The PACTE (Plan d’Action pour la Croissance et la Transformation des Entreprises) law of April 11th, 2019 has simplified the obligations of French companies in terms of appointment of statutory auditors. The new rules are of particularly important within the context of the approval of French companies’ yearly accounts.
An auditor must only be appointed by commercial companies that exceed at least two of the three thresholds requiring the appointment of a statutory auditor (i.e. (i) turnover of 8 million Euros, (ii) total balance sheet of 4 million Euros and (iii) 50 employees).
In groups of companies:
- the group parent company will need to appoint a statutory auditor if two of those three reference thresholds are exceeded jointly by the group companies ; and
- the companies controlled by the group parent company will have to appoint a statutory auditor if they exceed two of the three following thresholds: i) turnover of 4 million Euros, (ii) total balance sheet of 2 million Euros, and (iii) 25 employees.
We believe that these lower thresholds should only be taken into account by subsidiaries of French companies, which must themselves appoint a statutory auditor because they form, with the subsidiaries under their control, a group that exceeds the applicable thresholds on a consolidated basis.
The law is nevertheless not clear in this respect and our interpretation is not in line with the position of the National Auditing Body (Compagnie Nationale des Commissaires aux Comptes). However, if the lower thresholds were to be applied to subsidiaries of a foreign company, this would require the appointment of a statutory auditor in situations where it would not have been required before the new PACTE law, which would thus be contrary to the intentions of the legislative body and objectives of the Law.
The mandate of a statutory auditor generally lasts six years. However, if a statutory auditor is appointed within a group of companies or on a voluntary basis, his mandate may be limited to three financial years and exercised in a simplified way (specific audit rules for “small companies”).
French companies do not have to (re)appoint a statutory auditor if they do not exceed two of the three thresholds set for the compulsory appointment of a statutory auditor in the course of the two preceding financial years.
Appointment in accordance with the articles of association
When the articles of association provide for the appointment of a statutory auditor without referring to the legal conditions for such appointment, the appointment will be required even if the thresholds set by law are not exceeded.
In the same way, the appointment of a deputy statutory auditor is no longer required by law since the “Sapin II » Law of December 2016, unless the statutory auditor is a natural person or a single-member company. Nevertheless, the appointment of a deputy statutory auditor will always be required if it is provided so in the articles of association without any reference to the conditions for appointment set by the law.
In this area, as is the case in many others, it is therefore essential to draft the articles of association most carefully.