Two mandatory procedures for French companies:
1 – The appointment of an official auditor
2 – A sustainability report “Corporate Sustainability Reporting Directive (CSRD)”
When it comes to ensuring the transparency and reliability of financial information within a company, the appointment of an auditor is of crucial importance.
This independent professional is responsible for controlling the regularity and sincerity of the company’s accounts, as well as verifying compliance with legal and regulatory obligations in accounting matters.
The thresholds for appointing an auditor vary depending on different criteria, such as turnover, workforce or the nature of the company’s activity.
On the other hand, in order to encourage the sustainable development of companies, the European directive CSRD “Corporate Sustainability Reporting Directive” sets new standards and obligations for extra-financial reporting.
It was established by the ordinance of December 6th 2023 and Decree 2023-1394 of December 30st 2023, it concerns large companies and SMEs listed on the stock exchange.
This directive has been applicable for certain companies on management report on financial years beginning on or after January 1st 2024.
I – The thresholds for appointment of an official auditor in France
1 – Definition of an auditor
He is a professional registered on the list of auditors, who is vested with a legal mission defined as follows:
Control of the regularity and sincerity of the accounts of legal entities. Thus, he verifies that the accounts are consistent with the actual situation of the company and that the law is respected in the context of the operation of the company.
Prevention of company difficulties within the framework of the alert procedure.
His intervention results in certification.
When he notices irregularities or inaccuracies, he must report them at the next general meeting. He is also obliged to inform the public prosecutor of the criminal acts of which he is aware.
Some companies sometimes give a one-off mission to an auditor. These missions most often consist of certifying intermediate accounts before a loan request, formulating an opinion on forecast accounts, establishing certifications for obtaining subsidies or having an acquisition audit before a possible buyout procedure.
2 – The thresholds for appointing an auditor
All companies, regardless of their legal status, must appoint an auditor when they exceed, at the end of their accounting year, two of the following thresholds:
balance sheet total greater than 5 million euros;
turnover excluding tax greater than 10 million euros;
number of employees greater than 50.
For companies controlled directly or indirectly by an entity required to appoint an auditor, the thresholds are lower:
balance sheet total greater than 2.5 million euros;
turnover excluding tax greater than 5 million euros;
number of employees greater than 25.
Associations must make the nomination if they receive more than €153,000 per year from donations and public subsidies combined.
Certain associations are required to appoint an auditor regardless of the sums received, these include:
associations recognized as being of public utility;
associations that issue bonds;
associations which grant loans for the creation or development of businesses, or for the realization of integration projects by individuals.
3 – The procedure for appointing the auditor
He can be designated in the statutes or appointed at a general meeting. He is sometimes appointed by court decision in the event of failure or recusal of the auditor in office.
It is mandatory to appoint a titular auditor as well as an alternate auditor.
The partners freely choose the auditor from among the persons registered on the list of auditors.
4 – The fees of the auditor
They depend on the number of hours necessary for the proper execution of the mission in compliance with the ranges defined by decree as well as the hourly rate retained by each firm.
The auditor’s fees are the responsibility of the company he controls.
II – Corporate Sustainability Reporting Directive (CSRD)
Applicable since January 1st 2024, the CSRD sets new standards and obligations for extra-financial reporting. It concerns large companies and SMEs listed on the stock exchange.
1 – What is CSRD Report?
The European Commission established the CSRD as part of the European Green Deal and the carbon neutrality strategy in 2050.
It considers that the publication of information through the sustainability report can “help companies identify and manage their own risks and opportunities linked to sustainability issues” and “can serve as a basis for improved dialogue and communication between companies and their stakeholders and help companies improve their reputation” (Non Financial Reporting Directive/NFRD, 2022/2464 of December 14th 2022).
The CSRD replaces the extra-financial performance declaration (DPEF), which was provided for by the NFRD directive and inserted in the management report of the companies concerned.
Companies must indicate in this report information that allows them to understand:
the impact of the company on sustainable development issues (environment, social rights, governance factors);
how sustainability issues impact business development, results and situation of the company.
2 – Companies concerned and effective dates
The amounts and dates of application take into account the new thresholds set by Decree 2024-152 of February 28th 2024 modifying the thresholds which define the size of companies.
- Companies and groups affected by immediate application
Sustainability reporting is now mandatory for more than 45,000 companies at European level. All credit institutions, insurance or reinsurance companies or listed on the stock market whose number of employees employed during the financial year exceeds 500 are immediately affected.
In addition, the consolidating companies of a large group are concerned.
Definition of a large group
Group formed by a company and the companies it controls, which, on the closing date of the financial year, exceeds the thresholds of at least two of the following three criteria:
€24 million balance sheet total;
€48 million in net turnover;
250 employees employed during the financial year.
For these companies, the CSRD must be incorporated into the management report relating to financial years beginning on or after January 1st 2024.
Companies for which the implementation of the sustainability report is deferred
Management report on financial years beginning on or after January 1st 2025:
All large companies (other than those above) that exceed two of the following criteria:
25 M€ balance sheet total;
€50 million net turnover;
250 employees (average number during the financial year).
Management report on financial years beginning on or after January 1st 2026:
Mandatory only for listed companies that are small or medium-sized enterprises and those carrying out the activities of small and non-complex credit institutions (Regulation (EU) No 575/2013 of the European Parliament) or captive insurance and reinsurance companies.
These companies (small and medium businesses) must not exceed two of the following criteria:
balance sheet total between €450,000 and €25 million;
net turnover between €900,000 and €50 million;
number of employees between 10 and 250.
Management report on financial years beginning on or after January 1st 2028:
Companies with a French branch exceeding certain thresholds and companies controlled or included in the consolidated accounts of a foreign company.
Companies exempt from filing the sustainability report
These are micro-enterprises not exceeding two of the following criteria:
€450,000 total balance sheet;
€900,000 net turnover;
10 employees.
3 – The report content
The Commercial Code (art. R. 232-8-4, I new) specifies the detailed information to be included in the sustainability report.
We provide an overview below:
The business model and strategy of the company specifying:
degree of resilience of the company’s business model and strategy with respect to risks related to sustainability issues;
the opportunities that sustainability challenges hold for the company;
the Company’s plans to ensure the compatibility of its business model with the transition to a sustainable economy;
how the company’s business model and strategy take into account the interests of its stakeholders and the impact of its activity on sustainability issues;
how the company’s strategy is implemented with regard to sustainability issues.
The company’s sustainability goals and the progress made in achieving these goals;
The role of management, administrative or supervisory bodies regarding sustainability issues;
The company’s policies regarding sustainability issues;
Incentives linked to sustainability issues granted by the company to members of management or administrative bodies;
The vigilance procedure implemented by the company regarding sustainability issues;
The main potential or actual negative impacts;
The main risks for the company linked to sustainability issues, including its main dependencies, and the way in which it manages these risks.
The FBA team is here to support you in these 2 subjects, to help you see things more clearly and comply with French regulations, so do not hesitate to contact us!
