Bankruptcy Law

The statutory auditor's mission is to certify, by justifying his assessment, that the annual accounts are regular and genuine and give a true and fair view of the results of the operations of the past financial year as well as of the financial situation and assets of the person or entity at the end of this financial year . The auditor's permanent mission is also to verify the values and accounting …

Missions of the Statutory Auditor

The statutory auditor's mission is to certify, by justifying his assessment, that the annual accounts are regular and genuine and give a true and fair view of the results of the operations of the past financial year as well as of the financial situation and assets of the person or entity at the end of this financial year . The auditor's permanent mission is also to verify the values and accounting documents of the person or entity whose accounts he is responsible for certifying and to check the conformity of its accounts with the current regulations . Finally, the auditor has the duty to alert management if he or she observes “facts likely to jeopardize the continuity of the operations” .

The alert of the statutory auditor implies that one has been appointed, either because legal thresholds have been crossed, or because the company has, outside of any legal obligation, deemed it useful to engage its services. The PACTE Law of 22 May 2019  has considerably reduced the cases in which the appointment of an auditor is mandatory. Prior to its entry into force, all public limited companies and limited partnerships with shares were required to appoint an auditor. Other types of companies were only required to appoint an auditor when certain thresholds were exceeded. From now on, companies, whatever their form, excluding EIGs , which exceed two of the three thresholds: 4 million euros of balance sheet, 8 million euros of turnover excluding tax, 50 employees , are required to appoint a statutory auditor. Companies that do not meet these thresholds may still appoint a statutory auditor. The appointment of a statutory auditor is also mandatory for parent companies when the entity they form with the companies they control exceeds the established thresholds  unless these parent companies are themselves controlled by a company that has appointed a statutory auditor. Subsidiaries are required to appoint an auditor when they exceed two of the following three thresholds: EUR 2 million in balance sheet, EUR 4 million in sales excluding tax, 25 employees . Legal entities under private law that are not traders and that carry on an economic activity are also required to appoint an auditor when two of the following three thresholds are reached: EUR 1.55 million of balance sheet, EUR 3.1 million of turnover excluding tax, 50 employees . They retain the right to appoint one even if these thresholds are not crossed .

There is no legal definition of the concept of “facts likely to jeopardize the continuity of operations”, so that it can encompass a multitude of situations. The statutory auditor notes the existence of such facts in the course of his or her mission by examining the documents communicated to him or her  and, more generally, on the basis of any element of a financial  or operational nature . The threat must be sufficiently serious and certain to jeopardize the company's ability to continue as a going concern, which excludes future facts or events or those of relative probability. In addition, the statutory auditor is not obliged to carry out any investigations other than those required by his mission. The auditor's failure to do so does not engage his responsibility if all the shareholders were aware of the company's irredeemably compromised situation . Similarly, Article L. 822-17 of the Commercial Code excludes the possibility of engaging his liability for information or disclosures made in the performance of his mission  unless he can demonstrate that he acted in bad faith . On the other hand, such conduct, if established, could justify a removal from office .

The alert procedure differs depending on whether the company is a public limited company or another commercial company.

In public limited companies, Article L. 234-1 of the Commercial Code provides for a four-stage procedure: informing the directors, referring the matter to the board of directors or the supervisory board, warning the meeting and informing the president of the court. When the auditor identifies facts likely to jeopardize the company's continued operation, he or she informs the Chairman of the Board of directors or of the management board without delay, by registered letter with acknowledgement of receipt , and asks them for explanations. The latter respond in the same way within fifteen days of receiving the auditor's letter. If the reply is satisfactory, the procedure is not continued. In the absence of a reply or in the event of an unsatisfactory reply, the second stage begins, during which the statutory auditor invites the managers, by registered letter with acknowledgement of receipt, with a copy to the president of the Commercial Court, to have the board of directors or the supervisory board deliberate on the facts raised. If the auditor is satisfied with the decision taken, the procedure is not pursued. If, in spite of the decisions taken, it appears to him that the continuity of the operation remains compromised, a general meeting is convened by the board of directors, the management board or, in the event of their failure to act, the auditor. The third stage of the procedure begins with a assembly of the general meeting of shareholders, during which the auditor presents his report. If, at the end of the general assembly, the auditor finds that the decisions taken do not ensure the continuity of the business, he opens the fourth stage of the procedure, during which he informs the president of the commercial court of his actions and communicates the results. The auditor may ask to be heard by the president of the court .

In other commercial companies , Article L. 234-2 of the Commercial Code provides for a three-stage procedure: informing the directors, holding a general assembly and informing the president of the court. The statutory auditor asks the director, without delay, by registered letter with acknowledgement of receipt , for explanations of facts likely to jeopardize the continuity of operations. The director is required to reply by registered letter with acknowledgement of receipt within fifteen days of receiving the request for explanation . A copy of the reply is sent, in the same form and within the same time-limit, to the social and economic committee or, failing that, to the employee representatives and, if there is one, to the supervisory board. In his reply, the manager gives his analysis of the situation and specifies, if necessary, the measures envisaged. Upon receipt of the response, or in the absence of a response within fifteen days, the statutory auditor informs the president of the Commercial Court. He may ask to be heard by the president of the court, in which case the second paragraph of I of Article L. 611-2 is applicable, allowing him to obtain information likely to give him accurate information on the economic and financial situation of the debtor. In the absence of a reply from the manager or if he finds that, despite the decisions taken, the continuity of the business remains compromised, the auditor draws up a special report and invites, by registered letter with acknowledgement of receipt, within fifteen days of receipt of the manager's reply or the date of expiry of the time-limit for the reply, in writing, a copy of which is sent to the president of the Commercial Court, the manager to have the general assembly deliberate on the facts noted. The general assembly meets at the latest within one month following the date of the invitation made by the auditor. If the director fails to do so, the statutory auditor convenes the general assembly within eight days of the expiry of the time-limit given to the director .

If, at the end of the general meeting, the auditor finds that the decisions taken do not ensure the continuity of operations, he shall inform the president of the Commercial Court of his actions and communicate the results to him. He may ask to be heard by the latter, in which case the second paragraph of I of Article L. 611-2 is applicable.

Ordinance No 2021-1193 of 15 September 2021  allows the statutory auditor, when it appears to him that the urgency requires the adoption of immediate measures and that the director refuses to do so or indicates that he is considering measures that he considers insufficient, to inform the president of the competent court as soon as the first information is made  to the president of the board of directors or the supervisory board or to the director of his findings and steps with a copy of all the documents useful for this information and to explain the reasons that have led him to note the inadequacy of the decisions taken. He may, on his own initiative or at the request of the president of the court, transmit to the court any additional information likely to provide it with accurate information on the economic and financial situation of the company. The statutory auditor may also, at any time, request to be heard, together with the directors, by the president of the court .

Financial events: negative net equity position, insufficient self-financing, payment incidents, non-renewal of loans required for operations, litigation or disputes that could have a significant financial impact.

Events of an operational nature: departure of key employees from the entity who have not been replaced, loss of an important market, conflicts with employees, technological or regulatory changes.

Court of Cassation, 3 March 2004, LawLex202100005473JBJ. 

Court of Cassation, 3 December 1991, LawLex202100005495JBJ, considering that the excessive attention to detail of a statutory auditor, which leads him or her to wrongly trigger a warning procedure, does not engage his liability as long as his bad faith is not established.

Court of Cassation, 14 November 1995, LawLex202100005503JBJ, for an auditor who had triggered the alert in bad faith, in the absence of facts likely to jeopardize the continuity of the company, and falsely warned the public prosecutor, by nineteen successive letters, that the exercise of his missions was being impeded.

Commercial Code, Art. L. 234-1, R. 234-1 to R. 234-4.

Commercial Code, Art. L. 234-1 and L. 612-3.

OJ No 216 of 16 September 2021. Provisions applicable as of 1 October 2021.

Commercial Code, Art. L. 234-1, L. 234-2, L. 251-15 and L. 612-3

Law No 2019-486 of 22 May 2019 relating to the growth and transformation of companies (known as the "PACTE Law").

Commercial Code, Art. L. 251-12 and R. 251-1.

Decree 2019-514 of 24 May 2019, which establishes thresholds for the appointment of statutory auditors and deadlines for developing professional practice standards.

Bankruptcy Law

13. Missions of the Statutory Auditor

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13. Missions of the Statutory Auditor

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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