What to do with excess cash before selling your company in France

Excess cash does not sell for more than its face value: in a French share deal the buyer pays for it euro for euro at best, and often prefers it taken out before completion so as not to finance it. Three routes exist: distribute it as a dividend before the sale, leave it in the price, or contribute the shares to a holding company. The right choice depends on your situation (retiring or not, selling directly or through a holding, reinvestment plans) and is calculated before the letter of intent, not during negotiations.

The whole discussion rests on a distinction sellers rarely make: cash needed for operations versus excess cash. The first finances the permanent gap between what you collect and what you pay out: the normalised working capital requirement, corrected for seasonality. A company showing 400,000 euros in the bank on 31 December but paying out 250,000 euros of salaries, VAT and suppliers in January does not have 400,000 euros of excess.

That calculation is a chartered accountant's job: rebuilding the working capital requirement month by month over twelve to twenty-four months, identifying the cash low point, and deducing what can genuinely be distributed without straining operations. That figure, and that figure alone, is what you then discuss with the buyer. Overstate it and you sell an under-capitalised business and pay for it through the warranty; understate it and you leave value sleeping.

For an owner selling directly (shares held personally), the starting tax is the same on both sides since 1 January 2026: the French flat tax applies at a global rate of 31.4% (12.8% income tax plus 18.6% social levies since the 2026 social security financing act), whether the euro leaves as a pre-sale dividend or as capital gain inside the price. The exceptional contribution on high incomes (3%, then 4%) can apply in both cases.

The equivalence stops there, and two situations tip the scales:

You are retiring. The fixed allowance of 500,000 euros under article 150-0 D ter of the French tax code applies to the capital gain, not to dividends. In its current version (law 2026-103 of 19 February 2026) it is no longer time-limited. If your gain fits under the allowance, every euro of cash left in the price escapes income tax (the 18.6% social levies remain due on the full amount); the same euro paid as a dividend would bear 31.4%. On 300,000 euros of excess, the gap approaches 38,000 euros.

You sell through a holding company. If the shares are held by your corporate-tax holding, the logic reverses: a pre-sale dividend enjoys the parent-subsidiary regime (only a 5% add-back is taxed), and the gain on qualifying participations is taxed on a 12% add-back only. Both routes are gentle at corporate level; the real question becomes what the holding does with the funds, not how they leave.

Most French SME deals are negotiated cash-free, debt-free: the price is set for the business without its excess cash and without financial debt, then adjusted. Three practical consequences:

• Cash left inside has to be financed. A buyer borrowing to pay the price also borrows to buy back your cash. Many therefore ask for it to be taken out before completion: it reduces the headline price, the acquisition debt and the friction.
• Registration duties are charged on the price. The buyer pays 0.1% on shares of an SAS or SA and 3% on SARL units after a 23,000-euro pro-rated allowance (article 726 of the French tax code). A price inflated by cash mechanically raises those duties, especially for an SARL.
• The warranty follows the perimeter. Less cash in the target at closing also means a simpler discussion on the reference working capital, the point where most price adjustments break down.

If your plan after the sale is to reinvest rather than spend, contributing the shares to a holding company before the sale (article 150-0 B ter of the French tax code) places the gain under a tax deferral. In the version resulting from law 2026-103, applicable to sales completed since 21 February 2026, a holding that sells the shares within three years of the contribution must reinvest 70% of the proceeds within two years in an economic activity to keep the deferral. This is a structure you prepare: it must be in place before the sale process starts, and it only makes sense if the reinvestment is real. We covered the conditions and pitfalls in our article on the 150-0 B ter contribution-sale mechanism.

A dividend cannot be improvised between the letter of intent and closing.

1. Check what is distributable. Dividends are paid out of profits and distributable reserves, not out of the bank balance. A company can have cash and nothing to distribute, or the reverse.
2. Choose the legal vehicle. An ordinary distribution is voted at the general meeting after the accounts are approved. Mid-year, an interim dividend requires interim accounts certified by a statutory auditor (article L. 232-12 of the French commercial code): an attestation assignment we carry out.
3. Distribute before the process starts. A distribution voted between the letter of intent and closing lands in the price adjustments and unsettles the buyer; one made before the business goes to market is a fait accompli.

A services SARL shows 380,000 euros of cash. The normalised working capital calculation reveals a low point of 130,000 euros: the distributable excess is 250,000 euros. The retiring managing partner, whose gain fits under the 500,000-euro allowance, is better off leaving the excess in the price: taxed as a gain, it bears 18.6% of social levies instead of 31.4% as a dividend, a gap of roughly 32,000 euros. His 45-year-old minority partner, who qualifies for no allowance, is tax-indifferent but prefers the dividend: it avoids depending on the buyer's financing. The right answer differs for two partners of the same company: it is an individual calculation.

The fate of the cash is decided before the letter of intent, on three numbers: the true excess (normalised working capital), your personal tax position (retirement allowance or not, direct or holding ownership), and the buyer's financing capacity. It is one of the first points we address in a business sale assignment, together with the valuation: a company presents better for sale with a clean balance-sheet structure than with a cash cushion the buyer will have to finance.