Management fiducie

What the fiduciary does, and to whom it is accountable

In a management fiducie, everything turns on one sentence of the agreement: the mission. Article 2018, 6° of the Civil Code requires it to define, on pain of nullity, the fiduciary's mission and the scope of its powers of administration and disposal. A fiduciary can thus be confined to collecting rents, or authorised to sell. Between the two, everything is a matter of drafting.

The counterpart of these powers is the duty to account, organised by article 2022. The agreement sets its terms and frequency; upon request, the beneficiary and the third party designated under article 2017 also receive the accounts.

• The mission and the scope of powers must appear in the agreement on pain of nullity (art. 2018, 6°)
• The agreement defines the terms on which the fiduciary accounts to the settlor (art. 2022)
• The beneficiary and the third-party protector designated under article 2017 receive the accounts on request, at the agreed frequency
• If the settlor is placed under guardianship (tutelle) during the fiducie, the fiduciary accounts to the guardian, on request, at least once a year
• Under curatorship (curatelle), it accounts on the same terms to the settlor and the curator
• Appointing a third-party protector to watch over the settlor's interests is optional, but it is the first governance reflex in family fiducies

This is why a management fiducie is drafted like a mandate, not like a security: what the fiduciary may not do must be written as clearly as what it must do. The firm itself acts as fiduciary, which gives this drafting a very concrete meaning: we write the obligations we undertake to honour.

What a management fiducie does not allow

A warning first, because it comes up in almost every first meeting. Article 2013 of the Civil Code provides that a fiducie agreement is void if it proceeds from a donative intent in favour of the beneficiary, and that this nullity is a matter of public policy. The fiducie therefore replaces neither a gift nor a will: it organises management, it does not transfer wealth gratuitously.

Business owners: entrusting shares for a period without giving up their economic value

A company director or reference shareholder may transfer all or part of their shares to a fiduciary for a set period: extended absence, duties that make direct management of a holding awkward, preparation of a sale or a family transfer, lasting disagreement between shareholders. The transfer is a transfer of ownership, but the settlor may remain the beneficiary of the fiducie (Article 2016 of the Civil Code): depending on the contract, they keep the value and income, while the fiduciary exercises the rights attached to the shares within the limits of its mission.

Everything turns on drafting that mission (Article 2018, 6°): does the fiduciary vote alone, under written guidelines, or as the settlor directs? May it sell, and at what price conditions? Who replaces it if it is prevented? These answers must be written before the transfer, not negotiated during a crisis.

• Articles of association first. An approval or lock-up clause may catch the transfer to the fiduciary, which remains a transfer of ownership; its reach depends on its wording and the type of company. Approval is obtained before the transfer, where appropriate by signing subject to a condition precedent.
• Corporate settlor. Where the shares are on a company's balance sheet, the result of the transfer is not included in the taxable profit of the transfer year if the conditions of Article 238 quater B of the French Tax Code are met: eligible activity of the settlor, designation as beneficiary, recording on its balance sheet of the rights representing the transferred shares, accounting and tax undertakings of the fiduciary. It is a regulated deferral, not general neutrality. For the 5% threshold of the parent-subsidiary regime, transferred shares still count if the settlor keeps the voting rights or the fiduciary exercises them as the settlor directs (BOI-IS-BASE-10-10-10-20); for the 95% tax-consolidation threshold, Article 223 A of the Tax Code also requires the shares to carry dividend and voting rights.
• Incapacity. A fiducie signed by a director with full capacity continues to have effect if they are later placed under guardianship or curatorship; the fiduciary then reports to the guardian or curator (Article 2022).
• Death. The contract ends on the death of the individual settlor (Article 2029) and the remaining fiduciary estate automatically returns to the succession (Article 2030). A management fiducie replaces neither a gift nor a will.
• Shares under a Dutreil undertaking. The transfer to the fiduciary is a transfer of ownership: if it concerns shares subject to a Dutreil retention undertaking, it may breach that undertaking. A prior review of the current phase (collective or individual undertaking) and of the applicable rules is essential.
• No disguised gift. Naming one's children as beneficiaries without consideration would expose the contract to the public-policy nullity of Article 2013.

Vulnerable persons: a fiducie is decided while one can still sign

This is the rule families discover too late: a guardian may not, even with the court's authorisation, transfer the assets or rights of a protected adult into a fiduciary estate (Article 509, 5° of the Civil Code). For a minor, the prohibition is general (Article 408-1). Once guardianship is opened, the guardian can therefore no longer set up a fiducie on behalf of the protected person; a fiducie validly concluded beforehand, however, continues to run. It must therefore be concluded by the person themselves, with full capacity, when the need for protection appears: diagnosis of a progressive illness, old age, an estate that has become too heavy to manage alone.

• Under curatorship, the person may still conclude a fiducie contract, but only with the assistance of the curator (Article 468).
• In our view, a lasting power of attorney (mandat de protection future) does not allow the agent to set up the fiducie in the principal's place. A private-deed power is limited to acts a guardian may perform without authorisation (Article 493): the fiducie is excluded. A notarial power includes the property acts the guardian has power to perform alone or with authorisation (Article 490); since the guardian never has that power (Article 509, 5°), the creation of a fiducie by the agent is very probably excluded, with no published case law to date: the point should be secured before acting, if necessary before the judge. A person authorised under a family authorisation (habilitation familiale) cannot set up the fiducie as representative either, since the authorisation covers acts the guardian may perform (Article 494-6).
• The two tools complement each other. The fiducie, signed in advance, organises the management of assets that require a professional (portfolio, investment property, company shares); the lasting power of attorney appoints the trusted person who will look after the rest of the estate and the person themselves.
• The settlor remains beneficiary (Article 2016): the contract may provide for income to be paid out to fund care home fees, medical care or home help, on a written schedule and within written limits.
• An appointed protector. An individual settlor cannot waive the right to appoint, at any time, a third party to safeguard their interests (Article 2017). In a protective fiducie, the firm recommends making the appointment at signature: a relative, the attorney under the lasting power or an independent professional. The appointment must, on pain of nullity, be recorded in a written deed drawn up by the fiduciary and registered (Article 2019).
• Reporting adapts to the measure. If guardianship is opened during the contract, the fiduciary reports to the guardian, at the guardian's request, at least once a year; under curatorship, to the settlor and the curator (Article 2022).

Two limits remain fixed. The fiducie ends on the settlor's death, and the fiduciary estate returns to the succession (Articles 2029 and 2030): it protects a person, it does not pass on their estate. And it may carry no donative intent towards relatives (Article 2013). The contract itself must be registered within one month, on pain of nullity (Article 2019), and only the fiduciaries listed in Article 2015, including lawyers, may act. Succession planning is prepared separately, with a notary and the tools of estate planning.