the year.
• The profits realized (or foreseeable).
• The losses incurred (or foreseen).

Warning: The failure to produce this written report is a cause for nullity of the annual assembly decisions. If you hold a meeting to approve the accounts but the Manager never wrote a report, a disgruntled associate could sue to have the approval cancelled years later (provided they can prove this irregularity caused them harm).

The Right to Know (Article 1855)

You, as an associate, are not a passive observer. Article 1855 of the Civil Code gives you a powerful weapon: The Right of Communication. At least once a year, you have the right to inspect all books and documents at the head office. You can demand to see contracts, invoices, and bank statements. Furthermore, you can submit written questions to the Manager about the management of the company. The Manager is legally compelled to answer these in writing within one month.

The “Regulated Agreements” Trap

Does your SCI rent a property to you? Did the SCI borrow money from your brother? These are “Regulated Agreements” (Conventions Réglementées). If the SCI has an “economic activity” (which includes renting property), the Manager must produce a specific report on any agreements signed between the company and its managers or associates. This report details the nature of the deal, the amounts involved, and the terms. The goal is transparency—to prevent the Manager from siphoning off company assets via sweetheart deals. Note that “standard operations” (like buying stamps or minor expenses) are exempt.

Part 3: The Assembly – How to Approve the Numbers

You have your accounts (however simple) and your Manager’s Report. Now you must make them official. This happens at the Annual General Assembly (AGO).

1. Timing the Meeting

While commercial companies have a strict 6-month deadline after year-end to hold this meeting, Civil Societies are freer. The law simply says “at least once a year”. However, for tax reasons, it is wise to hold this before May to align with your personal French tax returns.

2. The Convocation (The Paper Trail)

You cannot just call your partners and say “Meeting on Tuesday.”

• The Method: You must send a Registered Letter (Lettre Recommandée) at least 15 days before the meeting.
• The Content: The letter must include the Agenda (Ordre du jour), clearly drafted so associates understand what they are voting on without needing to call for clarification.
• The Attachments: You must include the Manager’s Report, the text of the proposed resolutions, and the accounts (Balance Sheet/P&L).

Can we skip the formalities? Yes, but be careful. If all associates are present and nobody complains, a verbal convocation can be valid. However, if one person is absent or disputes the meeting later, the lack of a registered letter is fatal.

3. The Vote

Unless your statutes say otherwise (and you should check them!), decisions at the AGO are taken by the unanimity of associates. This is a critical distinction from UK companies. In a standard French SCI, a 1% shareholder can often veto the approval of accounts. If your statutes allow for majority voting, verify the specific majority required for “Ordinary Decisions.”

4. Written Consultation

Does everyone have to fly to France? No. Article 1853 allows for Written Consultation—but only if your statutes explicitly permit it. If your statutes are silent, you technically must hold a physical meeting (or a video conference if the statutes allow). Alternatively, Article 1854 allows for a decision to be taken by a “Deed signed by all associates”. If you can get everyone to sign the same piece of paper (Minutes), you avoid the convocation rules entirely.

COVID-19 Update: During the pandemic, the government allowed for greater flexibility (email voting, closed-door meetings). While the acute phase has passed, these precedents have highlighted the need for modern statutes that allow remote decision-making permanently.

Part 4: Show Me the Money – Allocating Profits

The accounts are approved. The spreadsheet shows a profit (or a loss). What happens next? This is the “Affectation du Résultat.”

The Concept of “Distributable Profit”

Just because there is cash in the bank does not mean there is a profit. Conversely, just because there is no cash does not mean there isn’t a taxable profit (e.g., if you used income to pay down the capital of a loan). A dividend only legally exists when the assembly notes the existence of distributable sums and votes to allocate them to associates. Until that vote, the money belongs to the company.

Where does the money go?

The assembly has three main choices:

1. Distribution: Pay it out to associates as dividends.
2. Reserves: Put it in a “Reserve” account for future projects (e.g., “Reserve for Roof Repairs”).
3. Retained Earnings: Leave it in the “Report à Nouveau” (carry forward) account to be dealt with next year.

The “Clause Léonine” (The Lion’s Share) You might want to allocate all profits to one partner (perhaps the one with the lowest tax rate). Be careful. Article 1844-1 forbids “Leoline Clauses”—clauses that give all the profit to one associate or exempt one associate from all liability. Such clauses are deemed “unwritten” (void). However, you can have unequal distribution. If you own 50/50 but do 90% of the work, the statutes can validly give you 70% of the profits, provided the other partner isn’t totally deprived.

The Revaluation Trap

SCIs often own property that increases in value. It is tempting to update the accounts to show the property’s new, higher value. This creates a “Revaluation Variance” (Ecart de réévaluation) on the balance sheet. Can you distribute this “paper profit” as a dividend? A high-profile Conseil d’État case (Sté Cofathim, 2013) suggests this is highly risky. Tax law may view distributing this unrealized gain as a “taxable event,” triggering capital gains tax immediately on the property—even though you haven’t sold it! Furthermore, it can lead to double taxation later when you actually sell the shares. The Advice: Do not touch the Revaluation Variance. Leave it on the balance sheet. Do not try to pay it out as cash.

Part 5: The Dark Side – Allocating Losses

Not every year is a vintage year. Sometimes, the SCI loses money. Who pays?

The Liability of Associates

In a UK Limited company, your liability is capped. In a French SC, associates are indefinitely responsible for debts. However, unlike a commercial partnership, this liability is conjoint (proportionate), not solidary. If you own 10%, creditors can only demand 10% of the debt from you—and only after they have unsuccessfully sued the company first.

Dealing with Accounting Losses

When the accounts show a loss, the assembly must decide where to put it.

1. Carry Forward: The most common option. You put the loss in “Report à Nouveau” (negative) and hope future profits will wipe it out.
2. Imputation: You can write off the loss against existing Reserves.
3. Reimbursement: You can ask associates to put their hands in their pockets and pay cash to cover the loss immediately.

Important: You cannot force an associate to pay cash to cover a loss during the life of the company unless the statutes explicitly say so. This is an “increase in engagement”, which requires unanimous consent. Without that clause, creditors can sue the associates, but the company itself cannot force an internal cash call to balance the books.

Part 6: When You Must Go “Commercial”

There is a threshold where this relaxed civil regime stops. If your SCI becomes too successful, it might be forced to adopt full commercial accounting rules.

The Thresholds

If your SCI crosses two of the following three thresholds at year-end:

1. 50 employees (unlikely for a property holding company).
2. €3.1 million in turnover (rents).
3. €1.55 million in Total Balance Sheet (value of assets).

Then you must:

• Adopt full commercial accounting (Plan Comptable Général).
• Appoint a Statutory Auditor (Commissaire aux Comptes).
• Produce a Management Report (Rapport de Gestion).

Most private family SCIs will stay under these limits. But if you hold a high-value portfolio (e.g., a large Parisian building or a vineyard), check your Balance Sheet total. Crossing that €1.55m line changes the game.

The Tax Switch

Also, if you opt for Corporation Tax (IS), you automatically submit yourself to commercial accounting rules. You cannot enjoy the flat tax benefits of the IS regime while keeping your accounts on the back of a napkin.

Conclusion: The Peace of Mind Ledger

For the English Investor, the takeaway is simple: Formalize to Protect.

The “relaxed” nature of the Civil Society is a double-edged sword. It gives you freedom, but it gives you enough rope to hang yourself if a dispute arises or the taxman knocks.

Your Annual Checklist:

1. The Books: Are all receipts filed? Is the bank statement reconciled?
2. The Report: Has the Manager written the annual report on activity?
3. The Meeting: Have you held the AGO (or signed the Minutes) to approve the accounts?
4. The Result: Have you clearly voted on where the profit/loss goes?
5. The Archive: Is this all printed and stored in a “Registre des Assemblées”?

Doing this takes perhaps two hours a year. But those two hours forge the armor that protects your French asset.

Disclaimer: Always consult with a French Expert-Comptable or Notary regarding your specific tax and accounting situation.