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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 3

Preparing annual accounts

The annual accounts contain vital information. They must be rigorously prepared by the companies concerned.

Companies required to prepare annual accounts

All commercial companies, whether they are publicly listed (that is to say, companies whose shares are traded on a regulated market) or not, and even if they have a non-commercial ('civil', in French) business activity, are required to prepare annual accounts for each financial year: The SNC, SCS, SARL, SA, SAS and private practice company (SEL) with limited liability (SELARL); limited company (SELAFA); limited liability partnership (SELCA); simplified joint stock company (SELAS).

Filing annual accounts

Overview of a few practical modalities for preparing annual accounts

The obligation to prepare annual accounts falls on the executive body of each commercial company

-In the SA , this responsibility falls on the board of directors or the executive board, if the company has one or more of these bodies;

- In the SAS (simplified joint stock companies), by the Chief Executive Officer and the directors designated for this purpose in the articles of association;

- In companies with managers (SNC, SCS, SCA and SARL), by the managers.

Good to know: If there is more than one manager, the annual accounts must be prepared by all managers. Moreover, in EURLs and SASUs, it is the managing director (whether or not this is the sole partner or sole shareholder), in the first case, and the Chief Executive Officer in the second case, who must take on this role.

Periodicity and deadlines for preparing annual accounts

The annual accounts, as their name indicates, must be prepared for each financial year. The financial year represents, in principle, the twelve month period, selected to assess the results of the company's business, using accounting techniques.

In principle, the annual accounts for every financial year must be prepared by the executive bodies of commercial companies at the end of that financial year.

Good to know: The closing date of the financial year, in principle, corresponds to the last day of this twelve month period. Usually the financial year follows the calendar year and ends on 31 December. But it is possible to begin, and therefore end, during the month.

However, in practice, irrespective of tax declaration deadlines for the profits of commercial companies, the annual accounts are usually prepared over more generous time limits, starting from the closing date of the last financial year and which differ depending on the type of company.

Therefore, these delays are, for example:

- For the SNC and the SARL: five and a half months from the end of the financial year (i.e., no later than at least fifteen days before the Annual General Meeting called on to approve the annual accounts);
- For the SA with an executive board, three months from the end of the financial year.