The preparation of the annual management report is a core obligation for the officers of a French company. As a key disclosure document for shareholders and other stakeholders, it provides a transparent overview of the company’s activities, its position at the close of the financial year, and its future prospects. Compliance with the applicable legal framework is critical to mitigate any potential liability exposure for management.
As the annual general meeting season is in full swing, we offer a series of articles to help officers and shareholders better understand the rules relating to the approval of French SAS and SARL’s annual accounts for SAS and SARL, as well as the obligations arising from them. Fourth round of Q&As.
The management report is an annual document prepared by the company’s legal representatives for the benefit of shareholders and other stakeholders. Drawing on the annual financial statements, it provides a comprehensive and analytical overview of the company’s financial position, performance, key risks and future prospects.
As a general rule, all French business companies are required to prepare a management report. However, limited liability companies (Société à responsabilité limitée – SARL) and simplified joint-stock companies (Société par actions simplifiée – SAS) qualifying as micro or small businesses are exempt from this requirement.1 These exemptions apply to companies that do not exceed two of the following three thresholds at the end of the financial year:
| Balance sheet total | Net turnover | Average workforce | |
| Micro-business | EUR 450,000 | EUR 900,000 | 10 employees |
| Small business | EUR 7.5 million | EUR 15 million | 50 employees |
This exemption is not available to certain companies, especially those operating in the banking, financial or insurance sectors.2 Furthermore, the bylaws may provide for the preparation of a management report, even where the applicable thresholds are not met.
The management report is prepared by the general manager(s) in a SARL and by the president in a SAS. In SAS companies, the bylaws may further require the involvement of general directors and other governance bodies (e.g., a strategic committee or a board of directors).
The preparation timeline is subject to several legal requirements:
In principle, the report is prepared once the financial statements are available. In practice, the closing process is often time-consuming and typically completed only after three to four months.
The report should therefore be prepared in parallel, based on available information, to ensure compliance with applicable deadlines. Close coordination among all stakeholders (internal teams, legal counsel, accountants and, where applicable, the statutory auditor) is key.
The law prescribes the mandatory content of the management report for both SAS and SARL companies.5 Additional disclosures may be required under the articles of association, any shareholders’ agreement, or the company’s internal practices.
In practice, the level of detail will vary depending on the shareholding structure, the nature of the business and the company’s scale of operations. Consistency in the level of disclosure from year to year is generally recommended, unless justified by a change in circumstances.
This section should provide a fair and comprehensive analysis of the company’s business performance, results and financial position, including, in particular, its level of indebtedness. It should also highlight the key events that affected the company during the financial year, whether from a financial or commercial standpoint. This includes, for example, developments impacting the markets in which the company operates, as well as transactions that have materially affected its legal or economic structure (such as capital transactions or financing arrangements).
The report should also address the company’s expected future development and any significant events occurring between the end of the financial year and the date of preparation of the report.
Where applicable, the report should describe the company’s research and development activities, including key projects, their objectives and allocated budgets, as well as any results achieved or expected and any other relevant information.
The report must list subsidiaries, equity interests and branches, and disclose any related transactions, in particular acquisitions or disposals.6 It must also present the activities and results of subsidiaries within the meaning of Article L.233-6 of the French Commercial Code.
These indicators are intended to explain the development of the company’s business and performance. They may be financial and, where appropriate, non-financial.
With respect to financial indicators, the report should comment on the main metrics included in the annual financial statements and explain their evolution over the financial year.
Non-financial indicators are not legally defined as such and will depend on the nature of the company’s activities. They may include, for example, human resources data (such as headcount, internal equality or anti-discrimination policies, where applicable), as well as the company’s social or environmental commitments (e.g. sponsorship activities). The nature and level of detail of such indicators vary significantly from one company to another.
It should be noted that companies whose securities are admitted to trading on a regulated market and which meet the criteria of “large businesses” are subject to more detailed non-financial reporting obligations, resulting from the Corporate Sustainability Reporting Directive (CSRD).7 For other companies, including SAS and SARL, these requirements will be introduced progressively from the 2027 financial years, subject to potential regulatory developments currently under discussion.
In addition, the management report must include certain specific disclosures, such as:
The failure to prepare a management report, or the submission of an incomplete report, may give rise to significant consequences for both the company and its officers.
In an SARL, such failure may result in the nullity of the resolutions approving the financial statements.10 A similar risk exists in an SAS under the new regime governing the nullity of corporate decisions, as the rules relating to the management report may arguably be regarded as “mandatory provisions of corporate law”.
In addition, the general manager of an SARL, as well as the president of an SAS, may be subject to criminal penalties of up to two years’ imprisonment and a fine of EUR 9,000.11 Finally, their civil liability may also be engaged, allowing for compensation to be sought in respect of any resulting loss, as applicable.
