Liliane Bettencourt, the 88-year-old L’Oréal heiress who is France’s richest woman, has lost her bitter three-year battle against her own daughter Francoise Meyers-Bettencourt to retain control of her €15bn ($21bn) ­fortune.

A French court ruled on Monday that Mrs Bettencourt was no longer fit to run the family fortune, including her 31 per cent stake in the world’s largest cosmetic company founded by her father. The judge in the Courbevoie court near Paris placed the heiress under the protection of her family.

Her lawyers immediately said they would appeal against the ruling, which nonetheless comes into immediate effect. This means that Mrs Bettencourt, diagnosed by doctors to be suffering from “mixed dementia” and “modestly severe” Alzheimer’s, will be placed under guardianship with her daughter and grandsons looking after her wealth and property.

The ruling also means she will lose her seat on the L’Oréal board and will no longer head the family holding company.

Although mother and daughter have been engaged in an increasingly public personal feud, both have repeatedly insisted on the family’s profound bonds with L’Oréal and their desire to continue to support the cosmetics group’s future development.

The French government has been particularly worried that the family row could ultimately undermine the French cosmetics champion should Nestlé, the Swiss food multinational with a 29.6 per cent stake in L’Oréal, decide to exercise its right to acquire the Bettencourt stake if it were up for sale.

Nestlé has so far not indicated what it wants to do with its L’Oréal stake – either increasing it or disposing of it – adopting a longer term wait-and-see attitude. But the French government has been concerned that should Nestlé eventually take overall control of L’Oréal, the cosmetics group’s decision-making centre would inevitably shift to Switzerland.

Nestlé’s top executives are meeting in Paris on Thursday for a nine-month sales presentation. The timing is hardly coincidental and the Swiss group has underlined its attachment to France – its second largest market with 29 plants and 17,000 employees.

Before Monday’s court ruling, Mrs Bettencourt warned in the Journal du Dimanche, a French Sunday newspaper, that she would consider leaving France if she was placed under the protection of her daughter. A few weeks ago she told Le Monde she was ready to declare “nuclear war” on her daughter by reclaiming billions of euros she had already given her in shares in the family cosmetics and shampoo empire.

The daughter has all along claimed that her mother had come under the influence of what she described as a “predatory circle pretending to be affectionate to the detriment of the family”. She also claimed that many of her mother’s close advisers and friends were rapacious opportunists acting against her interests.

This unseemly but all too familiar family inheritance saga also turned into an affair of state with allegations – always hotly denied – that President Nicolas Sarkozy’s UMP ruling party had received illegal party funding from Mrs Bettencourt. Nonetheless the fact that the wife of a former UMP budget minister worked in the family office of Mrs Bettencourt has raised eyebrows.

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