Approving annual accounts: what must a French company director do each year?

The approval of accounts passes for a formality; it is in fact the backbone of the annual corporate housekeeping, and the first point checked by any buyer, any bank and any auditor. Missing or late approvals are paid for years later, in a pre-sale due diligence.

1. Closing the accounts: who, when, how

The management body, the manager of a SARL, the president or the body designated by the articles of a SAS, closes the annual accounts prepared by the accountant: balance sheet, income statement, notes. It prepares the management report where the company is required to produce one, small companies within the accounting thresholds being exempt under conditions. Closing the accounts is a dated management decision, an indispensable preliminary to the convening: approving accounts that were never formally closed is a classic defect of neglected corporate housekeeping.

The officer should agree an annual reverse timetable with the accountant: closing date, convening, meeting, filing, because each step conditions the next.

2. Deciding on time: SARL, SAS, sole shareholder

In the SARL, the management report, the inventory and the annual accounts are submitted to the shareholders in general meeting within six months of the year end, subject to extension by court decision; failing that, the public prosecutor or any interested party may have the convening ordered under a periodic penalty (article L. 223-26 of the French Commercial Code). In the SAS, the approval of accounts is one of the mandatory collective decisions, taken in the forms and under the conditions set by the articles (article L. 227-9); where the company has a sole shareholder, that shareholder approves the accounts within six months of the year end, and where the sole shareholder, an individual, is also the president, filing the signed accounts with the registry within that period amounts to approval.

For a 31 December year end, the operative deadline is 30 June: that date, not the filing deadline, should structure the accountant’s and the lawyer’s calendar.

3. The standard resolutions and the allocation of the result

The annual decision has a constant core: approval of the accounts and of non-deductible expenses, discharge of the officer where applicable, allocation of the result, legal reserve up to its ceiling, retained earnings, possible distribution, and approval of the related-party agreements. A dividend distribution follows its own conditions, the existence of distributable profits and a paid-up capital, and the decision must set its payment timetable.

The allocation of the result is a patrimonial decision, not boilerplate: reserving, carrying forward or distributing is decided each year in view of cash, projects and the shareholders’ tax position.

4. Related-party agreements: do not forget them

Agreements between the company and its officers or significant shareholders, atypical remuneration, services invoiced by a holding company, interest-bearing current accounts, leases with the officer’s SCI, fall under the related-party control specific to each corporate form: a special report and a shareholder vote, under rules that differ between the SARL and the SAS. Omission does not in principle invalidate the agreement, but it deprives the company of a control and leaves the harmful consequences with the interested party.

The annual reflex: keep the list of current agreements up to date and send it to the accountant with the year-end file, so that the special report is complete.

5. Filing with the registry and the confidentiality option

The approved accounts are filed with the registry within one month of approval, or two months where filing is electronic (articles L. 232-22 and L. 232-23 of the French Commercial Code). Micro-companies may declare their accounts confidential, except companies referred to in article L. 123-16-2 and companies whose activity consists of managing equity holdings and securities, holding companies included; small companies may ask that the income statement not be made public, and medium-sized companies may opt for a simplified presentation of the balance sheet and notes, companies belonging to a group and companies referred to in article L. 123-16-2 being excluded from the latter two options (article L. 232-25). The option is ticked at the time of filing: forgotten, the accounts are public.

For an officer who values discretion, the confidentiality option is checked every year at filing, and its availability is reviewed whenever the company crosses the thresholds or joins a group.

6. What the officer risks by abstaining

Failure to hold the meeting on time exposes the officer to an injunction under a periodic penalty (article L. 223-26 of the French Commercial Code for the SARL) and constitutes actionable mismanagement. Failure to file the accounts exposes the company to sanctions and opens the way to an injunction; above all it sends a public signal of disorder, read by banks, credit insurers and business partners. And at the time of a sale, reconstructing years of missing approvals delays the transaction and feeds the buyer’s negotiation.

Regularisation is always possible and always preferable: reconstituting the missing approvals before a third party asks for them turns a risk into a simple catch-up.

7. Delegating the corporate housekeeping

The annual corporate housekeeping, convening notices, minutes, filings, registers, is usefully delegated: it follows a fixed calendar, and a missed step usually comes to light at the worst moment: in an audit or a sale. The firm takes it on in coordination with the accountant, who remains in charge of the figures; the officer signs, decides the allocation and keeps control of the choices.

For a group or a multi-company director, the point is consistency: the same templates, the same calendar, the same up-to-date registers, which is what makes the difference in a due diligence.

Frequently asked questions

See also: the corporate health check for your company.

This information is general and does not constitute legal advice. Every transaction calls for its own analysis.