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The obligation of commercial companies to prepare annual accounts

In practice, annual accounts are indispensable to provide a minimum level of information on the main accounting, financial management parameters and operations of commercial companies. The annual accounts are also intended to present, as of the closing date of each financial year, a faithful picture of the assets, the financial situation and the accounting profits of the companies' business activities. By comparing this data from these documents, from one period to the next, you can assess, at least in numerical terms, development over time. They are therefore an essential decision-making tool aiding the diverse interests of any interested party (directors; shareholders; investors; government authorities; creditors, such as bankers, suppliers; customers; competitors; commercial courts and potentially other judicial authorities, responsible for preventing and dealing with companies in difficulty) near or far through access to the company's business data as well as their financial, accounting and management situation. Taken in isolation, the annual accounts essentially contain several sets of simple indicators of accounting levels. They therefore appear to be insufficient to understand whether or not the company is managed effectively under their dynamic aspect. These documents are not capable of showing the root causes of the reported amounts and their possible developments over the short, medium or long term. This is particularly the case when it comes to re-positioning the parameters of companies' financial and accounting position in the most general context of their operations, with respect to developing their internal capacities (management effectiveness, adaptability of employees etc. ) and their external environment (customers, suppliers, investors etc. ). This is why the annual accounts must be accompanied by significant additional documents, including, primarily, the annual financial review (or management report).

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The minutes of general meetings for approval of the annual accounts of commercial companies

Once a year, the annual accounts for the last financial year, i.e., the balance sheet, the profit and loss statement and the notes, must be approved of the Annual General Meeting. More specifically, in most commercial companies (SA, SAS, SNC, SCS, SA, SARL etc. ), the members of the executive bodies are liable to heavy criminal and civil sanctions for management error, if they breach the obligation to submit annual accounts for approval by the partners or shareholders. For this reason, the members of these executive bodies must demonstrate that they have indeed submitted the company's annual accounts for the preceding financial year for approval by the partners or shareholders, who generally meet in Annual General Meeting, by drawing up minutes of the general meeting. The approval of the annual accounts is therefore strictly regulated. By approving these annual accounts, these partners or shareholders implicitly demonstrate that the documents concerned contain data that has been prepared on a true and sincere basis. They also presume that, as of the closing date of each financial year, these annual accounts reflect a faithful picture of the assets, the financial position and the book profit (or loss) for the companies' business. More generally, the approval of the annual accounts represent the indispensable tool to provide a minimum of information on the main accounting parameters, financial management and operations of commercial companies. They are therefore an essential decision making tool aiding the diverse interests of any interested person (directors; shareholders; investors; government authorities; creditors, such as bankers, suppliers; customers; competitors; commercial courts and potentially other judicial authorities, responsible for preventing and dealing with companies in difficulty) near or far, through access to the company's business data as well as by their financial, accounting and management position. For all these reasons, it is vital that the annual accounts must be approved in strict compliance with the statutory requirements.

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File : The minutes of general meetings for approval of the annual accounts of commercial companies

Part 1

Why do you need to draw up minutes of the general meeting that approves the annual accounts?

The general meeting is the only context in which the partners or shareholders may exercise their full powers of control over the executive body's management of the business and on the functioning of the company.

The minutes of general meeting, the sole tool proving that the annual accounts have been approved or rejected

The decision of the partners or shareholders to approve or refuse the annual accounts presented by the executive body of commercial companies of which they are the members, in principle, may only be made in an annual general meeting.
 
The minutes of general meeting, produced in a hard copy, remains the only solution legally acceptable to record the decisions taken by the General Meeting, and therefore in annual general meeting.
 
The probative value of the minutes of an annual general meeting is considerable. This document is legally secured by official procedures that, while contrasting, are sufficiently comprehensive, structured and rigorous. This is done by following the various regulations, that are sometimes common to all the various legal forms of companies and sometimes specific to some of them, governing the minutes in detail, with respect to:
  • their legal form; 
  • their content; 
  • the persons authorised to draw them up; 
  • the signatories; 
  • the methods for making corrections, archiving and communication; 
  • The sanction for breaching these regulations. 
 
Good to know: In companies that have only one owner, i.e. containing only one partner (for example, the EURL) or a single shareholder (for example, the SASU), the annual accounts are approved merely filing the annual accounts with the registry office of the commercial court. No minutes need to be drafted, as an exception to the rules of annual approval of annual accounts, which are common to all the other types of commercial companies. 
 

Who is required to prove that the annual accounts have been approved?

On the one hand, it is the responsibility of the executive body of each of the commercial companies to submit the annual accounts for the preceding financial year to the collective approval of the partners or shareholders convened, in principle, once a year in annual general meeting. 
 
The breach of this obligation carries with it heavy criminal sanctions, up to a six-month prison and a fine of €9,000.
 
The members of the executive bodies of each commercial company are directly affected by these penalties:
 
- The chairman or the board directors of limited companies with a board of directors;
- The members of the executive board of limited companies with an executive board and supervisory board;
- The managers of an SARL ...
 
Good to know: By way of derogation from these criminal provisions, common to all commercial companies, the directors of SAS (simplified joint stock companies) are not subject to any of these sanctions.
 
On the other hand, when the annual general meeting to approve the annual accounts is not convened within the statutory prescribed time limit, the directors will be held civilly liable for management error. In this case, they may be liable to be ordered to pay damages when it can be demonstrated that the delay caused prejudice to the company or its member shareholders or partners.
 
It is primarily and directly for these reasons that the members of the executive body of each of the commercial companies are required to prove that they have submitted the annual accounts of the previous financial year to the approval of the partners or shareholders.
 
The following proof must be provided:
 
- In SA (Ltd) companies, by the chairman or other members of the board of directors or the executive board, if the company has either of these bodies;
- In the SAS (simplified joint stock companies), by the chairman and the directors designated for this purpose in the articles of association;
- In companies with managers (SNC, SCS, SCA and SARL), by the managers.
 
Filing annual accounts online
Obligation to file annual accounts
Drawing up minutes
Obligation of commercial companies to prepare annual accounts