Collectivision: Back Before the CAA
In a decision dated October 4, 2023, the Council of State overturned the initial ruling of the Marseille Administrative Court of Appeal and clarified that“the conclusion by a company of a service agreement with another company for the performance, by the director of the former, of tasks falling within the scope of the duties normally assigned to him does not constitute abnormal commercial management if that company establishes that its competent corporate bodies actually intended, through the payment of fees corresponding to these services, indirectly remunerate the manager and that, consequently, this payment is not without consideration for the company, since the choice of an indirect method of remuneration does not in itself constitute a depletion of assets for purposes unrelated to its interests”(CE, 9th and 10th Ch., Oct. 4, 2023, No. 466887, Cited in the tables).
He then referred the case to the Administrative Court of Appeals, which issued its ruling last week. As a reminder, Collectivision had two managers:
Sonely, with which a service agreement for executive functions had been entered into;
an individual who was also a partner and manager of Sonely.
The Court finds that:
administration that the individual manager“did not perform any technical functions or provide any services other than those involved in fulfilling his duties as manager of Collectivision.”
The company does not demonstrate any intention to indirectly compensate the individual manager through the execution of a service agreement with Sonely. Sonely had presented a management report to the annual general meeting.
The Court thus upholds the tax assessment against the company.