Parents have given their children the nue-propriété (the bare ownership) of the shares and have kept the usufruit (a life interest in the asset, carrying the right to its income). The general meeting votes a distribution. The question looks straightforward: who banks the money? It is not, because the answer does not turn on the status of usufruitier (the holder of the usufruit) but on the accounting origin of the sum distributed. The same transfer, into the same account, sometimes belongs to the person who receives it and sometimes to the person who never sees it go past. And statute almost never says so: the matter is decided by four judgments, two of them handed down a month apart and not saying quite the same thing.
The essentials in five answers
Is the usufruitier entitled to the dividends?
The usufruitier is entitled to the dividend drawn from the profit of the financial year, and that dividend alone belongs to it outright. The right of the usufruitier bears on fruits: « L'usufruitier a le droit de jouir de toute espèce de fruits, soit naturels, soit industriels, soit civils, que peut produire l'objet dont il a l'usufruit » [the usufruitier has the right to enjoy every kind of fruits, whether natural, industrial or civil, that the object of which it holds the usufruit may produce] (C. civ. art. 582). The profit must still have become a fruit, which happens only when the vote is taken: profits « ne participent de la nature des fruits que lors de leur attribution sous forme de dividendes, lesquels n'ont pas d'existence juridique avant l'approbation des comptes de l'exercice par l'assemblée générale » [share in the nature of fruits only when they are allocated in the form of dividends, which have no legal existence before the accounts for the year are approved by the general meeting] (Cass. com. 10 février 2009, n° 07-21.806). Before that vote, the usufruitier has no right at all over the result. After it, the dividend of the year goes to the usufruitier with no obligation to restore it.
And sums drawn from the reserves?
They do not belong to the usufruitier: it has the enjoyment of them, subject to restoring them. The chambre commerciale (the commercial division of the Cour de cassation, the French supreme court for civil and commercial matters) holds that « dans le cas où la collectivité des associés décide de distribuer un dividende par prélèvement sur les réserves, le droit de jouissance de l'usufruitier de droits sociaux s'exerce, sauf convention contraire entre celui-ci et le nu-propriétaire, sous la forme d'un quasi-usufruit, sur le produit de cette distribution revenant aux parts sociales grevées d'usufruit » [where the body of shareholders decides to distribute a dividend by drawing on the reserves, the right of enjoyment of the usufruitier of corporate rights is exercised, failing agreement to the contrary between the usufruitier and the nu-propriétaire, in the form of a quasi-usufruit, over the proceeds of that distribution attributable to the shares burdened with the usufruit] (Cass. com. 27 mai 2015, n° 14-16.246). So the usufruitier banks the money, but becomes a debtor: the court adds that the usufruitier « se trouve tenu […] d'une dette de restitution exigible au terme de l'usufruit » [is bound by a debt to restore, falling due when the usufruit comes to an end]. The sum is the usufruitier's to use; its value belongs to the nu-propriétaire (the holder of the nue-propriété).
Who receives the price when the company sells its assets?
The nu-propriétaire, where the sale covers the entirety of the assets and compromises the corporate purpose. A société civile immobilière (a non-trading property-holding company) had sold its whole portfolio and distributed the proceeds. The third civil division held that this distribution « affecte la substance des parts sociales grevées d'usufruit en ce qu'elle compromet la poursuite de l'objet social et l'accomplissement du but poursuivi par les associés » [affects the substance of the shares burdened with the usufruit in that it compromises the pursuit of the corporate purpose and the achievement of the aim pursued by the shareholders], and that in such a case « le dividende revient, sauf convention contraire entre le nu-propriétaire et l'usufruitier, au premier, le droit de jouissance du second s'exerçant alors sous la forme d'un quasi-usufruit sur la somme ainsi distribuée » [the dividend goes, failing agreement to the contrary between the nu-propriétaire and the usufruitier, to the former, the right of enjoyment of the latter then being exercised in the form of a quasi-usufruit over the sum so distributed] (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). The usufruitier receives the funds, but owes them.
Do these sums cost the nu-propriétaire inheritance tax?
No, where the claim arises from a distribution of reserves: the published guidance of the French tax authorities expressly excludes it from the 2023 regime. Article 774 bis of the French Tax Code denies deduction to « les dettes de restitution exigibles qui portent sur une somme d'argent dont le défunt s'était réservé l'usufruit » [debts to restore, then due, bearing on a sum of money over which the deceased had reserved the usufruit] (CGI art. 774 bis). But the Bulletin officiel des finances publiques (the published guidance of the French tax authorities) places among the debts not caught those which result from the payment to the usufruitier « de la distribution de dividendes prélevés sur les réserves » [of the distribution of dividends drawn from the reserves], on the ground that the sum « constitue le produit d'une cession ou d'une opération assimilable dont le défunt n'a pas été à l'initiative » [constitutes the proceeds of a disposal, or of a comparable transaction, which the deceased did not initiate] (BOI-ENR-DMTG-10-40-20-20, § 270). The whole difficulty lies in that one word: initiative.
What really decides the question?
The agreement between the usufruitier and the nu-propriétaire, because every one of these rules begins by reserving it. The 2015 judgment reserves the « convention contraire entre celui-ci et le nu-propriétaire » [agreement to the contrary between the latter and the nu-propriétaire]; the 2024 judgment reserves the « convention contraire entre le nu-propriétaire et l'usufruitier ». The division of assets after liquidation, for its part, takes place « sauf clause ou convention contraire » [failing any clause or agreement to the contrary] (C. civ. art. 1844-9). Default rules occupy almost the whole of the ground here, and they are default rules only for those who have written something down. Where nothing is written, the parties are left with solutions built case by case, some of which are not yet settled as between the divisions of the Cour de cassation.
The dividing line: fruit or substance
What exactly does the right of the usufruitier bear on?
On the enjoyment of the thing, on condition that its substance is preserved. The definition has remained that of 1804: « L'usufruit est le droit de jouir des choses dont un autre a la propriété, comme le propriétaire lui-même, mais à la charge d'en conserver la substance » [the usufruit is the right to enjoy things of which another has the ownership, as the owner itself does, but subject to preserving their substance] (C. civ. art. 578). The two halves of the sentence govern one another. The usufruitier enjoys the thing as an owner would, and therefore broadly; but the substance does not belong to it, so it may neither consume that substance nor let it disappear. Applied to company shares, that requirement is not measured against the piece of paper but against what the share represents: a proportionate interest in the company's assets. It is this reasoning that governs all the solutions that follow, and it explains why two identical bank transfers can receive opposite treatment.
When does a profit become a fruit?
At the moment when the general meeting decides to allocate it, and not before. The chambre commerciale said so in a formula that is the starting point of the whole analysis: profits « ne participent de la nature des fruits que lors de leur attribution sous forme de dividendes, lesquels n'ont pas d'existence juridique avant l'approbation des comptes de l'exercice par l'assemblée générale, la constatation par celle-ci de l'existence de sommes distribuables et la détermination de la part qui est attribuée à chaque associé » [share in the nature of fruits only when they are allocated in the form of dividends, which have no legal existence before the accounts for the year are approved by the general meeting, before that meeting records the existence of distributable sums, and before the share allocated to each shareholder is determined] (Cass. com. 10 février 2009, n° 07-21.806). The consequence drawn is clear-cut: « avant cette attribution, l'usufruitier des parts sociales n'a pas de droit sur les bénéfices » [before that allocation, the usufruitier of the shares has no right over the profits]. The fruit does not exist in the accounts: it is born of a decision.
Can the usufruitier complain that the meeting retained the profits in reserve?
It cannot, and if it votes for the transfer to reserves itself it confers no bounty on the nu-propriétaire. The same judgment draws the second consequence: « en participant à l'assemblée générale qui décide de les affecter à un compte de réserve, il ne consent aucune donation au nu-propriétaire » [by taking part in the general meeting that decides to allocate them to a reserve account, it makes no gift to the nu-propriétaire] (Cass. com. 10 février 2009, n° 07-21.806). The practical reach of this is considerable in family groups: the tax authorities cannot treat a sustained policy of retaining profits as a disguised transfer chargeable to gift tax. An usufruitier who forgoes a distribution gives nothing, because it held nothing yet. Which does not stop the nu-propriétaire from being enriched in fact: it is enriched without any instrument.
Why must the label « produit » be handled with care?
Because the Cour de cassation does not use it in the judgments that practice attributes to it. Commentators readily contrast fruits, which go to the usufruitier, with produits [products], which eat into the substance and go to the nu-propriétaire. The contrast is convenient and it is illuminating. But neither the judgment of 27 May 2015 on distributed reserves nor that of 19 September 2024 on the proceeds of the sale of the assets uses the word. Both reason on enjoyment, on substance and on the quasi-usufruit. Presenting the fruits-produits dichotomy as the actual wording of the case law invites disappointment on the day an audit asks for the exact text. Articles 583 and 584 of the Civil Code, for their part, define natural, industrial and civil fruits, without dealing with company shares.
The dividend drawn from the profit of the financial year
Does that dividend really belong to the usufruitier?
Yes, outright, and with no obligation to restore it when the usufruit ends. This is the only one of the five cases examined here in which the usufruitier keeps what it has received. The basis is the right to enjoy « toute espèce de fruits, soit naturels, soit industriels, soit civils » [every kind of fruits, whether natural, industrial or civil] (C. civ. art. 582), combined with the rule that the profit becomes a fruit through the vote allocating it (Cass. com. 10 février 2009, n° 07-21.806). No debt arises, no claim enters the estate of the usufruitier, and the nu-propriétaire has nothing to demand on its death. That is why the accounting distinction between the result of the year and the reserves, often treated as a formality, in fact decides who owns the money.
Does the Commercial Code define what is distributable?
It does, and its definition mixes the current year with earlier years. The text is precise: « Le bénéfice distribuable est constitué par le bénéfice de l'exercice, diminué des pertes antérieures, ainsi que des sommes à porter en réserve en application de la loi ou des statuts, et augmenté du report bénéficiaire » [the distributable profit consists of the profit of the financial year, reduced by earlier losses and by the sums to be carried to reserve under statute or under the articles, and increased by the profit carried forward] (C. com. art. L. 232-11). The distributable profit therefore takes in the report bénéficiaire (profit carried forward), that is to say results of past years left in suspense. The same article deals separately with drawings on the reserves: « l'assemblée générale peut décider la mise en distribution de sommes prélevées sur les réserves dont elle a la disposition. En ce cas, la décision indique expressément les postes de réserve sur lesquels les prélèvements sont effectués. » [the general meeting may decide to distribute sums drawn from the reserves at its disposal. In that case, the decision expressly states the reserve accounts from which the drawings are made.]
What is the mention of the reserve accounts in the minutes worth?
It is evidence of where the funds came from, and therefore evidence of who is entitled to them. The duty to state « expressément les postes de réserve sur lesquels les prélèvements sont effectués » [expressly the reserve accounts from which the drawings are made] (C. com. art. L. 232-11) was written for the information of the shareholders. Where ownership of the shares is split, it becomes the document that settles the respective positions of the usufruitier and the nu-propriétaire, because the regime of the sum depends entirely on the account it comes out of. The text adds, to the same effect, a rule of allocation: « les dividendes sont prélevés par priorité sur le bénéfice distribuable de l'exercice » [dividends are drawn as a matter of priority on the distributable profit of the financial year]. A resolution that merely votes a global dividend, with no breakdown, leaves the question open until the moment when it will be most expensive to answer: the winding up of the estate.
And the report bénéficiaire?
The Commercial Code includes it in the distributable profit, but no decision that could be read settles its fate expressly where ownership is split. Article L. 232-11 of the Commercial Code increases the distributable profit by the « report bénéficiaire », without classing it among the reserves, which are the subject of a separate paragraph. The textual argument therefore favours treatment aligned on the current result. It remains an argument: the civil foundation of the solutions reached on reserves is the impairment of the substance, and a large, long-standing carry-forward may raise the same question as a reserve. In the absence of any published decision on this precise point, prudence calls for the fate of the carry-forward to be settled in the agreement rather than left for a court to settle. The expression « report à nouveau », common in practice, does not appear in the text, which says « report bénéficiaire ».
Sums drawn from the reserves
What exactly does the 2015 judgment decide?
That the usufruitier receives the sum in quasi-usufruit, and owes it back when the usufruit comes to an end. The formula has become the seat of the subject: the right of enjoyment « s'exerce, sauf convention contraire entre celui-ci et le nu-propriétaire, sous la forme d'un quasi-usufruit, sur le produit de cette distribution revenant aux parts sociales grevées d'usufruit, de sorte que l'usufruitier se trouve tenu, en application du premier des textes susvisés, d'une dette de restitution exigible au terme de l'usufruit et qui, prenant sa source dans la loi, est déductible de l'actif successoral lorsque l'usufruit s'éteint par la mort de l'usufruitier » [is exercised, failing agreement to the contrary between the usufruitier and the nu-propriétaire, in the form of a quasi-usufruit, over the proceeds of that distribution attributable to the shares burdened with the usufruit, so that the usufruitier is bound, under the first of the provisions referred to above, by a debt to restore which falls due when the usufruit comes to an end and which, taking its source in statute, is deductible from the assets of the estate where the usufruit is extinguished by the death of the usufruitier] (Cass. com. 27 mai 2015, n° 14-16.246). The judgment is given on the basis of articles 587 and 1842 of the Civil Code and articles 768 and 773-2 of the French Tax Code.
Why a quasi-usufruit rather than ownership?
Because money is consumed by being used, and the Code has governed that case from the outset. The provision relied on by the court is this one: « Si l'usufruit comprend des choses dont on ne peut faire usage sans les consommer, comme l'argent, les grains, les liqueurs, l'usufruitier a le droit de s'en servir, mais à la charge de rendre, à la fin de l'usufruit, soit des choses de même quantité et qualité soit leur valeur estimée à la date de la restitution » [if the usufruit includes things of which no use can be made without consuming them, such as money, grain or liquor, the usufruitier has the right to use them, but subject to returning, at the end of the usufruit, either things of the same quantity and quality or their value assessed at the date of restitution] (C. civ. art. 587). The quasi-usufruit is therefore not a judge-made construct grafted onto shares: it is the statutory regime of a usufruit bearing on a sum of money. The usufruitier may spend the sum; it owes its value. The nu-propriétaire is not paid, it becomes a creditor.
Is that debt deductible from the estate of the usufruitier?
The Cour de cassation held it deductible because it arises from statute and not from an agreement. What was at stake in the 2015 judgment was tax: the authorities refused the deduction, relying on the presumption of sham that attaches to certain debts granted by a deceased person to its heirs. The court dismissed the objection, observing that the debt, « prenant sa source dans la loi » [taking its source in statute], is « déductible de l'actif successoral lorsque l'usufruit s'éteint par la mort de l'usufruitier » [deductible from the assets of the estate where the usufruit is extinguished by the death of the usufruitier] (Cass. com. 27 mai 2015, n° 14-16.246). The drafting lesson is a paradoxical one: in such a case a quasi-usufruit agreement is not needed to create the debt, and a badly drawn agreement can cost the benefit of a debt that already existed without it.
Does the solution also apply to wealth tax?
The chambre commerciale transposed it a year later, while shifting its basis. The reasoning is repeated word for word, with one difference: the debt to restore, « prenant sa source dans la loi, est déductible de l'assiette de l'ISF jusqu'à la survenance de ce terme » [taking its source in statute, is deductible from the base of the ISF until that term arrives] (Cass. com. 24 mai 2016, n° 15-17.788). The provisions relied on, however, change: this time the court bases its solution on articles 584 and 587 of the Civil Code, where the 2015 judgment relied on articles 587 and 1842. That shift towards the article defining civil fruits feeds the debate on the nature of the sums distributed without resolving it. The impôt de solidarité sur la fortune (the former French wealth tax) has since been replaced; the statement of principle is still the one that is applied.
The two 2016 judgments that do not say the same thing
What does the first civil division hold one month after the chambre commerciale?
That funds coming from a distribution of reserves benefit the nus-propriétaires alone, with no mention of any quasi-usufruit. The formula deserves to be read in full: « si l'usufruitier a droit aux bénéfices distribués, il n'a aucun droit sur les bénéfices qui ont été mis en réserve, lesquels constituent l'accroissement de l'actif social et reviennent en tant que tel au nu-propriétaire » [while the usufruitier is entitled to distributed profits, it has no right over profits that have been carried to reserve, which constitute the increase in the company's assets and as such go to the nu-propriétaire], so that the funds coming from the distribution of the reserves « devaient bénéficier aux seuls nus-propriétaires et figurer à l'actif de l'indivision successorale » [were to benefit the nus-propriétaires alone and to appear among the assets held in undivided co-ownership by the estate] (Cass. 1re civ. 22 juin 2016, n° 15-19.471). The funds enter the assets of the undivided estate: they do not pass through any quasi-usufruit of the usufruitier.
Do the two divisions contradict one another?
They agree on value and differ on enjoyment. Both decisions give the nu-propriétaire the value of the distributed reserves, and neither makes the usufruitier the owner of the sum. The difference concerns what the usufruitier keeps between the distribution and the extinction of its right: the chambre commerciale recognises its enjoyment of the funds in the form of a quasi-usufruit, while the first civil division says that the funds benefit « aux seuls nus-propriétaires » [the nus-propriétaires alone]. Between those two readings lies the cash position of an elderly parent over fifteen or twenty years. The divergence has not been formally resolved by a chambre mixte (a mixed division) or by the full court.
Which line do the recent authorities lean towards?
Towards that of the chambre commerciale, but through a judgment given on a different question. In 2024 the third civil division, ruling after taking the opinion of the chambre commerciale, held that the dividend « revient, sauf convention contraire entre le nu-propriétaire et l'usufruitier, au premier, le droit de jouissance du second s'exerçant alors sous la forme d'un quasi-usufruit sur la somme ainsi distribuée » [goes, failing agreement to the contrary between the nu-propriétaire and the usufruitier, to the former, the right of enjoyment of the latter then being exercised in the form of a quasi-usufruit over the sum so distributed] (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). The structure is exactly that of 2015: the value to the nu-propriétaire, the enjoyment to the usufruitier. But the judgment concerns the proceeds of a sale of assets, not reserves, and it was ruling on an application to forfeit the usufruit for abuse of enjoyment. It indicates a direction; it does not close the debate.
What practical conclusion follows?
That the absence of an agreement exposes the parties to an uncertainty that neither of them controls. So long as two formations of the Cour de cassation state solutions that do not coincide, the fate of a distribution of reserves depends in part on the division before which the dispute will come up, which itself depends on the nature of the litigation: division of an estate, a tax challenge, or a corporate action. Both judgments reserve the agreement to the contrary. A clear agreement therefore takes the situation out of the lottery, and it is the only way of doing so. The choice to be made is not technical but economic: should the usufruitier have the funds at its disposal, or should they stay with the nu-propriétaire?
The sale of the company's assets
Why does the sale of a company asset change the position?
Because it may impair the substance of the shares, and not merely their yield. The reasoning of the third civil division starts from the definition of the usufruit and from the contract of company: « Il résulte de la combinaison des articles 578 et 582 du code civil que si l'usufruitier a droit aux fruits générés par la chose objet de l'usufruit, il a l'obligation de conserver la substance de cette chose » [it follows from articles 578 and 582 of the Civil Code read together that while the usufruitier is entitled to the fruits generated by the thing subject to the usufruit, it is under a duty to preserve the substance of that thing] (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). The court infers that the distribution of the proceeds of the sale « de la totalité des actifs immobiliers d'une société civile immobilière affecte la substance des parts sociales grevées d'usufruit en ce qu'elle compromet la poursuite de l'objet social et l'accomplissement du but poursuivi par les associés » [of the entirety of the real-estate assets of a société civile immobilière affects the substance of the shares burdened with the usufruit in that it compromises the pursuit of the corporate purpose and the achievement of the aim pursued by the shareholders].
Does the solution apply to the sale of substantially all the assets?
The judgment speaks only of the entirety, and the extrapolation is not settled. The statement of principle is drafted on the hypothesis of the sale « de la totalité des actifs immobiliers » [of the entirety of the real-estate assets] of a société civile immobilière, and the official headnote uses the same expression. The widespread suggestion that the rule would cover the disposal of all « ou de l'essentiel » [or substantially all] of the company's assets extends the reach of the decision beyond what it says. The criterion adopted by the court supports the view that a decisive partial disposal could receive the same treatment, since that criterion is the impairment of the substance and of the corporate purpose, not a proportion. But no published decision has so held: characterising an intermediate case calls for an examination on its own facts.
Is a trading company caught?
The judgment was given about a société civile immobilière, and its transposition is not automatic. The reasoning refers to the aim pursued by the shareholders and to the pursuit of the corporate purpose, two notions that are not assessed in the same way depending on whether the company's object is to hold buildings or to carry on a business. The sale of one business by a company that operates several does not have the same consequences as the sale of the whole portfolio of a wealth-holding structure. The 2024 reasoning can be transposed as a method; its outcome depends on the facts. To present the solution as a general one, in an instrument or in an opinion, would be to lend it an authority it does not yet have.
Does an usufruitier who votes for such a distribution commit a fault?
No, and that is precisely what the court held. The application before it sought to forfeit the right of the usufruitier for abuse of enjoyment. The answer is in the negative, and its logic is plain: since the usufruitier receives the funds only in quasi-usufruit, it has misappropriated nothing. « La décision, à laquelle a pris part l'usufruitier, de distribuer les dividendes prélevés sur le produit de la vente de la totalité des actifs immobiliers d'une société civile immobilière, sur lesquels il jouit d'un quasi-usufruit, ne peut être constitutive d'un abus d'usufruit » [the decision, in which the usufruitier took part, to distribute dividends drawn from the proceeds of the sale of the entirety of the real-estate assets of a société civile immobilière, over which it enjoys a quasi-usufruit, cannot amount to an abuse of the usufruit] (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). The nu-propriétaire is not left without remedy: it is a creditor, and its claim falls due at the term.
The boni de liquidation
Who takes the boni when the company is dissolved?
The Civil Code governs the division without dealing with split ownership, and refers the matter to the agreement. The applicable provision is short: « Après paiement des dettes et remboursement du capital social, le partage de l'actif est effectué entre les associés dans les mêmes proportions que leur participation aux bénéfices, sauf clause ou convention contraire » [after payment of the debts and repayment of the share capital, the assets are divided between the shareholders in the same proportions as their share in the profits, failing any clause or agreement to the contrary] (C. civ. art. 1844-9). It designates the shareholders, without saying what happens where the status of shareholder is split, and it reserves the contrary clause from the outset. The same chapter also provides that the dissolution of a company entails its liquidation (C. civ. art. 1844-8). None of these provisions allocates the boni de liquidation (the liquidation surplus) as between usufruitier and nu-propriétaire.
Is there a decision that settles the question?
No decision could be found on the official databases, and the references in circulation are not there. The solution presented as settled — the boni would be a produit, taken by the usufruitier subject to restitution — is generally attributed to a judgment of 17 November 1998. A search of the Cour de cassation databases and of Légifrance does not make it possible to identify it. Professional caution forbids citing a decision one has not read, and practical caution forbids making it the basis of an instrument. The state of the law, as it can be verified today, is therefore this: a default provision, and no published and accessible solution in the case law.
How, then, is the question to be reasoned?
By the method of the 2015 and 2024 judgments, whose criterion is the impairment of the substance. The liquidation of a company does not distribute a yield: it returns capital and brings the corporate purpose to an end. The criterion adopted in 2024, the impairment of the substance of the shares and the compromising of « la poursuite de l'objet social » [the pursuit of the corporate purpose] (Cass. 3e civ. 19 septembre 2024, n° 22-18.687), is met in the most complete way imaginable. Transposed, it leads to giving the value to the nu-propriétaire and the enjoyment to the usufruitier in the form of a quasi-usufruit. That reasoning is sound, but it remains reasoning by analogy: it does not remove the need to write the rule down.
What should be done in practice before a dissolution?
Settle the fate of the boni in a separate instrument, before the liquidation is set in motion. Article 1844-9 of the Civil Code itself opens that route: the assets are divided between the shareholders « sauf clause ou convention contraire », and its third paragraph allows the shareholders to decide, « soit dans les statuts, soit par une décision ou un acte distinct » [either in the articles, or by a separate decision or instrument], that certain assets will be allocated to certain of them. The writing must settle three things: who is entitled to the value, who has the disposal of it, and how the claim for restitution is to be secured and valued. An agreement signed after the dissolution, once the funds have already been taken, is open to argument; an earlier agreement is not.
What tax makes of the debt to restore
What does the regime that came into force at the end of 2023 provide?
It refuses the deduction of certain claims for restitution and taxes them in the hands of the nu-propriétaire. The principle is laid down in one sentence: « Ne sont pas déductibles de l'actif successoral les dettes de restitution exigibles qui portent sur une somme d'argent dont le défunt s'était réservé l'usufruit » [debts to restore, then due, bearing on a sum of money over which the deceased had reserved the usufruit are not deductible from the assets of the estate] (CGI art. 774 bis). The sanction is then spelled out: the corresponding value « donne lieu à la perception de droits de mutation par décès dus par le nu-propriétaire et calculés d'après le degré de parenté existant entre ce dernier et l'usufruitier » [gives rise to inheritance tax payable by the nu-propriétaire and calculated according to the degree of kinship between the nu-propriétaire and the usufruitier]. The provision applies « aux successions ouvertes à compter de la promulgation de ladite loi, à savoir du 29 décembre 2023 » [to estates opened from the promulgation of that statute, namely from 29 December 2023].
Is a claim arising from a distribution of reserves caught?
The published guidance of the tax authorities expressly excludes it from the scope of the provision. The Bulletin officiel des finances publiques devotes a heading to « dettes non concernées par la non-déductibilité » [debts not caught by the non-deductibility]. It states there that the provisions « ne sont ainsi pas applicables lorsque la somme d'argent dont le défunt s'était réservé l'usufruit constitue le produit d'une cession ou d'une opération assimilable dont le défunt n'a pas été à l'initiative » [are thus not applicable where the sum of money over which the deceased had reserved the usufruit constitutes the proceeds of a disposal, or of a comparable transaction, which the deceased did not initiate], and places among those cases the one in which the debt results from the payment « de la distribution de dividendes prélevés sur les réserves » [of the distribution of dividends drawn from the reserves] (BOI-ENR-DMTG-10-40-20-20, § 270). Article 774 bis of the French Tax Code contains, moreover, neither the word reserves, nor the word dividends, nor the word company.
Why is initiative the sensitive point?
Because in a family company it is very often the usufruitier that votes the distribution. The guidance says that this is « en principe » [in principle] the position where the sum comes from a transaction which the deceased did not initiate. The qualification contained in those two words is not a matter of style. The right to vote on the allocation of the result most often belongs to the usufruitier, and a massive distribution of reserves decided shortly before death, in favour of an usufruitier that voted for it, does not look the same as an ordinary distribution decided by a meeting in which the nu-propriétaire carries weight. Documenting the economic reason for the distribution, at the time it is voted, costs little; reconstructing it ten years later costs a great deal.
What becomes of a claim arising from a sale price?
It is deductible, but on proof, and the burden of proof lies on the nu-propriétaire. The provision makes an exception for « dettes de restitution contractées sur le prix de cession d'un bien dont le défunt s'était réservé l'usufruit, sous réserve qu'il soit justifié que ces dettes n'ont pas été contractées dans un objectif principalement fiscal » [debts to restore incurred on the sale price of an asset over which the deceased had reserved the usufruit, provided it is shown that those debts were not incurred for a mainly tax purpose] (CGI art. 774 bis). The guidance states that « la notion d'objectif principalement fiscal est plus large que celle de but exclusivement fiscal au sens de l'article L. 64 du LPF » [the notion of a mainly tax purpose is wider than that of an exclusively tax aim within the meaning of article L. 64 of the Tax Procedure Code] (LPF art. L. 64), and that the absence of a mainly tax aim « peut ainsi être caractérisée par un faisceau d'indices » [may thus be established by a body of indicia], among them the time elapsed between the splitting of ownership and the disposal.
And where the split carries over to something other than money?
The provision does not apply, because no debt bearing on a sum of money arises. The guidance says so unambiguously: where, after the disposal, the rights of usufruit and of nue-propriété are « reportés par subrogation réelle, légale ou conventionnelle, sur un bien autre qu'une somme d'argent (tel qu'un contrat de capitalisation, des valeurs mobilières, des crypto-actifs, un compte courant d'associé, etc.), le report ne crée pas de dette de restitution portant sur une somme d'argent au sens des dispositions de l'article 774 bis du CGI » [carried over, by real subrogation, whether statutory or contractual, to an asset other than a sum of money (such as a capitalisation contract, securities, crypto-assets, a shareholder current account, and so on), the carry-over does not create a debt to restore bearing on a sum of money within the meaning of article 774 bis of the French Tax Code] (BOI-ENR-DMTG-10-40-20-20, § 210). The choice of the asset to which the split carries over therefore determines, by itself, whether the regime applies.
The meeting that decides, and the usufruitier who votes there
Does the vote of the meeting determine the regime of the sums?
It determines it entirely, because it fixes the origin of the funds distributed. Until the meeting has resolved, there is neither a dividend nor any right of the usufruitier (Cass. com. 10 février 2009, n° 07-21.806). Once it has resolved, the account from which it has drawn governs who keeps the sum, who owes it back, and how the tax authorities will treat the claim on death. The Commercial Code requires, moreover, that the decision state « expressément les postes de réserve sur lesquels les prélèvements sont effectués » [expressly the reserve accounts from which the drawings are made] (C. com. art. L. 232-11). The resolution of the meeting is therefore not an accounting formality: it is the instrument that allocates wealth between two generations.
How should the resolution be drafted?
By breaking down the origin of the sums and by characterising their fate as between usufruitier and nu-propriétaire. A useful resolution states the amount drawn on the result of the financial year, the amount drawn on the report bénéficiaire, the amount drawn on each reserve account, and specifies, for shares held in démembrement (the splitting of ownership between usufruit and nue-propriété), whether the sum is paid to the usufruitier in quasi-usufruit with a debt to restore, or divided between the holders of rights. It refers to the agreement governing the split, where there is one. Minutes that merely vote a single dividend per share leave the heirs, the tax authorities and possibly the court to characterise, after the event, sums paid out long before.
Who exercises the right to vote on the allocation of the result?
The answer depends on the articles and on the corporate form, and it must be checked before any distribution. The allocation of the right to vote as between usufruitier and nu-propriétaire is one of the most disputed questions in French company law, and it is largely settled in the articles. Its bearing here is direct: it is the holder of the voting right who takes the initiative of the distribution, and it is initiative that the tax guidance relies on in deciding whether or not the non-deductibility regime applies. Aligning the drafting of the articles with the intended effect on wealth calls for an examination that takes account of the corporate form, of the deed of gift and of the circumstances of each family.
Can the nu-propriétaire oppose a distribution?
The Code gives it a protective principle, but not a veto. The general rule is laid down: « Le propriétaire ne peut, par son fait, ni de quelque manière que ce soit, nuire aux droits de l'usufruitier » [the owner may not, by its own act, nor in any manner whatsoever, harm the rights of the usufruitier] (C. civ. art. 599), a formula that protects the usufruitier against the nu-propriétaire and not the other way round. The nu-propriétaire does, on the other hand, have a claim where the distribution gives rise to a quasi-usufruit, and the courts have refused to see an abuse of enjoyment in the mere fact that the usufruitier voted for such a distribution (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). Its real protection is therefore contractual: it is negotiated beforehand, not afterwards.
What the agreement can write
How far can the agreement to the contrary go?
The decisions that govern the subject all reserve it, and in the same terms. The judgment on distributed reserves reserves the « convention contraire entre celui-ci et le nu-propriétaire » (Cass. com. 27 mai 2015, n° 14-16.246); the judgment on the proceeds of the sale of the assets reserves the « convention contraire entre le nu-propriétaire et l'usufruitier » (Cass. 3e civ. 19 septembre 2024, n° 22-18.687); the division of assets after liquidation takes place « sauf clause ou convention contraire » (C. civ. art. 1844-9). These reservations are not clauses of style: they pass to the contract the task of saying what statute does not say.
What must a useful quasi-usufruit agreement contain?
The origin of the sums it covers, the method of valuing the claim, and its security. The statutory debt to restore bears, under the text, on « des choses de même quantité et qualité » [things of the same quantity and quality] or on « leur valeur estimée à la date de la restitution » [their value assessed at the date of restitution] (C. civ. art. 587). Between those two measures the gap can be considerable over twenty years. A useful agreement decides: nominal amount or indexed amount, and on which index. It also states which sums are covered, account by account, so that future distributions fall within it automatically. Finally, it organises security, failing which the nu-propriétaire holds no more than an unsecured claim against an estate.
Should the quasi-usufruit be displaced or organised?
Both solutions are open, and the choice is economic before it is legal. Displacing the quasi-usufruit means paying the sums to the nu-propriétaire, which deprives the usufruitier of cash it may need, in particular to pay for its accommodation. Organising it leaves the funds with the usufruitier and creates a claim in favour of the nu-propriétaire, with the risk that the claim will not be honoured if the estate is encumbered. A third route is to carry the split over to an asset other than a sum of money, which also alters the tax treatment of the transaction. The choice depends on the ages of the parties, on the wealth available and on the needs of the usufruitier.
When should the agreement be signed?
Before the distribution, and preferably in the instrument that creates the split. An agreement entered into after the funds have been taken by the usufruitier is open to argument on two fronts: its date, and its genuineness. An agreement contained in the gift itself, or signed before any distribution, does not lay itself open to the same objections. It remains the case that, for distributed reserves, the debt to restore exists without any agreement, since it takes « sa source dans la loi » [its source in statute] (Cass. com. 27 mai 2015, n° 14-16.246). A badly dated agreement can therefore be more harmful than no agreement at all: it substitutes a contested debt for a statutory one.
The five origins in one table
How are the sums allocated according to their origin?
The table below summarises the solutions that can be verified, and flags what has not been decided. It reads in two stages: who is entitled to the value, and who has the disposal of the funds until the usufruit comes to an end. Every line is subject to any agreement to the contrary between the parties. The last column indicates the treatment of the claim for restitution on the death of the usufruitier, where a claim arises. The table holds only for the general rules: characterising a particular case, in particular a partial disposal of assets, calls for an examination on its own facts.
| Origin of the sum distributed | Who is entitled to the value | Who has the disposal of the funds | Claim for restitution on death |
|---|---|---|---|
| Dividend drawn on the profit of the financial year | The usufruitier, outright | The usufruitier | Not applicable: no debt arises |
| Dividend drawn on the report bénéficiaire | Not settled by any published decision | Not settled | To be settled in the agreement |
| Dividend drawn on the reserves | The nu-propriétaire | The usufruitier, in quasi-usufruit (chambre commerciale) | Outside the scope of the 2023 provision: deductible |
| Proceeds of the sale of all the assets of a société civile immobilière | The nu-propriétaire | The usufruitier, in quasi-usufruit | Falls under the regime of sale proceeds |
| Boni de liquidation | No published decision found | Not settled | To be settled in the agreement |
Four common mistakes
« The usufruitier receives the dividends, that is the whole point of the split »
The statement is accurate only for the dividend drawn on the profit of the financial year. For sums drawn on the reserves, the chambre commerciale holds that the right of enjoyment is exercised « sous la forme d'un quasi-usufruit » [in the form of a quasi-usufruit], the usufruitier being bound by « une dette de restitution exigible au terme de l'usufruit » [a debt to restore falling due when the usufruit comes to an end] (Cass. com. 27 mai 2015, n° 14-16.246); the first civil division, for its part, holds that those funds « devaient bénéficier aux seuls nus-propriétaires » [were to benefit the nus-propriétaires alone] (Cass. 1re civ. 22 juin 2016, n° 15-19.471). On either reading, the usufruitier does not keep the money. To present the split as an arrangement that secures a definitive income for the usufruitier is to promise what the law does not give.
« The sale of the assets by the company benefits the usufruitier »
The opposite is what was decided. The assertion circulates, including from the pens of commentators, in relation to the judgment of 19 September 2024. The text of the decision says that the dividend « revient, sauf convention contraire entre le nu-propriétaire et l'usufruitier, au premier, le droit de jouissance du second s'exerçant alors sous la forme d'un quasi-usufruit sur la somme ainsi distribuée » (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). « Le premier » [the former] is the nu-propriétaire. The mistake carries heavy consequences, since it would lead to no claim for restitution being provided for in an instrument, and therefore to the nu-propriétaire being deprived of its right.
« A quasi-usufruit agreement must be signed for the debt to be deductible »
For distributed reserves, the debt is deductible precisely because it does not come from an agreement. The 2015 judgment sets aside the presumption of sham by observing that the debt, « prenant sa source dans la loi, est déductible de l'actif successoral lorsque l'usufruit s'éteint par la mort de l'usufruitier » [taking its source in statute, is deductible from the assets of the estate where the usufruit is extinguished by the death of the usufruitier] (Cass. com. 27 mai 2015, n° 14-16.246). An agreement is often useful to fix the valuation, the security and the perimeter; it is not the source of the debt. Drawn without care, and in particular dated after the distribution, it can move the argument onto ground less favourable than that of the statutory debt.
« The nu-propriétaire will pay tax on the reserves claim »
The published guidance of the tax authorities excludes that case from the 2023 regime. The Bulletin officiel des finances publiques places the debt resulting from the payment « de la distribution de dividendes prélevés sur les réserves » among the debts not caught by the non-deductibility (BOI-ENR-DMTG-10-40-20-20, § 270). The confusion comes from the fact that article 774 bis of the French Tax Code is drafted in general terms and covers « une somme d'argent dont le défunt s'était réservé l'usufruit » [a sum of money over which the deceased had reserved the usufruit] (CGI art. 774 bis), without naming any origin. It is the guidance that draws the distinction, and the distinction rests on who initiated the transaction: a point worth documenting at the time of the vote.
Frequently asked questions
Does the usufruitier of shares keep the dividends it receives?
It keeps those drawn from the profit of the financial year, because the usufruitier « a le droit de jouir de toute espèce de fruits » [has the right to enjoy every kind of fruits] (C. civ. art. 582) and because the profit becomes a fruit through the vote allocating it (Cass. com. 10 février 2009, n° 07-21.806). Sums drawn from the reserves, or coming from the sale of the company's assets, follow another regime: the usufruitier receives them, but owes them back.
Who receives sums drawn from the reserves?
The usufruitier receives them in quasi-usufruit, failing agreement to the contrary, and owes them back when the usufruit comes to an end (Cass. com. 27 mai 2015, n° 14-16.246). The first civil division held, one month after an identical judgment of the commercial division, that those funds « devaient bénéficier aux seuls nus-propriétaires » [were to benefit the nus-propriétaires alone] (Cass. 1re civ. 22 juin 2016, n° 15-19.471). The divergence has not been formally resolved.
Who receives the price when the company sells all of its assets?
The dividend goes to the nu-propriétaire, the usufruitier exercising no more than a quasi-usufruit over the sum distributed (Cass. 3e civ. 19 septembre 2024, n° 22-18.687). The judgment concerns the sale of the entirety of the real-estate assets of a société civile immobilière; it does not decide the case of a partial sale, nor that of a trading company.
What is a quasi-usufruit over a sum of money?
It is the regime of a usufruit bearing on things « dont on ne peut faire usage sans les consommer, comme l'argent » [of which no use can be made without consuming them, such as money]: the usufruitier « a le droit de s'en servir, mais à la charge de rendre, à la fin de l'usufruit, soit des choses de même quantité et qualité soit leur valeur estimée à la date de la restitution » [has the right to use them, but subject to returning, at the end of the usufruit, either things of the same quantity and quality or their value assessed at the date of restitution] (C. civ. art. 587). The usufruitier has the funds at its disposal and owes their value.
Is the claim of the nu-propriétaire deductible from the estate?
Where it arises from a distribution of reserves, it is: the Cour de cassation held it deductible because it takes « sa source dans la loi » [its source in statute] (Cass. com. 27 mai 2015, n° 14-16.246), and the published guidance of the French tax authorities places that case among the debts not caught by the non-deductibility regime (BOI-ENR-DMTG-10-40-20-20, § 270).
Does article 774 bis of the French Tax Code apply to dividends?
Its wording names no origin: it covers « les dettes de restitution exigibles qui portent sur une somme d'argent dont le défunt s'était réservé l'usufruit » [debts to restore, then due, bearing on a sum of money over which the deceased had reserved the usufruit] (CGI art. 774 bis). It is the published guidance of the tax authorities that expressly excludes the claim arising « de la distribution de dividendes prélevés sur les réserves » [from the distribution of dividends drawn from the reserves], on the ground that the deceased did not initiate the transaction (BOI-ENR-DMTG-10-40-20-20, § 270).
Who takes the boni de liquidation where ownership of the shares is split?
The Civil Code provides that the assets are divided between the shareholders « dans les mêmes proportions que leur participation aux bénéfices, sauf clause ou convention contraire » [in the same proportions as their share in the profits, failing any clause or agreement to the contrary] (C. civ. art. 1844-9), without dealing with split ownership. No published decision could be found on the official databases. The question has to be settled by a clause or by an agreement.
Does an usufruitier who votes to retain profits in reserve make a gift?
No. By taking part in the meeting that decides to allocate the profits to a reserve account, « il ne consent aucune donation au nu-propriétaire » [it makes no gift to the nu-propriétaire], because before the dividend is allocated it « n'a pas de droit sur les bénéfices » [has no right over the profits] (Cass. com. 10 février 2009, n° 07-21.806).
Can an agreement displace these rules?
Yes, and every one of the decisions expressly reserves it. The 2015 judgment reserves the « convention contraire entre celui-ci et le nu-propriétaire » [agreement to the contrary between the latter and the nu-propriétaire], the 2024 judgment the « convention contraire entre le nu-propriétaire et l'usufruitier », and the division of assets after liquidation takes place « sauf clause ou convention contraire » (C. civ. art. 1844-9). The agreement must state the origin of the sums covered, how the claim is to be valued, and how it is secured.