Article of 21/06/2017 updated on 31/05/2022
The partners of French S.A.R.L.s must approve the financial statements by a general meeting which must be held within six months of the closing date of the financial year. Thus, with this article, we will indicate the main steps of the procedure to be followed to carry out this approval.
I – Information to know to prepare properly a general meeting
1 – Mandatory meeting within 6 months
Here is what article L.223-26 of the Commercial Code specifies:
“The approval of the accounts must take place within 6 months of the end of the financial year. If the manager does not meet the partners within this period, the public prosecutor or any interested party may request the president of the commercial court to order the manager, if necessary under penalty, to convene this meeting or to appoint an agent to do it.”
2 – The assembly
The general meeting of shareholders deliberates mainly on:
- The approval of the accounts;
- The allocation of the result;
- The discharge to the manager;
- The appointment of the manager;
- The remuneration of the management;
- The appointment of an external auditor if necessary;
- The approval of regulated agreements;
- The prior authorization of the manager for certain major transactions provided for by the articles of association (e.g. purchase of commercial premises, bank loan, etc.).
3 – The manager
He prepares the annual accounts and the management report. At the time of convening the meeting, he must also prepare the agenda, the text of the resolutions and a report on the regulated agreements.
4 – Business continuity
The accounts are closed on the assumption that business continuity is assured. It is prudent to check, in particular, the state of the actual indebtedness and its evolution as well as that of the cash in order to see if it will be able to cover this indebtedness during the next financial year. It is also advisable to check the real possibilities of bank financing, the state of the order book, etc.
II – The preparative acts of a general assembly
1 – Documents to check or prepare
- The statutes of the SARL: the manager will have to check if they do not contain special rules that derogate from the Commercial Code. If this is the case, it will of course have to take it into account in the procedure of convocation and holding of the assembly;
- Document for the appointment of the manager: he must verify that his mandate does not expire. In this case, it will be necessary to have it renewed by the assembly. He will also check whether it is necessary to approve his remuneration;
- List of regulated agreements: this is drawn up by the manager or, where applicable, by the auditor. It concerns the conventions:
- Concluded during the closed financial year between, on the one hand, the company and, on the other hand, one of its managers or one of the partners either directly or through an intermediary;
- Concluded with another company whose manager is simultaneously manager or partner of the S.A.R.L.;
- Or having taken effect during a previous financial year and which continued during the financial year in question.
- Accounting documents: obviously, the balance sheet, the income statement and the appendix must be drawn up, including the statement of guarantees, endorsements given by the company, and the inventory;
- Statutory auditor: it should also be checked whether the company has not reached a threshold or taken a stake that would lead to the obligation to appoint a statutory auditor.
2 – The reports to be drawn up
> The management report
It must mainly exhibit:
- The situation of the company during the past financial year;
- Its foreseeable evolution;
- Significant events occurring between the closing date of the financial year and the date on which it is established;
- Its research and development activities;
- The list of existing branches;
- An objective and exhaustive analysis of the evolution of the business, the results and the financial situation of the company;
- Key performance indicators of a financial nature and, where applicable, of a non-financial nature relating to the specific activity of the company when they are necessary for understanding the evolution of the company’s activity;
- For companies subject to corporate tax, the report must indicate the amount of dividends paid during the last three financial years.
The management report must be understandable by a non-specialist.
Companies which belong to the category of small businesses (which do not exceed, at the end of the financial year, two of the following three thresholds: €6 million in balance sheet total, €12 million in net turnover and 50 employees) are not required to draw up a management report.
> Other reports
- Auditor’s reports: when the S.A.R.L. has an auditor, the latter must draw up a report on the annual accounts;
- Manager’s report on regulated agreements: we have discussed its content in chapter II paragraph 1;
- Group management report: here is what Article L. 233-16 of the Commercial Code provides: “A S.A.R.L. which exclusively or jointly controls one or more other companies or which exercises significant influence over them is required to establish and publish consolidated accounts as well as a report on the management of the group” (unless it is controlled by a company which includes it in its consolidated and published accounts).
3 – Notice of meeting and information
The partners must be convened by registered letter or by e-mail at least 15 days before the meeting is held.
It will also be advisable to convene, when applicable, the auditor as well as the social and economic committee, if the latter has been set up and if the company employs at least 50 employees.
Documents to be attached to the invitation:
- The annual accounts (balance sheet, income statement, appendix);
- The management report (except exemption for small companies),
- The text of the resolutions proposed by the manager or by the partners;
- And, where applicable, the reports of the statutory auditor, the consolidated financial statements and the report on the management of the group.
4 – Particularities concerning E.U.R.L.
Only in an E.U.R.L. of which the sole shareholder is not the manager, these documents are sent by the manager to the sole shareholder at the latest one month before the expiry of the period provided for the approval of the accounts.
III – Holding of the meeting
1 – Participation and quorum
The meeting is chaired by the manager or one of the managers. If the manager is not a partner, the present partner owning or representing the largest number of shares will preside. If two partners owning or representing the same number of shares are accepting, the meeting is chaired by the oldest.
Writing an attendance sheet is not mandatory, but the statutes may provide for it. It can be useful, because it makes it possible to justify obtaining a majority.
2 – Documents to deposit at the office of the meeting (when the meeting of shareholders meets physically)
- A copy of the up-to-date statutes;
- Copies of the convening letters and acknowledgments of receipt from the partners and, where applicable, from the auditor;
- Where applicable, the attendance sheet signed by the shareholders present and the representatives;
- The powers of the representatives;
- The inventory, the balance sheet, the income statement and the annexes;
- The management report;
- The report on regulated agreements;
- Where applicable, the auditor’s report;
- The text of the draft resolutions;
- If necessary, written questions from the partners.
3 – Vote
Each shareholder present or regularly represented may, in principle, vote.
In the absence of a statutory clause, the chairman determines, in agreement with the meeting, the method of voting: vote by show of hands, ballot or secret ballot. Voting by correspondence and, more generally, by any means of telecommunication is prohibited for the approval of the annual accounts of an S.A.R.L.
Associates must approve, modify or reject accounts. The approval of the financial statements for a financial year is generally followed by the vote for a discharge given to the manager for the fulfillment of his mandate during the financial year.
Then, the partners decide on the allocation to be given to the results (profits or losses) proposed by the manager.
Apart from the standard agenda, consideration of other matters is often scheduled. It could be:
- Setting or reviewing the manager’s remuneration;
- The renewal of the manager’s term of office expiring;
- The appointment of an auditor;
- The approval of a regulated agreement;
- The authorization to be given to the manager to conclude an act;
4 – Minutes of the meeting
Any deliberation of the shareholders’ meeting is recorded in minutes, the content of which is specified in Article R. 223-24 of the Commercial Code.
The chairman of the meeting may accept or refuse to record in the minutes the observations, protests or particular statements made by certain shareholders when they so request.
5 – Particularities concerning E.U.R.L.
The power to approve the accounts belongs to the sole shareholder. This approval must occur, as for the SARL, within 6 months of the end of the financial year.
Following the approval of the accounts, the partner decides on the allocation of the result; in the event of distributable profits, it allocates dividends, if applicable.
The decisions of the sole shareholder, taken instead of the meeting, must be recorded in a special register: the register of decisions.
Approval of the accounts by deposit at the registry: when the sole shareholder is the sole manager of the company, he has the possibility of depositing in the trade and companies register, within the period of 6 months from the end of the financial year, the inventory and the annual accounts, duly signed. This deposit constitutes approval of the accounts without it being necessary to enter the deposit receipt in the decision register. However, this possibility is not recommended because it has the disadvantage of having to file the inventory, a source of information for third parties.
IV – Formalities after the meeting
1 – Filing of annual accounts
S.A.R.L. must file with the registry of the commercial court within one month of the approval of the accounts, the following documents:
- The annual accounts;
- The proposal for the allocation of the result submitted to the meeting and the voted allocation resolution;
- If applicable, the auditor’s report;
- If applicable, the consolidated financial statements, the group management report and the auditor’s report on the consolidated financial statements.
The management report does not have to be filed, but it is kept at the head office at the disposal of any person who requests it.
2 – Confidentiality of social accounts
> Confidentiality of the annual accounts of micro-enterprises
The S.A.R.L. concerned are those whose figures do not exceed, for the last closed financial year, two of the following three thresholds:
- € 350,000 total balance sheet;
- € 700,000 net turnover;
- 10 employees.
These companies may request that their accounts be kept confidential. In this case, they must attach a declaration of confidentiality to the documents filed with the registry of the commercial court.
> Small business income statement privacy
S.A.R.L. that belong to the category of small businesses can ask the registry of the commercial court that their income statement not be made public.
The companies concerned are those which do not exceed, for the last closed financial year, two of the following three thresholds:
- € 6 million in balance sheet total;
- € 12 million in net sales;
- 50 employees.
Companies wishing to benefit from this option must accompany the filing of the annual accounts with a declaration of confidentiality.
To conclude, we propose below a schedule of the main operations to be considered for the preparation and holding of an annual general meeting in an S.A.R.L.
V – Schedule of Operations
|The manager prepares the financial statements for the year ended. He prepares the management report and the text of the resolutions.
|Before the convening date.
|Convening of the meeting by registered letter or by e-mail. Must be attached to this letter:
* Financial States;
* The management report;
* The text of the resolutions;
* The report of regulated agreements;
* A form of proxy.
|15 days before A.G.M. Unless the statutes provide for a longer period.
|The partners can consult the inventory at the head office. They can also write questions to the manager.
|Between the date of the convocation and the day of the meeting.
|Possibility of requesting an extension of time to the President of the Commercial Court if the A.G.M. cannot be held within six months of the closing date of the accounts.
|Imperatively within six months of the closing date of the accounts.
|Holding of A.G.M.
* Approval of the management report and the annual accounts;
* Assignation of profit or loss;
* Approval of non-deductible expenses;
* Discussion on the other subjects on the agenda.
|Within six months of the end of the financial year.
|Deposit at the office of the court of commerce of the following documents:
* Accounts of the year;
* Proposal for profit allocation submitted to the AGM;
* Voted assignment resolution;
* Possibly: declaration of confidentiality of the annual accounts.
|Within one month of the meeting (or two months if electronic filing).
|Eventually, payment of the dividend.
|No later than nine months after the closing date of the financial year.
All these operations can partially be different if the company is a micro business or if it has an external auditor.
A Chartered Accountant will be at your disposal to give you details of each of these transactions. Feel free to contact us!
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