All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

The statutory auditor is a key body in the control of the company. Its status, identical regardless of the company concerned, is set out in Articles L. 822-1 et seq. of the Commercial Code.
With regard to the joint stock company, Article L. 225-218 of the Commercial Code provides that the ordinary general meeting may appoint one or more statutory auditors under the conditions set out in Articles L …

Mission and responsibility

The statutory auditor is a key body in the control of the company. Its status, identical regardless of the company concerned, is set out in Articles L. 822-1 et seq. of the Commercial Code.

With regard to the joint stock company, Article L. 225-218 of the Commercial Code provides that the ordinary general meeting may appoint one or more statutory auditors under the conditions set out in Articles L. 225-228 and L. 22-10-66. According to these articles, the statutory auditors are proposed for appointment by the general meeting through a draft resolution from the board of directors or the supervisory board. When the company's shares are admitted to trading on a regulated market, the board of directors selects the statutory auditors it intends to propose, without the CEO and the deputy CEO, if they are directors, participating in the vote.

Companies are required to appoint at least one statutory auditor if, at the close of a fiscal year, they exceed the thresholds of four million in total balance sheet, eight million in net sales, or fifty employees . Even if these thresholds are not met, the appointment of a statutory auditor may be requested in court by one or more shareholders representing at least one-tenth of the capital. Companies are also required to appoint a statutory auditor for a term of three fiscal years if one or more partners representing at least one-third of the capital make a reasoned request to the company.

The essential mission of the statutory auditor consists of a legal audit . Article L. 823-10 indeed provides that statutory auditors have the permanent mission, excluding any interference in management, to verify the values and accounting documents of the person or entity whose accounts they are responsible for certifying and to check the compliance of its accounting with the applicable rules. They also verify the accuracy and consistency with the annual accounts of the information provided in the management report of the board of directors, the executive board, or any management body, and in the documents sent to shareholders or partners regarding the financial situation and annual accounts. They specifically attest to the accuracy and sincerity of the information relating to the remuneration and benefits of any kind paid to each corporate officer. They verify, if applicable, the accuracy and consistency with the consolidated accounts of the information provided in the group management report. They may request on-site access to all documents they deem useful for the exercise of their mission, including all contracts, books, accounting documents, and minutes registers . Entrusted with a permanent control mission, the statutory auditor cannot certify accounts falsified by an employee accountant who committed embezzlement prior to the establishment of their report .

Furthermore, Article L. 823-16 requires statutory auditors to alert the governing bodies and shareholders of any potential anomalies detected. Article L. 823-12, para. 2, also mandates that statutory auditors report to the public prosecutor any irregularities that may be subject to criminal classification, as soon as they become aware of them in the course of their duties, even if such classification cannot be precisely defined at that time . They must also report to the TRACFIN unit any amounts recorded in their books or transactions involving amounts they know, suspect, or have reasonable grounds to suspect originate from an offense punishable by more than one year of imprisonment or are related to the financing of terrorism. It is also the statutory auditor who ensures that the directors and members of the supervisory board hold the shares that the statutes require them to possess .

Article L. 225-103 also grants them the ability to convene the general meeting after having unsuccessfully requested this convening from the board of directors or the executive board, as the case may be, by registered letter with a request for acknowledgment of receipt. When they proceed with this convening, they set the agenda and may, for compelling reasons, choose a meeting place other than that possibly provided for by the statutes, but located in the same department. They must present the reasons for the convening in a report read at the meeting. In the event of multiple statutory auditors, they act in agreement with each other. If they disagree on the advisability of convening the meeting, one of them may request authorization from the president of the commercial court ruling in summary proceedings to proceed with this convening, with the other auditors and the chairman of the board of directors or the executive board duly summoned. The president's order, which sets the agenda, is not subject to any appeal.

Finally, Article L. 234-1 of the Commercial Code provides that when the statutory auditor of a public limited company identifies, during the course of their mission, facts likely to jeopardize the continuity of operations, they inform the chairman of the board of directors or the executive board. Given the complexity of this procedure, the legislator has provided, in Article L. 611-2-2, measures to expedite the process. Thus, when it appears that urgency requires the adoption of immediate measures and the manager refuses or indicates that they are considering measures the statutory auditor deems insufficient, the latter may inform the president of the competent court as soon as the first information is given to the chairman of the board of directors or supervisory board or to the manager. In this case, the statutory auditor informs the president of the court by any means and without delay of their findings and actions. They may send a copy of all relevant documents for this information and explain the reasons that led them to determine the insufficiency of the decisions taken. On their own initiative or at the request of the president of the court, they may provide the court with any additional information necessary to give an accurate understanding of the company's economic and financial situation. The statutory auditor may also, at any time, request to be heard, along with the managers, by the president of the court.

Due to the importance of the statutory auditor's duties, their civil liability  may be engaged by both the company and third parties  for faults committed in the exercise of their functions. A statutory auditor thus incurs liability when they fail in their legal obligation to verify the accuracy of the executive's remuneration and commit a negligent act by refraining from alerting the company's competent bodies about a substantial increase in an executive's salary without a board decision, failing to make observations or reservations during the certification of accounts, or ensuring the accuracy of information related to this remuneration by remaining inactive, waiting to conduct an on-site review of accounting documents once the fiscal year is completed . This also applies when they certify annual accounts despite the absence of provisions for a potential liability  or unjustifiably report allegedly criminal acts committed within the controlled company to the public prosecutor, the day after the certification report is submitted, with a clear intent to harm . Conversely, the statutory auditor does not commit a fault by refraining from refusing to certify accounts due to abnormal capital flows between the company and its subsidiaries, as long as they have drawn the executives' attention to this issue in their reports on the accounts of two successive fiscal years, repeatedly highlighted the difficulty arising from the significance of these financial flows, and triggered two alerts . Similarly, a company that has undergone a reassessment by mistakenly considering itself exempt from the business tax cannot engage the statutory auditor's liability for fault if this inaccuracy was not likely to mislead third parties about its financial situation .

The statutory auditor is also subject to disciplinary sanctions in the event of failure to comply with the legal conditions for practicing the profession, any gross negligence, and any act contrary to probity or honor . The sanctions range from a warning to the withdrawal of honorary status . The statute of limitations is six years .

Finally, the criminal liability of the statutory auditor may be engaged for various offenses. Article L. 820-5 punishes the illegal practice of the profession with one year of imprisonment and a fine of 15,000 euro; Article L. 820-6 punishes with six months of imprisonment and a fine of 7,500 euro the act of any person accepting, exercising, or retaining the functions of a statutory auditor, notwithstanding legal incompatibilities, either in their own name or as a partner in a company of statutory auditors; and Article L. 820-7 punishes with five years of imprisonment and a fine of 75,000 euro the act of any person exercising the functions of a statutory auditor, giving or confirming false information about the situation of the legal entity, or failing to report to the public prosecutor the criminal acts of which they have become aware. Furthermore, the certification of annual accounts without accounting verification by a new statutory auditor constitutes a positive act of complicity in the offenses of bankruptcy and fraud committed by the company's directors, a fortiori when their predecessor refused to certify certain annual accounts and noted widespread fraud . Additionally, required to assess under their responsibility the value of contributions in kind made during a capital increase, statutory auditors, in their capacity as auditors of contributions, may indeed consider objective criteria unrelated to the sole market or sale value of the contributed assets, but commit the offense of fraudulent overvaluation of contributions in kind when they deliberately conceal elements of assessment likely to lead to a significant reduction in the value of these assets .

Cass. com., 19 October 1999, LawLex202300008970JBJ, considering that the statutory auditor is entrusted with a permanent control mission, which is not exercised solely a posteriori, but can also target embezzlements committed before the date of filing of their report on the annual accounts.

Cass. com., 15 March 2017, LawLex202200005597JBJ.

Cass. com., 8 November 2011, LawLex202200005600JBJ.

Cass. com., 2 November 2011, LawLex202200005599JBJ.

Cass. crim., 18 May 2011, LawLex202100002047JBJ.

Cass. crim., 12 April 1976, LawLex202300011974JBJ.

Cass. com., 24 October 2000, LawLex202300008972JBJ.

Cass. crim., 15 September 1999, LawLex202300008975JBJ.

Commercial Code, Art. L. 225-26 and L. 225-73.

Cass. crim., 15 September 1999, LawLex202300008975JBJ, considering that the criminal court is not competent to rule on the civil liability of the statutory auditor who failed to disclose, in his report to the general meeting, offenses committed by the corporate officers, since this liability arises not from a criminal offense, but from a civil breach.

Cass. com., 23 March 2010, LawLex202200005598JBJ, holding that the statutory auditor who acts as a partner, shareholder, or director of a company holding a statutory auditor's mandate is personally liable for the professional acts he performs on behalf of this company, regardless of its form.

Cass. com., 31 March 2021, LawLex202200005859JBJ.

Cass. com., 27 September 2017, LawLex202200005601JBJ.

Company Law (en cours)

511. Mission and responsibility

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511. Mission and responsibility

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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