An unseemly mother-daughter dispute threatens to smudge the glittering public face of L'Oréal, the world's most successful cosmetics company. The mental capacity of L'Oréal's chief shareholder, Liliane Bettencourt, 86, to manage her €23bn (£20.5bn) fortune has been challenged by her only child, Françoise.

Mme Bettencourt, one of the world's wealthiest women and a renowned philanthropist, is reported to have funded life insurance policies worth nearly €1bn which benefit a jet-set photographer, artist and author whom she has befriended. Her daughter has brought a legal action which suggests that her mother's great age makes her vulnerable to "abuse".

The complaint was first made almost a year ago but details have just emerged in the French press. An investigative website, Bakchich.info, reported that police had discreetly interviewed both Mme Bettencourt and the man who is said to have become virtually her adopted son, François-Marie Banier.

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M. Banier, 61, is a playwright, novelist and above all a photographer and friend of the glitterati, ranging from Johnny Depp to Princess Caroline of Monaco. He is said to be the sole beneficiary of several life insurance policies, endowed over many years by Mme Bettencourt.

According to Bakchich.info and the Journal du Dimanche, Mme Bettencourt confirmed the existence of the insurance policies to investigators but said that she knew exactly what she was doing and could "sponsor" whoever she liked. To borrow L'Oréal's own catch-phrase, she was giving part of her fortune to M. Banier "because he was worth it".

Mme Bettencourt declined to undergo medical examinations to prove her mental capacity.

The row is part of a long-simmering dispute between mother and daughter, who have hardly spoken to each other for several years. Both Mme Bettencourt and Françoise Bettencourt Meyers are board members of L'Oréal which had a global turnover of €17.1bn in 2007 and employs 63,000 people worldwide. Other board members include Mme Bettencourt Meyers's husband, Jean-Pierre Meyers, and the Cheshire-born businessman Lindsay Owen-Jones, who built L'Oréal to its present pinnacle in his 18 years as chief executive of the company before he stood aside in 2006.

L'Oréal was founded by Mme Bettencourt's father, Eugene Schueller. She married the French politician André Bettencourt, a friend of the late President François Mitterrand, in 1950. She still owns 27.5 per cent of the stock of L'Oréal and has used her fortune, among other things, to fund the Bettencourt-Schueller foundation which invests in medical research, helping the illiterate and housing for the homeless.

A confidante of her daughter told the Journal du Dimanche yesterday that Mme Bettencourt Meyers had brought the legal action because she feared that her mother was no longer in control of her actions. "She is not looking for any money, but is afraid, quite simply, that her mother, at her advanced age, is about to fritter away her fortune," the confidante said.

Mme Bettencourt's lawyer, François Goguel, told the newspaper: "She is travelling in the United States at present and is very well. She does not wish to make any comment on what is a private affair."

The lawyer said, however, that the €1bn figure had been "exaggerated" and that the gifts to M. Banier, in the form of insurance policies, had been made freely over a number of years.

Mme Bettencourt lives in a large house in Neuilly-sur-Seine, the wealthy suburb just west of the Paris city boundary which was for many years the political fiefdom of President Nicolas Sarkozy. The public prosecutor for Nanterre, who covers the Neuilly area, must now decide whether to launch a full investigation or let the matter drop.

Mme Bettencourt is known to have one of the finest private collections of art in France. She has donated several works, including paintings by Pablo Picasso, to M. Banier but they are not covered by her daughter's legal action.

M. Banier has written several novels and plays but is best known as a photographer with privileged access to the famous. His friends include the actress Isabelle Adjani and the fashion designer Pierre Cardin. He is also a close friend of the celebrity acting couple Vanessa Paradis and Johnny Depp, whose relationship began at M. Banier's home in the south of France.