Associated files

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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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 obligation of commercial companies to prepare annual accounts

Part 2

Which documents should accompany the annual accounts?

Depending on their legal form and their size, commercial companies and, if appropriate, their auditors, are required to prepare documents related to the annual accounts.

Overview of the main documents to be prepared by commercial companies

The annual financial review (or management report)

All commercial companies (SNC, SCS, SARL, SA, SCA, SAS) whether they are listed (i.e., companies whose shares are traded on a regulated market) or not-listed, must produce an annual financial review.

Generally, the annual financial review permits company directors (e.g., the manager of the SARL) or the bodies responsible for management (e.g., the board of directors for a SA (limited company) to report to the company's deliberative organ (generally the General Meeting of shareholders), on their management and the company's position during the preceding financial year. The annual management report accompanied by annual accounts which it can clarify.

Among other items, this report also covers:

  • the company's research and development activities;
  • important events that have occurred between the date the last financial year ended and the date on which the report was prepared;
  • the company's likely development over the short term.


Good to know: The EURL and SASU are exempted from preparing the annual financial review, when, on the one hand, their sole shareholder, a natural person, is only responsible for the management or the chairmanship and that, on the other hand, the company does not, at the end of a financial year, exceed two of the three following thresholds: balance sheet total: €1.000,000; turnover exclusive of VAT: €2,000,000; average number of permanent employees during the year: 20.

The consolidated accounting documents

The consolidated accounting documents incorporate the annual accounts for each of the companies monitored in a group, when they fall into one or other of the three situations outlined below. They carry out adjustments in order to make it appear as if there is only one single company. This is why the content and purpose of these documents are almost identical to those of a single company (annual accounts, management report, annex).

These documents are as follows:

  • The consolidated annual accounts: these documents include the consolidated balance sheet, the consolidated profit and loss statement and a note for this balance sheet and profit and loss statement;
  • The annual report on the management of the group.

Any commercial company must prepare these documents when it fulfils at least one of the three following criteria:

- It exclusively controls one or more companies (either by directly or indirectly owning the majority of these company's voting rights; or due to the appointment, during two successive financial years, of the majority of the members of the administrative, management or supervisory bodies of these companies; or by exercising a dominant influence due to a contract with these companies);

- It jointly controls one or more companies, due to sharing the control of one or more companies jointly operated by a limited number of partners or shareholders (this is the case, for example, of a joint subsidiary) ;

- It has a notable influence on one or more companies by directly or indirectly holding at least 20 per cent of the voting rights for these companies.

The obligation to prepare these documents is also incumbent on any commercial company which, although not subject to the obligation to prepare consolidated annual accounts, does so voluntarily.

Some documents are specific to certain companies

- The report of the supervisory board. Among commercial companies, only sociétés anonymes (limited companies) with an executive board and supervisory board as well as publicly traded partnerships must prepare this report. This document records, in the form of observations, the results (for example, the irregularities in the annual accounts for the financial year) of the corporate governance exercised by the supervisory board. These comments relate primarily to the annual financial review (a document by which the company's directors or executive bodies mainly provide a report to the deliberative organ of their management during the past financial year) and the company's annual accounts.

- The report of the chairman of the board of directors or the supervisory board (as appropriate) on internal control and risk management procedures (resulting from the accounting, financial and management information; industrial activities such as environmental and occupational accident risks etc.) implemented by the company on corporate governance and the conditions for preparing and organising the work of the board (related topics: the composition of the supervisory board or board of directors; the application of the principle of balanced male - female representation; any governance charter used as reference for the company; the terms for shareholder involvement in the General Meeting etc. ) .

Among commercial companies, only publicly listed SA and SCA (basically, a generic term for any company whose shares are traded on a regulated market or on an organised market that uses a multilateral trading system) are required to prepare this report.

- The profits table for the last five financial years. Only the SA and SCA, among commercial companies, regardless of whether or not they are listed, are required to prepare this document. For these companies, a table must be included with the financial review of the management board or executive board, showing the company's profits for each of the last five financial years (or for each of the years ended since the company was established or merged with another company, if the number of these periods is less than five). This table will notably include the following elements:

  • Financial position at year end (share capital, number of shares issued, number of bonds that can be converted into shares);
  • Overall profits for the current operations (turnover excluding VAT; profit before tax, depreciation and provisions; income tax; profits after taxes, depreciation and provisions; amount of distributed profits) ;
  • Profit for operations per share (profit after tax but before depreciation and provisions; profit after taxes, depreciation and provisions; dividend paid to each share) ;
  • Staff (number of employees; payroll total; amount paid under social benefits, such as social security, charitable works, etc.).

Documents to be prepared by the auditor(s)

The auditors are independent professionals legally responsible for permanently monitoring and controlling the annual accounts (procedures frequently grouped together under the generic term of "statutory audit of accounts", notably for commercial companies.

Consequently, whenever at least one auditor has been appointed by a company (regardless of whether this appointment is compulsory or voluntary), its audit constitutes an instrument to objectively analyse the data in the annual accounts drawn up each year by the companies themselves.

In doing so, the work of these professionals produces a supplementary source of information on the annual accounts and therefore an essential decision-making tool to assist the complementary interests of any user (the company itself; its directors, partners or shareholders; its employees; investors; government authorities; creditors, such as bankers, suppliers; customers; competitors; commercial courts and possibly the other judicial authorities responsible for preventing and dealing with companies in difficulty) from near or far interested in these companies operational activities as well as their management and therefore their financial and accounting position.

The documents drawn up by these stakeholders mainly include the following:

The "statutory auditor's report on the annual accounts" (new term for this report replacing the words "general report"):

This report is mandatory for all commercial companies, whenever at least one statutory auditor is appointed for a company, regardless of the compulsory or voluntary nature of this appointment. In this document, the auditor gives a report of its work. It(they) notably outline observations on the regular nature, sincerity and faithful image of annual accounts.

Where it is believed that these characteristics are met, the auditor(s) hereby certify the regularity and sincerity of annual accounts as well as the faithful impression they give of the annual accounts of the company. If the auditor expresses reservations with respect to certifying the annual accounts or if it refuses to certify them, it should give reasons for these reservations or its refusal.

Good to know: A copy of the annual accounts must be attached to the statutory auditor's report on the annual accounts.

Auditors Report on the consolidated annual accounts
The auditors must prepare this document when the company meets at least one of the three following criteria:

- It exclusively controls one or more companies (either by directly or indirectly owning the majority of these company's voting rights; or due to the appointment, during two successive financial years, of the majority of the members of the administrative, management or supervisory bodies of these companies; or by exercising a dominant influence due to a contract with these companies);

- It jointly controls one or more companies, due to sharing the control of one or more companies jointly operated by a limited number of partners or shareholders (this is the case, for example, of a joint subsidiary) ;

- It has a notable influence on one or more companies by directly or indirectly holding at least 20 per cent of the voting rights for these companies.

The obligation to prepare this document is also incumbent on auditors whenever company which, although not subject to the obligation to prepare consolidated annual accounts, does so voluntarily.

The content and the purpose of this document are very similar to that of the auditor's report on the annual accounts of a single company. In effect, the professional statutory auditors also certify also that the consolidated statements (which incorporate the annual accounts of each of the companies when they find themselves in one or more of the three situations mentioned previously) are true and fair and provide a faithful picture of the financial position as well as the profits of all the companies in the consolidation scope..

The auditor's report expresses its opinion on the internal control and risk management procedures for preparing and handling accounting and financial data.

In this document, the auditors report on the results of their assessments of these procedures as presented by the Chief Executive Officer, or if appropriate, the board of directors or the supervisory board, in the context of the report on all the procedures, corporate governance and the conditions for preparing and organising of work of the board.

This document must be prepared by the statutory auditor when the company is a SA or a SCA that is publicly listed (basically a generic term for companies whose shares are traded on a regulated market or on an organised market using a multilateral trading system). A copy of the auditor's report must be attached to the annual accounts.

Obligation to file annual accounts
Filing annual accounts