The annual ordinary general meeting is a key event in the life of a company. On this occasion, shareholders are provided with detailed information on the company’s financial position and strategic direction. They are also called upon to exercise their voting rights through the approval of the accounts for the past financial year and the allocation of the result, whether a profit or a loss.
As the season of annual general meetings is in full swing, we propose a series of articles to help managers and shareholders of French business companies (SAS and SARL) better understand the rules governing the approval of annual accounts, as well as the obligations arising from them. First round of Q&As.
Each year, shareholders must meet in an annual ordinary general meeting to approve the financial statements for the previous financial year. More broadly, they must rule on the management of the company by its executives, the allocation of the result (profit or loss), and, where applicable, the distribution of dividends.
In French limited liability companies (société à responsabilité limitée – SARL) and French simplified joint-stock companies (société par actions simplifiée – SAS), the process follows a common framework while still allowing for some differences, mainly due to the contractual flexibility specific to SAS.
The approval of accounts serves a dual purpose.
From a financial perspective, it allows shareholders to rule on the annual accounts prepared by the legal representatives (president or general manager) and to decide on the allocation of the financial year’s result.1 If there is distributable profit, they may decide to pay dividends, either spontaneously or in accordance with provisions set out in the articles of association or a shareholders’ agreement (minimum dividend, preferred dividend, etc.).
From a governance perspective, it is a key moment for informing shareholders and exercising their political rights (renewal of mandates, approval of major decisions, etc.).
In a SARL, the general manager is responsible for both preparing the annual accounts and organizing the entire approval process. In an SAS, the burden is on the president. However, the articles of the SAS may provide that certain responsibilities (such as convening shareholders) fall under other bodies.
In both cases, a careful review of the articles of association and any shareholders’ agreements in force is recommended to check each party’s responsibilities and the absence of additional procedures. For example, it can be provided that the annual accounts of an SAS will have to be approved by a committee or a board before they are submitted to the annual meeting.
Failure to comply with applicable rules may expose company officers to civil or even criminal liability. Certain decisions may also be held null and void.
In SARLs, the general meeting called to approve the accounts must be held within six months from the end of the financial year.2 This deadline may be extended by court order upon request.
Failing this, the public prosecutor or any interested party may apply for an injunction to convene the shareholders or for the appointment of a representative to do so.
In SAS with multiple shareholders, there is no express deadline provided by French law. However, dividends must be distributed within nine months of the end of the financial year.3 In practice, aligning with the six-month deadline is considered good governance and is widely followed. The articles often provide for this deadline, making it binding.
By contrast, where the SAS has a single shareholder, Article L. 227-9 of the French Commercial Code (FCC) provides that this shareholder must approve the accounts within six months following the end of the financial year.
The approval process generally includes four stages:
The SAS is characterized by broad contractual freedom regarding shareholder consultation.4 The articles of association notably determine:
However, this flexibility does not exempt compliance with fundamental principles of company law, including the shareholders’ information rights.
Conversely, SARLs remain subject to a process framed by French law more strictly. As a general rule, the decision to approve the accounts must be taken by the shareholders meeting in an ordinary general meeting convened by the manager. However, since a reform in 2024, this principle has been softened. The company’s articles may now allow decisions to be taken by a written agreement reflecting the unanimous consent of the shareholders, aligning on the possibilities offered to SAS.
In any case, failure to comply with obligations relating to the submission of accounts for shareholder approval exposes the officers to sanctions specific to SARLs, particularly financial ones.5
