Directors of French commercial companies are required to submit each year the annual accounts to the shareholders for their approval. Failure to comply with this obligation may result in criminal sanctions, the scope of which was recently clarified by a ruling of the French Cour de cassation.
While many companies with a financial year ending on December 31 completed their annual accounts approval process in June, a ruling handed down earlier this year by the French Cour de cassation1 clarified the conditions under which criminal sanctions may be imposed on company direcctors who failed to submit the accounts on time.
According to the Court, a mere delay in presenting the annual accounts to the shareholders is not sufficient to constitute the offense of failure to submit, punishable by a fine of €9,000 under Article L.241-5 of the French Commercial Code. This interpretation opens the door to a possible regularization.
In the case at hand, the general manager of a French private limited company (SARL) was accused of failing to submit the company’s annual accounts to the shareholders for the financial years 2012 through 2017. He was convicted on appeal, the court holding that the offense was constituted by the fact that the six-month period following the end of each financial year had been exceeded.
The French Cour de cassation overturned the appeal decision on the basis of Article L.241-5 of the French Commercial Code. The Court noted that the Law of March 22, 2012, had repealed the six-month deadline that previously applied to general managers under this article, for submitting the accounts to the shareholders’ meeting. As a result, it held that a mere delay in presenting the financial statements to the shareholders of a SARL is not sufficient to constitute a criminal offense.
This ruling provides a useful clarification. Following the repeal of the six-month deadline in relation to the criminal provisions, the conditions for establishing the offense under Article L.241-5 of the Commercial Code had remained unclear until now.
The Court now affords company managers a significant margin of discretion: only complete a failure to present the accounts or other documents to the shareholders’ meeting—not a mere delay—may constitute a criminal offense under this provision.
This decision has notable practical implications, as it requires that the offense be assessed at the time the judge rules on the case—and only if the accounts have still not been submitted to the shareholders by that date. Therefore, it leaves room for a possible regularization of the situation until the very last moment, which appears to limit the effectiveness of the criminal sanction provided for in Article L.241-5 of the French Commercial Code, whose application is already rare.
Finally, it is worth noting that this judicial solution could be extended to public limited companies (SA), as the criminal offence of failing to submit accounts—under Article L.242-10 of the French Commercial Code—is defined in almost identical terms. It may even apply to simplified joint-stock companies (SAS), through a possible extension of the rules applicable to SAs.
Beyond the criminal sanction provided for under Article L.241-5 of the French Commercial Code, commercial companies are subject to various obligations regarding the approval of annual accounts by shareholders and the subsequent filing with the registry. Any failure to comply may give rise to injunctions by the president of the competent commercial court, possibly with a penalty (astreinte). The management may also be held liable if such failure causes damages to the company or its shareholders.
Pursuant to Articles L.223-26 (for SARLs) and L.225-100 (for SAs) of the French Commercial Code, the management report and annual accounts, among other documents, must be submitted by the general manager, the board of directors or the executive board (as applicable) to the shareholders for approval at a general meeting to be held within six months following the end of the financial year. Failing that, an extension must be requested to the commercial court.
With respect to SASs having multiple shareholders, Article L.227-9 provides that the annual accounts must be approved by the shareholders. The approval process, including the timeline, is freely determined by the company’s bylaws. However, this freedom is limited by Article L.232-13, which requires that if dividends are to be distributed, payment must occur within nine months after the financial year’s end, unless an extension is granted by judicial decision. In the absence of any provision in the bylaws regarding the approval deadline, the National Company of Auditors (Compagnie Nationale des Commissaires aux Comptes – CNCC) recommends consulting the shareholders within six months following the end of the financial year.2
Regarding SASs with a sole shareholder, the sole shareholder must approve the accounts within six months following the end of the financial year pursuant to Article L.227-9, paragraph 3.
In case of default, the shareholders or the State Attorney (Ministère Public) may request the president of the commercial court to order the competent corporate body, under penalty, to convene the meeting required for approving the accounts or to appoint a representative for this purpose.
Finally, pursuant to Articles L.232-22 (for SARLs) and L.232-23 (for SAs and SASs) of the French Commercial Code, the company’s annual accounts, the management report, the statutory auditors’ report (where applicable), and the decision on the allocation of financial results must be filed with the registry of the commercial court within one month following their approval.
The president of the commercial court may, at the request of any interested party or the State Attorney (Article L.123-5-1), or on their own initiative (Article L.611-2), order that the filing be carried out, under penalty. Failure to comply may also result in criminal sanctions.
