2026 Finance Act: what changes in the equity bridge and cash-out model

The 2026 Finance Act rewrote the management package regime back to 15 February 2025, and the flat tax is now 31.4%. What this changes in entry valuations, rollovers and the cash-out model.

The 2026 Finance Act (loi n° 2026-103 of 19 February 2026) was published in the Journal officiel on 20 February, after the Conseil constitutionnel cleared most of it the day before (décision n° 2026-901 DC). Article 24 amends the management package regime in article 163 bis H of the CGI, which was introduced a year earlier. Most of the changes apply to gains realised from 15 February 2025. Separately, the 2026 social security financing act (loi n° 2025-1403 of 30 December 2025) raised the CSG on capital income from 9.2% to 10.6%. That takes the flat tax on securities gains from 30% to 31.4%, and it already applies to gains realised in 2025.

Tax counsel will cover the legal points. This note covers what changes in the equity bridge and in the managers' cash-out model.

The regime in one paragraph

A gain on management package shares is taxed as salary by default. The part below a cap is taxed as a capital gain at the flat tax, provided the shares carried a real risk of loss and, for non-statutory instruments, were held for at least two years. The cap is the entry base × (3 × exit value of the company ÷ entry value of the company − 1). Anything above the cap is taxed as salary, at a marginal rate that can reach about 59% once the 10% employee contribution is included.

Change 1: the entry base is now a valuation, not a price

Under the 2025 text, the entry base was the price the manager actually paid. The 2026 Act replaces it with the real value of the shares at the date they were acquired or subscribed. The company value used in the ratio is defined as the real value of its equity, plus amounts owed to shareholders and related companies.

This makes the entry valuation a tax position. On an audit at exit, the value must have been set at entry and must tie to the deal's equity bridge and the instrument terms. It cannot be rebuilt five years later. The buy-side or vendor due diligence (DD) becomes evidence: enterprise value, net debt and debt-like items, shareholder loans, price per instrument.

What we now check at entry:

• One bridge, one date. The EV to equity bridge in the management valuation must match the SPA closing statement. Any net debt or debt-like difference between the two is a gap the tax authority can use.
• Instruments priced separately. Ordinary shares, preference shares and ratchets need a value each. One price per share across all classes will not survive an audit when the economic rights differ.
• A dated report. The valuation should be dated at closing, signed by an independent valuer where the package is material, and kept with the DD report it relies on.

Change 2: shareholder loan repayments are added back at exit

The Act also says that amounts repaid on shareholder loans before the exit are added to the exit value of the company. In the 2025 text, a sponsor that repaid its shareholder loan or convertible bonds before the sale lowered the exit value, and therefore the managers' ratio. Separate rules stop debt created after entry from inflating the cap.

On our side, this means tracking every shareholder loan movement between entry and exit: drawdowns, capitalised interest, repayments, and refinancing through bank debt. That schedule rarely exists at exit unless it was kept from closing.

A worked example

Take a target bought for an EV of €60m. Bank net debt is €36m. The sponsor funds €24m: €14m as a shareholder loan and €10m as ordinary equity. The company value used in the ratio is therefore €24m. A manager subscribes ordinary shares with a documented real value of €300k.

Five years later, the asset is sold for an EV of €108m. Bank net debt is €30m, so equity plus the remaining shareholder loan is €78m. Over the period, the group repaid €6m of shareholder loan from cash.

With the ratchet, the manager receives €4.5m, a gain of €4.2m. Under the 2026 Act, €2.85m is taxed at 31.4% (about €0.89m). The remaining €1.35m is taxed as salary at roughly 59% (about €0.80m). Net proceeds are about €2.8m. The add-back moves €225k from salary to capital gain, which saves the manager about €60k.

If the tax authority argues the shares were worth more than €300k at entry, the whole split moves. A valuation that holds up matters more than the €60k.

Change 3: rollover now defers the salary part

Before the 2026 Act, a contribution of shares to the next acquisition vehicle deferred only the capital gain fraction. The salary fraction was taxed immediately, even if the manager received no cash. The Act adds a deferral of the salary fraction, in proportion to the gain reinvested, when the shares are exchanged in a transaction covered by article 150-0 B. The reinvestment must be in the issuer, its parent or a subsidiary. The deferral can carry through successive exchanges. It ends when the shares received are sold, redeemed or cancelled.

Two limits matter for the structure:

1. Not through a personal holding company. The deferral does not apply when the shares are contributed to a company that manages the private wealth of the manager or the family. An apport-cession through a personal holdco no longer defers the salary fraction.
2. The "parent or subsidiary" test. The text requires the parent or subsidiary link to exist before the exchange. A new acquisition vehicle in a secondary buyout may not meet that test. Settle this with counsel before the steps memo is final.

In the sources and uses. A rollover is a non-cash source. With deferral, the managers' tax due at closing is calculated on the cash part only. In the example, if the manager rolls 50% of the gain, about €0.4m of salary tax is deferred. The cash-out model should show three lines: cash received, tax payable now, and tax deferred, which becomes payable when the next exit ends the deferral.

Holdco layers: the new tax on private holding companies

Article 7 of the Act creates an annual tax of 20% (article 235 ter C of the CGI), payable by companies that meet all of the following conditions:

• liable to corporation tax;
• gross assets at market value of at least €5m;
• at least 50% controlled by an individual or a family;
• passive income above half of total revenue.

The base is the value of listed non-business assets: residences reserved for shareholders, non-business cars and boats, aircraft, jewellery, wine, horses. Cash, securities, subsidiaries, art and other property are excluded. The first financial years affected are those ending on or after 31 December 2026.

Management companies holding only shares in the group are unlikely to be caught. Founders' personal holdcos are more exposed, especially when sale proceeds are reinvested there and the company also owns a residence or a car. The same Act tightened the apport-cession rules for disposals from 21 February 2026: 70% of the proceeds must be reinvested (previously 60%), over three years (previously two). A founder's cash-out model built in 2025 needs to be re-run on both counts.

What to do now

1. Re-run the management cash-out models for any deal signing or closing in 2026: use 31.4% flat tax, the new cap base, and the shareholder loan add-back.
2. Commission the entry valuation at closing. It should cover each instrument class, tie to the SPA equity bridge, and come with the DD report it relies on.
3. Keep a shareholder loan schedule from day one, covering drawdowns, interest, repayments and refinancing. This is a five-minute task at closing and a two-week task at exit.
4. Split the rollover tax in the sources and uses into tax due now and tax deferred, and confirm the "parent or subsidiary" reading with counsel before the steps plan.
5. List the holdco layers above each founder and manager, and ask tax counsel which ones meet the €5m, control and passive-income tests before the 2026 year-end.

This note is general information, not advice on a specific transaction.