#Approval of Annual Accounts in France

Approving the annual accounts is a legal obligation for all commercial companies. It must take place within a set period after the end of the financial year, following a precise procedure: convening the shareholders, sending them the required documents in advance and holding a vote at a shareholders’ meeting. Failure to comply exposes corporate officers to penalties and can create difficulties in the running of the company.

Beyond the formality itself, the meeting that approves the accounts is often the moment when disputes between shareholders come to a head, when strategic decisions are challenged and when the liability of corporate officers may be called into question.

Legal obligations for approving the accounts of a French company

Commercial companies must submit their annual accounts for approval by their shareholders within a legal period from the end of the financial year. In an SARL (private limited liability company) and an SA (public limited company), this period is six months, unless extended by court order (Article L. 223-26 of the French Commercial Code (Code de commerce) (in French) and Article L. 225-100 (in French)). In an SAS (simplified joint-stock company), the articles of association organise the collective decision of the shareholders; a sole shareholder approves the accounts within the same six-month period (Article L. 227-9). Before approval, the shareholders must receive the legal documents within minimum periods set by law: the annual accounts, the management report and, where applicable, the statutory auditors’ reports.

The approved accounts must then be filed with the registry of the Commercial Court (tribunal de commerce) within a legal period. Failure to file may lead to an order to file and expose corporate officers to penalties.

Risks of failing to approve the accounts

Failing to approve the accounts on time can have several consequences. Legally, it exposes corporate officers to liability claims. In practice, it can make bank financing harder to obtain, delay the payment of dividends and weaken the company’s position in its contractual relationships.

Where, as a result of losses shown in the accounting documents, the company’s equity falls below half of its share capital, the shareholders must decide, within four months of the approval of the accounts that revealed this loss, whether to dissolve the company early. If the company is not dissolved, it must restore its equity or reduce its share capital no later than the end of the second following financial year (Articles L. 223-42 (in French) and L. 225-248 of the Commercial Code).

When the approval of the accounts is challenged

A shareholder may refuse to approve the accounts, abstain or challenge the documents submitted. These situations, which are common in companies affected by disputes between shareholders, can block the process or lead to litigation. We assist corporate officers and shareholders in handling these situations, whether by preparing a contentious meeting, responding to a challenge or bringing the matter before the court to resolve a deadlock.

Paying dividends

Dividends are paid after the accounts have been approved and distributable sums have been recorded (Article L. 232-12 of the Commercial Code), except for interim dividends paid under the conditions of that article. Distributable profit is the profit for the financial year, minus prior losses and the sums to be allocated to reserves under the law or the articles of association, plus retained earnings (Article L. 232-11). If a distribution is irregular, the company may claim repayment from the shareholders who knew it was irregular or could not have been unaware of it (Article L. 232-17 (in French)). Distributing fictitious dividends is also a criminal offence for corporate officers (Articles L. 241-3 and L. 242-6).

How we help

We prepare the meetings that approve the accounts, draft the notices of meeting, the minutes and the corresponding resolutions, and make sure the legal deadlines and formalities are met. We also act in disputes over the approval of the accounts or the payment of dividends.

See also our dedicated corporate lawyer page.

When to consult us

Before the annual meeting, to check that every formality has been complied with. When a shareholder disagrees with the accounts or with the distribution. When the legal deadlines have passed and you want to regularise the situation.

Every situation is different: the information on this page is general and does not replace legal advice tailored to your case. The firm makes no promise of outcome; it commits to the means it deploys.