Contributed By Herbert Smith Freehills
There are two main types of company in France: civil companies and commercial companies. Given that civil companies are less affected by corporate governance issues, due to their simpler and less widely used structure, this article will focus solely on commercial companies.
The most common forms of commercial company are limited liability companies (sociétés à responsabilité limitée – SARL), simplified companies limited by shares (sociétés par actions simplifiée – SAS) and public limited companies (sociétés anonymes – SA). In 2019, 34% of new companies created were SARL, 63% were SAS and less than 3% were SA.
Each of these entities (SARL, SA and SAS) provides their shareholders with limited liability, meaning that the liability of the shareholders is limited to their own contributions to the company.
The main characteristics of the SA, SAS and SARL are as follows:
This article will only deal with SA, SAS and SARL forms as they are the most prominent corporate forms in France, to the exclusion of other existing forms, such as partnerships limited by shares (société en commandite par actions), partnerships (société en nom collectif), limited partnerships (société en commandite simple) and societas Europaea (société Européenne).
When used in this article, the term "listed company" refers to companies listed on a regulated market (Euronext in France) and companies listed on multilateral trading facilities (Euronext Growth, the Free Market, etc).
Generally speaking, the French Commercial Code and the French Monetary and Financial Code (Code monétaire et financier) set corporate governance rules for most companies.
In addition, French companies must apply the relevant EU regulations, which are directly applicable – especially, but not exclusively, the Prospectus Regulation (Regulation (EU) No 2017/1129 of 14 June 2017) and the Market Abuse Regulation (Regulation (EU) No 596/2014) for listed companies.
Moreover, in France, the following sources of corporate governance requirements or guidelines apply or can apply to listed SAs:
By definition, soft law regulations are non-binding. However, when a company whose securities are admitted to trading on a regulated market voluntarily applies a corporate governance code, the French Commercial Code requires that company to identify any provisions of that code it has chosen not to apply, and to state the reasons for its non-compliance in its corporate governance report.
Finally, companies can set internal rules:
Companies whose shares are admitted to trading on a regulated market must comply with the mandatory corporate governance requirements set out below.
Each gender must represent at least 40% of the directors/supervisory board members. As an exception, if the board of directors/supervisory board is made up of eight members or fewer, the gender gap may not be greater than two directors/supervisory board members.
Corporate Governance Report
Each year, the board of directors or the supervisory board must submit a corporate governance report to the shareholders' general meeting providing information regarding, inter alia, the compensation paid or allocated to corporate officers in the last year and their compensation policy for the current year, the composition and conditions surrounding the preparation and organisation of the board's work, whether or not the company refers to a corporate governance code, and factors likely to have an influence in the event of a public tender offer.
"Say on Pay"
The shareholders must vote each year on the compensation policy (including on fixed, variable and exceptional compensation and the procedure set forth for the determination, modification and implementation of the said policy) for all corporate officers for the current financial year (ex ante vote). If such vote is negative, the compensation policy is the same as the one applicable for the previous financial year. In addition, the shareholders must vote each year on the section of the corporate governance report relating to the compensation applicable to all corporate officers. If this vote is negative, the compensation allocated to the directors or supervisory board members is suspended until a revised compensation policy is approved by the shareholders (global ex post vote). Finally, the implementation of the compensation policy for executive corporate officers (excluding the members of the board of directors and the members of the supervisory board) in respect of the previous financial year is submitted annually to the shareholders (individual ex post vote). If this vote is negative, variable and exceptional compensation cannot be paid to these persons.
Director(s) or Supervisory Board Member(s) Representing Employees
The articles of association of an SA must provide for the appointment of member(s) representing the employees to the board if, over two consecutive financial years, the SA employs: (i) at least 1,000 permanent employees together with its direct or indirect subsidiaries having their registered offices in France; or (ii) at least 5,000 permanent employees together with its direct or indirect subsidiaries having their registered offices in France and abroad. There may be exceptions to this obligation (in particular for the direct or indirect subsidiaries of a company subject to this obligation). The number of directors/supervisory board members representing the employees shall be: (i) at least one in companies that have eight or fewer directors/supervisory board members; and (ii) at least two in companies that have more than eight directors/supervisory board members.
Director(s) or Supervisory Board member(s) Representing Employee Shareholders
One or more directors/supervisory board members representing the employee shareholders must be appointed if the employees of the listed company and its affiliates hold more than 3% of that company's share capital.
An audit committee must be established to assist the board of directors or the supervisory board so that the latter has the information and resources needed to ensure the quality of internal controls and the reliability of the financial information provided to shareholders and the financial markets (see 7.2 Requirements for Directors Concerning Management Risk and Internal Controls).
The gender balance obligation mentioned in 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares is also applicable to companies that, for the third financial year in a row, employ an average of at least 250 permanent employees and have a net turnover (chiffre d'affaires) or a total balance sheet (total de bilan) of at least EUR50 million.
Companies that have a turnover or a consolidated turnover exceeding EUR100 million and at least 500 employees, or that are part of a group whose parent company has its registered office in France and that has at least 500 employees, must implement a programme to prevent and detect corruption.
Duty of Care
An SA employing, at the end of two consecutive financial years: (i) at least 5,000 employees together with its direct or indirect subsidiaries having their registered office located in France; and (ii) at least 10,000 employees together with its direct or indirect subsidiaries having their registered office located in France or abroad, must establish and implement a vigilance plan (plan de vigilance). The vigilance plan and the report on its effective implementation must be included in the management report (rapport de gestion). The vigilance plan's role is basically to identify, analyse and rank potential risks, and to propose action in order to mitigate or prevent these risks.
Corporate Governance Report
This obligation, as presented in 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares, is also applicable to non-listed SAs, with it being specified that the content of such report is slightly simplified.
Non-financial Performance Declaration
The management report must contain a non-financial performance declaration (déclaration de performance extra-financière) if the company is: (i) an SA with securities admitted to trading on a regulated market that has more than 500 permanent employees and a turnover exceeding EUR40 million or a total balance sheet exceeding EUR20 million; or (ii) an SA with securities not admitted to trading on a regulated market that has more than 500 permanent employees and a turnover or a total balance sheet exceeding EUR100 million. This declaration replaces the former report on corporate social responsibility. The declaration's role is to present the business model of the company (or its group), to identify the main risks in several categories of information (social and environmental consequences of the company's business, respect for human rights and anti-corruption efforts), to describe the policies implemented to prevent or mitigate the risks, and to specify the results of such policies.
Director(s) or Supervisory Board Member(s) Representing Employees
This obligation, as mentioned in 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares, is also applicable to non-listed companies.
Director(s) or Supervisory Board Member(s) Representing Employee Shareholders
This obligation, as mentioned in 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares, is also applicable to non-listed companies employing, at the end of two consecutive years: (i) at least 1,000 permanent employees together with its direct or indirect subsidiaries having their registered office located in France; or (ii) at least 5,000 permanent employees together with its direct or indirect subsidiaries having their registered office located in France and aboard.
Key recent developments in relation to corporate governance in France are as follows:
Key issues and requirements for companies in relation to reporting on environment, social and governance (ESG) issues include:
The French Government has recently enacted a series of extraordinary measures in relation to governance to address any coronavirus (COVID-19) impacts or restrictions:
Organisation of Shareholders’ Meetings
If shareholders’ meetings are scheduled to take place at a time when, due to administrative measures, the shareholders cannot gather together, French companies can:
The AMF further advised listed companies to encourage their shareholders to exercise their voting rights prior to the meeting either through remote voting or electronic voting, and to ensure that the shareholders’ meeting is transmitted live on their website.
Timing of Annual Shareholders’ Meeting and Corporate Filings
The regulations provide for:
In addition, ESMA expects that national regulatory authorities (the AMF in France) during this specific period not to prioritise supervisory actions against issuers in respect of the upcoming deadlines regarding annual and half yearly financial reports.
Organisation of Board Meetings
The board of directors, management board and supervisory board can exceptionally hold their meetings either using videoconferencing/telecommunication or through written communication, irrespective of any clause to the contrary in the articles of association or internal regulations or absence thereof.
The French Government further requires large French companies and their subsidiaries that apply for an extension of tax and social security payments or a government-guaranteed loan to commit to not paying dividends in 2020 to their shareholders in France or abroad (excluding entities with a legal obligation to distribute a fraction during the year 2020) and not to engage in share buybacks in 2020.
In an SA, the articles of association determine whether the company has a one-tier or a two-tier board system:
One-tier board system
The SA is managed by a board of directors, which appoints a chief executive officer (CEO) (directeur général), who is necessarily a natural person, in charge of the daily management of the company, and potentially one or more deputy CEO (directeur général délégué). The chairman of the board of directors may combine its functions with those of the CEO. The CEO and the deputy CEO can also be directors.
Two-tier board system
The administration and management of the company is carried out by a management board composed of one or more natural persons, while a supervisory board, composed of natural or legal persons, appoints the management board members and oversees their management. It is not possible to be a member of the supervisory board and the management board at the same time.
Please refer to 4.3 Board Composition Requirements/Recommendations for the composition of the board of directors (which is similar to the composition of the supervisory board).
In an SAS, the shareholders have complete freedom to set the nature and the composition of the management structure and its operating rules in the company's articles of association. However, French law provides for a mandatory corporate body, either a natural or legal person, called a "president" in charge of representing the company.
An SARL is managed by one or more managers (gérant). The number of managers is freely chosen and set in the articles of association. Only natural persons can assume the functions of a manager in an SARL.
One-tier board system
The board of directors determines the broad lines of the company's business activities and ensures their implementation. Within the limits of the corporate interest of the company, while also taking into consideration environmental and social issues related to its activity, and of the powers expressly granted by the law to the shareholders (which are discussed in 5.2 Role of Shareholders in Company Management) and to the CEO and deputy CEO(s) (day-to-day management of the company), the board of directors deals with all matters relating to the conduct of the company's business and decides all pertinent issues through its deliberations. Some decisions or acts are exclusively reserved to the board of directors – in particular, the convening of general meetings, the authorisation of related-party agreements, the issuance of bonds, and the granting of endorsements and guarantees.
The CEO and the deputy CEO(s) are in charge of the day-to-day management of the company, within the limits of the corporate object. However, in dealings with third parties, acts of the CEO or the deputy CEO(s) that are beyond the scope of the corporate object are validly binding on the company, unless it can prove that the third party was aware that the act in question was beyond the scope of the corporate object or that, given the circumstances, it could not have been unaware of that fact.
Two-tier board system
The management board is vested with the most extensive powers to act on the company's behalf in any circumstances. However, these powers must be exercised within the limits of the corporate object, the corporate interest of the company, while also taking into consideration environmental and social issues related to its activity, and the powers expressly attributed by the law to the supervisory board and the shareholders. However, in dealings with third parties, acts of the management board that are beyond the scope of the corporate object are validly binding on the company, unless it can be proved that the third party was aware that the act in question was beyond the scope of the corporate object or that, given the circumstances, the third party could not have been unaware of that fact. Some decisions or acts are exclusively reserved to the management board – in particular, the issue of bonds.
Unlike the board of directors, the role of the supervisory board is limited to oversight of the mission of the management body, meaning that the supervisory board is not involved in the management of the company. However, some decisions are exclusively reserved to the supervisory board – in particular, the appointment of the management board members, the authorisation of related-party agreements, and the granting of endorsements and guarantees.
The company is represented in its dealings with third parties by a president appointed under the conditions set out in the articles of association. The president is vested with the most extensive powers to act on behalf of the company in all circumstances, within the limits of the corporate object. However, in dealings with third parties, acts of the president that are beyond the scope of the corporate object are validly binding on the company, unless it can prove that the third party was aware that the act in question was beyond the scope of the corporate object or that, given the circumstances, the third party could not have been unaware of that fact.
The shareholders have complete freedom to allocate the different types of decisions between the existing bodies in the company's articles of association, within the limits of the powers expressly granted by the law to the shareholders.
The French Commercial Code gives shareholders the option of determining the extent of the manager's powers, within the limits of the powers expressly granted by law to the shareholders. As a result, the articles of association may limit these powers and require an authorisation from shareholders before certain contracts are concluded or "material" transactions are executed.
If there are several managers, each manager acts separately, unless otherwise provided in the articles of association.
In dealings with third parties, the manager is vested with the most extensive powers to act on behalf of the company in all circumstances.
With the exception of decisions made by an SA board of directors and supervisory board, which responds to certain formal rules described below, no specific decision-making process is set out in the French Commercial Code for the other bodies.
An SA's board of directors and supervisory board are collegiate bodies, which means that no decisions can be made individually by a board member. The convening procedures are freely determined in the articles of association and clarified in the internal regulations, if any. In principle, meetings are convened by the chairman of the board but, under certain circumstances, the CEO, a management board member and/or a group of directors or a group of supervisory board members may ask the chairman to convene a meeting of the board with a specific meeting agenda. The statutory auditor(s) must be given notice of each meeting of the board of directors or the supervisory board reviewing or approving the annual or interim accounts. The board of directors or the supervisory board can only validly deliberate if at least half of its members are present, with decisions being made by the majority of the attending or represented members.
As mentioned in 3.1 Bodies or Functions Involved in Governance and Management, the shareholders of an SA can choose between a one-tier board system (single board of directors) or a two-tier board system (management board and supervisory board).
SAs with a single board of directors are largely predominant (in 2018, about 88% of SAs had a single board and directors, and 12% had a management board and a supervisory board).
In SAs whose securities are admitted to trading on a regulated market, the law states that the board of directors and the supervisory board must be assisted by an audit committee. An SA can also decide to create other specialised committees, such as an appointments committee (recommended by the AFEP-MEDEF code), a compensation committee (recommended by the AFEP-MEDEF code), a governance committee, etc. The selection of the members of the specialised committees is made on the basis of their specific skills and experience.
Given the relative scarcity of the two-tier board system, sections 4.2 Roles of Board Members to 4.11 Disclosure of Payments to Directors/Officers will only deal with SAs with a single board.
In principle, the management of an SAS is performed by its president. Nevertheless, the articles of association may freely provide for a board (or several boards), whose structure and composition is freely set by the shareholders.
There is no board of directors in the SARL, as the management is exclusively performed by its manager(s).
The board of directors is a collegial body mandated by all the shareholders. Consequently, directors do not have any individual power or rights (except with respect to information rights) and so cannot act separately, except when they carry out a specific assignment (mission exceptionnelle) at the request of the board of directors.
As a reminder, the board of directors determines the company’s business strategy and ensures its implementation, pursuant to its corporate interest, while also taking into consideration environmental and social issues related to the company’s activity. With due respect to the powers expressly given to the shareholders, the CEO and the deputy CEO (if any), and within the limits of the corporate object, it addresses all questions related to the company’s proper functioning and, by its decisions, governs the affairs that concern it.
In addition, the directors who are members of a specialised committee must fulfil the missions granted to such specialised committee.
With respect to SAs, specific composition requirements include the following –
Directors are appointed by an ordinary resolution of the shareholders' meeting. Following a vacancy created by the death or resignation of a director, it is possible for the board of directors to provisionally appoint a director, whose appointment must be ratified by an ordinary resolution of the next shareholders' general meeting.
The chairman of the board of directors is appointed by the board of directors from amongst the directors and must be a natural person.
The CEO and the deputy CEO(s) (if any) are appointed by the board of directors (on proposal of the CEO for the deputy CEO).
Directors can be removed by ordinary resolution of the shareholders' meeting at any time, for any reason.
The chairman of the board of directors can be removed by the board of directors at any time, for any reason.
However, the dismissal of the directors or the chairman of the board may give rise to an award of damages if it is abusive (eg, if there are insulting or vexatious circumstances, if it is impossible for the director or the chairman to present his or her observations to the general meeting/board of directors, or if he or she is unaware of the cause of his or her dismissal).
The CEO and the deputy CEO, if any (on proposal of the CEO), may be dismissed at any time by the board of directors. However, if the dismissal is decided without just cause, the CEO and the deputy CEO(s) may claim damages to compensate the harm suffered.
For companies listed on a regulated market, the French Commercial Code requires the appointment of at least one independent director in the audit committee. However, it does not define the term "independent".
The AFEP-MEDEF code defines an independent director as a person who has no relationship with the company, its affiliate or its management's members that could compromise her or his judgement. To illustrate this definition, the AFEP-MEDEF code sets out a list of criteria to determine whether or not a director is independent.
The AFEP-MEDEF code recommends that independent directors represent at least half of the directors in listed companies without controlling shareholders and one third of the directors in controlled listed companies.
Regarding conflicts of interest, the AFEP-MEDEF code recommends that the directors disclose every situation that could lead to a conflict of interest, and all conflicts of interest that would occur. It also recommends that the directors do not discuss and vote on matters that create a conflict of interest for them.
The CEO must provide the directors with all the documents and information necessary for the performance of their duties.
In addition, the CEO and the deputy CEO(s) must act in accordance with the corporate interest, and comply with the law and the company's articles of association.
Directors owe their duties to the shareholders and the company. As discussed in 4.8 Consequences and Enforcement of Breach of Directors' Duties, under certain circumstances, directors can be liable toward third parties in case of a breach of their duties.
Directors must discharge their duties solely in accordance with the corporate interest, which corresponds to the interest of all the stakeholders and is distinct from the interest of the shareholders, the employees or creditors.
A breach of these duties can be enforced by:
The directors are individually (if the breach can be attributed to a specific director) or jointly civilly liable for such a breach.
Directors and officers can be held liable for four kinds of liabilities:
The liability of a director/officer can be limited or excluded in the following cases:
As developed in 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares, in companies listed on a regulated market, the "say on pay" mechanism sets the compensation of the corporate officers;
In addition, every year the shareholders set the global amount of compensation to be granted to the directors. The AFEP-MEDEF code recommends that the board’s compensation policy shall take into account the regular and actual attendance of each director at meetings of the board and committees and the amount shall therefore consist primarily of a variable portion.
The corporate governance report prepared by companies listed on a regulated market must provide the total remuneration and benefits of any kind paid or allocated to all corporate officers in the last year, including, inter alia, severance pay and defined-benefit pension plans, and any compensation paid or allocated by a company included in the same consolidation scope.
The corporate governance report of companies listed on a regulated market is made public (see 6.2 Disclosure of Corporate Governance Arrangements).
In addition, the AFEP-MEDEF code recommends that all executive corporate officers’ compensation components, whether potential or vested, must be publicly disclosed, immediately after the meeting of the board approving them.
The key document that governs the relationship between the company and its shareholders is the articles of association, which create a legally binding relationship between the shareholders and the company, and governs that relationship as well as the management of the company.
The original articles of association are filed with the court registrar by the initial shareholders as part of the process of registering the company, and may be amended at any time by the shareholders (in respect of the SAS, the articles of association may provide that for certain specific decisions the President is entitled to amend the articles of association). In any case, any updated version of the articles of association must be made publicly available through the court registrar.
Applicable laws and, possibly, the articles of association grant the shareholders specific rights over how the company is managed, in addition to their right to dividends. These specific rights are often exercised in shareholder meetings and include:
In addition to the articles of association, the shareholders may also enter into a shareholders' agreement containing specific provisions related to the governance of the company. The shareholders' agreement may be enforceable against the company if it is signed by or in the presence of the company. In principle, provisions in shareholders' agreements are not public information, unless the agreement involves a public listed company, in which case certain provisions must be publicly disclosed (see 6.2 Disclosure of Corporate Governance Arrangements).
The shareholders are not responsible for the day-to-day management of the company, which is reserved to the corporate officers.
Under French law, the executive officers of an SA, the president of an SAS and the manager(s) of an SARL have very broad powers to manage and represent their company vis-à-vis third parties.
However, the shareholders can play a more or less important role in company management through:
In any case, shareholders must refrain from interfering in company management, or the courts may characterise them as de facto corporate officers, which could result in them being personally liable under criminal, tax and civil law, in lieu of, or together with, de jure corporate officers, if the company were to breach applicable laws.
Under applicable French laws, two types of general shareholder meetings – ordinary and extraordinary – are held, depending on what is at stake. Both types of general meetings are governed by a separate set of rules (for quorum, majority voting, etc) in order to ensure that the interests of each shareholder, in particular minority shareholders, are effectively safeguarded. Mandatory provisions may be adjusted in the articles of association, especially in companies incorporated as an SAS. Within a company with a sole shareholder, the decisions taken unilaterally by the shareholder (décisions de l'associé unique) do not necessarily have to comply with French legal provisions for shareholders' meetings.
As part of shareholders' general oversight of the management and the business of the company, at least one ordinary shareholder meeting must be held annually to handle general matters related to the previous financial year, in particular through votes approving:
For listed companies, pursuant to the “say on pay” mechanism, the compensation of corporate officers must be approved at an ordinary general meeting (see 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares).
Extraordinary general meetings are convened to deal with specific key matters, including the amendment of the articles of association, the launch of a liquidation process, the approval of a merger, or any change to the share capital of the company.
Shareholder meetings are convened by the chairman of the board, the competent corporate officer of the company, or any person authorised to do so under the company's articles of association. Sufficient notice of the meeting must be given (at least 15 days in an SA and an SARL), by post, e-mail or a press release depending on the corporate form of the company and the provisions of its articles of association. The notice must contain certain mandatory information in order to ensure that shareholders are duly informed of which decisions will be discussed. For a public listed company, the notice must be released in the mandatory legal announcements bulletin (Bulletin d'Annonces Légales Obligatoires) within an appropriate timeframe.
Shareholders have a right to the information necessary for them to take the appropriate decisions. They must be provided with, or have access to, all the requisite supporting documents, including the meeting agenda, draft resolutions, management report, financial statements, articles of association, and minutes of the shareholders' meetings in the last three financial years.
Shareholder meetings may be held physically at the company's registered office (or any other place specified in the notice) or, under certain conditions, either remotely using telecommunications (eg, videoconferencing) or by written consultation.
Quorum and Majority
Quorums and majorities required to attend a general meeting depend on the corporate form of the company, the provisions of the articles of association and the nature of the decision at stake.
For example, the necessary attendees for an SA – it being understood that the articles of association may always require higher quorums and majorities – are set out below.
Ordinary general meetings
On first notice of meeting, attending or represented shareholders must represent at least 20% of voting shares (no quorum is required on a second call) and a simple majority of the attending or represented shareholders with voting rights is required to adopt an ordinary decision.
Extraordinary general meetings
On first notice of meeting, attending or represented shareholders must represent at least 25% of voting shares and at least 20% on a second call and a two-thirds majority of the attending or represented shareholders with voting rights is required to adopt an extraordinary decision.
Under certain conditions, the shareholders are entitled to be represented at meetings by a proxy, or to vote by correspondence or electronic voting.
Applicable laws provide that certain decisions require a unanimous vote of the shareholders – in particular, changing the nationality of the company or increasing the shareholders' financial commitments requires a unanimous vote of the shareholders.
Compensation of Shareholder Losses
Corporate officers may be liable for damages to shareholders for breach of the applicable laws or the articles of association, or if they have engaged in misconduct or negligence in the conduct of the management of the company (see 4.9 Other Bases for Claims/Enforcement Against Directors/Officers).
Compensation of Company Losses
In addition, under certain conditions any shareholder is entitled to bring a lawsuit against the corporate officers on behalf of the company to obtain damages for the company's loss (action ut singuli). If the corporate officers are found liable, damages are paid to the company (see 4.9 Other Bases for Claims/Enforcement Against Directors/Officers).
In order to protect their right to information, minority shareholders separately or jointly holding more than 10% of the share capital in an SARL, and 5% in an SA or SAS, are entitled to ask the court to appoint an expert in order to audit one or more specific and suspicious corporate operations carried out by the company. This request can be made after written questions sent to the president or the chairman of the board have gone unanswered for one month.
Shareholders of a public listed company are required to notify:
Shareholders who have entered into an agreement to act in concert by buying, selling or exercising voting rights must disclose this to the AMF.
All companies must file the following financial documents with the court registrar:
These financial documents must be filed in the month following approval of the annual financial statements by the shareholders at the general meeting, or within two months if such filing is done electronically.
Where company managers have not filed annual financial statements within the time limits provided for in the applicable legal provisions, the presiding judge of the court may order the managers to do so promptly in an injunction accompanied by a regular financial penalty for any further delays.
Public listed companies also have the following additional periodic reporting obligations:
Although French listed companies are no longer legally required to disclose interim or quarterly financial information, most issuers still voluntarily comply in accordance with a recommendation by the AMF to continue disclosing such information on a regular basis.
The board of directors or supervisory board of an SA is required to set up a specific report on the corporate governance of their company with specific mandatory provisions, and append it to the management report (see 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares).
Companies must file the financial documents mentioned in 6.1 Financial Reporting with the court registrar.
In addition, companies are required to provide the court registrar with updated constitutional documents and information during the life of the company, including amendments of the articles of association, changes of registered office, changes to the corporate officers and statutory auditors, and changes in the share capital, together with the related corporate documentation implementing these changes.
This corporate documentation is made available publicly by the court registrar, and the related changes must be published in a journal of legal notices (Journal d'annonces légales).
External auditors are in charge of auditing the company's financial statements and giving the shareholders a fair view of the company's financial situation.
For an SA, an external auditor has to be appointed regardless of the company's results; if the company publishes consolidated results, a second external auditor must be appointed.
To ease the burden of these requirements, new regulations have recently been enacted to harmonise the thresholds under which the appointment of an auditor by commercial companies is not mandatory.
Taking into account the auditor's specific mandate, applicable laws have clarified that the external auditor should be independent from the company:
The management report on a listed SA must contain details on the procedures the company has implemented for risk management and internal controls.
The shareholders and/or the board of directors are entitled to include a specific set of rules in the articles of association and in the company's internal rules to implement particular provisions on risk management and internal control procedures within the company. It is common for risk committees to be set up to review the conduct of the company's business by the board of directors and corporate officers. In general, risk committees are required to give their opinion on the internal procedures enacted by the company to ensure compliance with applicable laws and regulation, and on the choice of statutory auditor.
In addition, if statutory auditors notice facts that are likely to compromise business continuity in the course of their duties, they must inform the corporate officer(s), who must provide the auditors with an answer about the situation of the company.