I. Principles Applicable to All Statutory Auditors and Appointed Experts in France

A. Common Professional and Personal Requirements

Statutory auditors and appointed experts are subject to various requirements to ensure the proper performance of their duties. Accordingly, they are bound by the following obligations:

• Exclusivity of the mandate: an appointee may not simultaneously carry out multiple assignments;
• Independence and impartiality[1]: the auditor or expert must not have any financial, personal, or other interest in the company to which they are appointed;
• Non-interference with the company’s management;
• Professional secrecy (confidentiality obligations);
• Duty to report any irregularities or offences identified[2];
• Compliance with professional ethics (deontological rules).

They are also subject to incompatibilities[3], and may not engage in the following activities:

• Acting as a director or officer of the company, or of a parent or subsidiary company;
• Maintaining any professional relationship within the company;
• Carrying out any commercial activity.

Specific case of the auditor for special advantages: in the context of preferred shares, such auditor is subject to an additional requirement, namely that they must not have carried out any other assignment within the relevant company during the preceding three years[4].

B. Liability of the Statutory Auditor or Appointed Expert

A direct consequence of these requirements is the potential incurrence of liability. Such liability may be:

• Civil liability[5]: in cases of fault, negligence, or failure to disclose offences committed by directors or other corporate officers of which the auditor or expert had knowledge;
• Criminal liability: including unlawful use of the professional title or illegal practice of the profession[6], engagement in incompatible activities[7], breach of professional secrecy, dissemination of false information, etc.;
• Disciplinary liability[8]: for breaches of ethical obligations or statutory conditions governing the practice of the profession.

C. Rights and Obligations of Statutory Auditors and Appointed Experts

Statutory auditors and appointed experts are entitled to request the disclosure of any documents they deem necessary for the performance of their duties. They may also request written statements from the company’s management and may, at any time, conduct a review of the accounts, which the management may not obstruct.

In carrying out their duties, they may engage auditors or other experts, review minutes of shareholders’ meetings, and access any financial information (including the company’s accounts and statements of shareholders’ equity).

They are required to prepare a report setting out their assessments. This report is communicated to the shareholders and filed with the registry of the Commercial Court having jurisdiction over the company’s registered office. The applicable filing deadlines vary depending on the transaction concerned.

Example:

In the case of a capital increase, the report of the contribution auditor must be made available to shareholders at least 8 days prior to the extraordinary general meeting. It must also be filed with the Commercial Court registry within the same timeframe.

In the case of contributions made upon incorporation, the report must be made available to prospective shareholders 3 days in advance. Filing with the registry must occur no later than the company’s registration application.

D. Termination of the Mandate

Where an ad hoc statutory auditor is concerned, the duration of the assignment depends on the specific transaction for which the auditor is appointed, in accordance with the engagement letter issued by the company. By contrast, the term of office of a statutory auditor (commissaire aux comptes) is determined by law and may extend over 3 or 6 financial years.

The company may not unilaterally terminate the mandate. Termination is only possible in the event of voluntary resignation or removal for cause based on misconduct. In the case of statutory auditors, non-renewal of the mandate is also possible.

An auditor or expert may be challenged (recused) prior to appointment where there are grounds to suspect a lack of independence or impartiality.

II. The Ad Hoc Statutory Auditor

An ad hoc statutory auditor is appointed for a specific assignment. This role must be distinguished from that of an ad hoc agent (mandataire ad hoc), who is responsible for convening a shareholders’ meeting, carrying out formalities, voting on behalf of co-owners, etc.

A. Appointment

The appointment of such an auditor is governed by Article L.225-228 of the French Commercial Code. The appointment is made by the general meeting ruling on the contemplated transaction for which the auditor’s expertise is required.

The applicable legal framework corresponds to the specific type of statutory auditor whose role is being performed. In the case of statutory auditors (commissaires aux comptes), this framework is set out in Articles L.821-1 to L.821-87 of the French Commercial Code.

B. Duties

The ad hoc statutory auditor may:

• Perform, on a temporary basis, the role of statutory auditor in a company that has not appointed one;
• Act as an auditor for special advantages;
  Example: capital increase through the issuance of preferred shares[9].
• Carry out a specific assignment in connection with the following transactions:
  • Waiver of pre-emptive subscription rights in the context of a capital increase;
  • Issuance of dilutive securities;
  • Issuance of BSPCE (founders’ share warrants);
  • Payment for shares by way of set-off against receivables;
  • Grant of stock options;
  • Grant of free shares;
  • Share buyback by the company;
  • Mergers[10], demergers, and partial contributions of assets;
  • Corporate transformations (change of legal form)[11].

The duration of the assignment is strictly limited to the transaction in question.

Focus on Specific Transactions

1. Waiver of pre-emptive subscription rights in a capital increase: The auditor must verify the accuracy of the information provided to the shareholders, assess the proposed issue price, and evaluate the impact of the transaction on existing shareholders.

2. Payment for shares by set-off against receivables: The auditor verifies the regularity of the payment and issues the depositary’s certificate after reviewing the minutes of the decision approving such payment.

3. Grant of stock options: The auditor must verify the grounds for the decision, as well as the terms governing the exercise price and option period.

4. Grant of free shares: Without assessing the appropriateness of the transaction, the auditor must verify the request submitted to the decision-making body.

5. Share buyback by the company: The auditor verifies the purpose, duration, and price of the transaction, and ensures equal treatment among shareholders.

6. Merger: In the context of a merger, a merger auditor is appointed and, where contributions in kind are involved, also performs the role of a contribution auditor. Failing such appointment, a contribution auditor or an auditor for special advantages must be appointed where contributions in kind or special advantages are granted in connection with the merger. Outside these cases, a full exemption from the appointment of an auditor may apply in the case of a simplified merger[12].

7. Demerger: This transaction is subject to the same rules as mergers. The auditor is then referred to as a demerger auditor. Simplified demergers are exempt from this requirement.

8. Partial contribution of assets: Where this transaction falls under the regime applicable to demergers, the same rules apply. Where the demerger regime does not apply, only a contribution auditor must be appointed.

III. The Statutory Auditor

A. Appointment

1.Procedures for Appointment (French Commercial Code, Art. L.821-40)

The appointment of a statutory auditor may be provided for in the articles of association. Failing this, it must be decided by the ordinary general meeting (OGM). Such appointment must comply with the legal requirements applicable to the OGM (including rules relating to the convening of shareholders, quorum, and majority requirements).

2. Transactions Giving Rise to Appointment

• At incorporation: appointment in accordance with the rules applicable to each type of company;
• During the life of the company: appointment by the OGM approving the financial statements, in accordance with the applicable majority rules.

3. Mandatory Appointment

The appointment becomes mandatory from the financial year following the one in which two of the following three thresholds are exceeded[13]:

• Balance sheet total ≥ €5,000,000
• Net turnover (excluding tax) ≥ €10,000,000
• Average number of employees ≥ 50

For companies controlling one or more entities within the meaning of Article L.233-3 of the French Commercial Code, these thresholds are assessed at group level[14].

For companies directly or indirectly controlled by an entity required to appoint a statutory auditor, the following lower thresholds apply[15]:

• Balance sheet total ≥ €2,500,000
• Net turnover (excluding tax) ≥ €5,000,000
• Average number of employees ≥ 25

In such cases, the shareholders are expected to appoint the statutory auditor voluntarily; failing this, an application may be made to the court by the shareholders[16].

Failure to appoint a statutory auditor where legally required triggers criminal sanctions, including up to two years’ imprisonment and a fine of €30,000[17]. In addition, decisions taken in the absence of a duly appointed statutory auditor, or based on a report issued by an irregularly appointed or maintained auditor, may be declared null and void[18].

4. Optional Appointment

Appointment may be made voluntarily. Where no such appointment is made, shareholders may apply to the court for the appointment of a statutory auditor.

In such cases:

• For SARL, SA, SE, SCA, and SAS[19], applicants must hold at least 10% of the share capital;
• For SNC and SCS, the application may be made by a single shareholder, with no minimum capital holding requirement[20].

B. Duties

1. Scope of the Assignment (French Commercial Code, Arts. L.821-53 to L.821-56)

The statutory auditor is responsible for:

• Certifying the company’s financial statements;
• Verifying that the accounts are regular and give a true and fair view;
• Reviewing accounting records and supporting documents;
• Verifying the consistency of the management report with the financial statements;
• Conducting ongoing audit procedures and reporting any identified offences to the competent authorities where necessary;
• Ensuring equal treatment among shareholders.

2. Term of Office

• Principle: six consecutive financial years[21];
• Exception: may be limited to three financial years in certain cases[22].

3. Termination of the Mandate

• Challenge (recusal): upon application by shareholders representing at least 5% of the share capital[23];
• Removal for cause: upon application by shareholders representing at least 5% of the share capital, or by the management body or other competent entities[24];
• Non-renewal of the mandate by the general meeting at the end of its term;
• Voluntary resignation;
• Expiry of the term of appointment.

C. Specific Case of Public-Interest Entities

Public-interest entities are also subject to a mandatory requirement to appoint a statutory auditor.

For further details, see Articles L.821-28 to L.821-34, L.821-42, and L.821-45 of the French Commercial Code.

IV. The Contribution Auditor

A. Appointment

1. Procedures for Appointment

The contribution auditor is appointed by a unanimous decision of the shareholders at a general meeting. Failing such appointment, jurisdiction lies with the President of the Commercial Court of the place of the company’s registered office.

Associations (governed by the Law of 1901) and foundations are also required to appoint such an auditor. The decision is taken by mutual agreement, failing which the President of the Judicial Court has jurisdiction to make the appointment.

2. Timing of Appointment

• Upon incorporation of the company;
• In the event of a capital increase through contributions in kind[25];
• In the context of mergers, demergers, or partial contributions of assets (see Section I, “Focus on Transactions”: points 6, 7, and 8).

The contribution auditor intervenes only where contributions in kind are made. Cash contributions are inherently quantifiable, while contributions of services (apports en industrie) cannot be reliably valued using standard methods.

3. Mandatory Appointment

In the case of limited liability companies (SARL), the appointment of a contribution auditor is, in principle, mandatory for the transactions described above, although certain exemptions apply.

4. Optional Appointment

The appointment of a contribution auditor is no longer mandatory, and becomes optional, in the following cases:

• SAS and SARL: where no single contribution in kind exceeds €30,000 and the aggregate value of such contributions does not exceed half of the share capital. The decision not to appoint must be taken unanimously;
• EURL and SASU: where the contributed assets were already recorded in the balance sheet of the most recent financial year[26]. Failing this, the thresholds applicable to SAS and SARL apply;
• SA, SCA, and SAS: depending on the nature of the contributions (specific cases),
  g., where the contribution has been valued within the preceding six months;
• Public exchange offers (OPE): where securities are contributed in the context of a public exchange offer between companies whose shares are admitted to trading on a regulated market.

Civil companies are not subject to any statutory obligation to appoint a contribution auditor.

B. Duties

The contribution auditor must:

• Assess contributions in kind to ensure their accuracy and fairness;
• Verify that the value of the contributions covers the nominal value of the shares issued in consideration;
• Prepare a report describing the contributions and the valuation methods used. This report is communicated to the shareholders and filed with the Commercial Court registry within the applicable statutory time limits.

The duration of the assignment is strictly limited to the transaction specified in the engagement letter approved by the general meeting, unless the contribution auditor is also serving as the company’s statutory auditor.

1. Sanctions for Failure to Obtain Valuation

Failure to value contributions in companies limited by shares results in the suspension of voting rights and dividend rights attached to the shares issued in consideration of such contributions[27].

Warning: if shareholders fail to appoint a contribution auditor, they are held jointly and severally liable for a period of five years with respect to the value attributed to the relevant contributions.

Example: Article L.227-1, paragraph 7 of the French Commercial Code.

D. Relevant Provisions of the French Commercial Code

• SARL: Articles L.223-9 and L.223-33
• SA:

Article L.225-8 (incorporation with public offering)

Article L.225-12 (referring to L.225-8 for incorporation without public offering)

Article L.225-14

• SCA: Reference to the SA regime under Article L.226-1
• SAS: Article L.227-1

In civil companies, as well as in general partnerships (SNC) and limited partnerships (SCS), shareholders have unlimited liability. Consequently, no contribution auditor is required, since the valuation of contributions does not limit creditors’ rights. As a result, any under- or overvaluation does not affect the rights of third parties.

V. The Auditor for Special Advantages

Before addressing the auditor for special advantages, it is necessary to define such advantages.

Special advantages include, for example, preferred shares or any other exceptional rights, such as priority rights over liquidation proceeds. More broadly, they encompass any benefit not provided for by law and granted by agreement between the parties in favor of a specific person.

A. Appointment

1. Procedures for Appointment

The auditor for special advantages is, in fact, a statutory auditor entrusted with a specific assignment. They are appointed unanimously by the shareholders, in the same manner as a contribution auditor. In the absence of agreement, jurisdiction lies with the President of the Commercial Court.

2. Timing of Appointment

The auditor is appointed whenever special advantages are granted in connection with one of the following transactions:

• Incorporation of a company limited by shares (except SAS);
• Capital increase;
• Creation of preferred shares in favor of a specifically identified person (designation of a category of persons defined by objective characteristics is excluded, unless such characteristics effectively identify a specific individual);
• Transformation of the company into a company limited by shares;
• Merger (see Section I, “Focus on Transactions”: point 6).

3. Mandatory Appointment

The auditor for special advantages intervenes only where special advantages are granted. In such cases, their appointment is mandatory, with no available exemptions.

B. Duties

1. Scope of the Assignment

The auditor is responsible for:

• Assessing the substance and extent of the special advantages;
• Analyzing their legal and financial implications;
• Verifying compliance with applicable law and the company’s corporate interest (intérêt social);
• Preparing a report describing the valuation methodology and specifying the scope of the advantages granted. This report is provided to the shareholders and filed with the Commercial Court registry within the prescribed time limits.

2. Limits of the Assignment

Pursuant to the principle of exclusivity of the mandate, the auditor’s powers may be limited in certain situations.

Example: where new preferred shares belonging to an already existing category are issued, the auditor may only assess the advantages attached to such shares. A separate auditor must be appointed to determine the issue price if the company does not already have a statutory auditor.

C. Sanctions for Failure to Appoint

• Joint and several liability of the management and the company for any resulting damage;
• Nullity of the capital increase;
• Court injunction to comply.

Focus on Preferred Shares

1. Principle

Preferred shares are shares carrying specific rights, which may include:

• Financial rights: enhanced dividends, preferential rights to liquidation proceeds, priority rights over reserves;
• Governance rights: double or multiple voting rights, enhanced governance prerogatives;
• Non-financial rights: benefits in kind, rights relating to other group companies, enhanced financial information rights.

2. Creation

Only the general meeting may decide to create such shares or delegate this power to the management. The beneficiary of such shares may neither participate in the vote nor be counted for quorum purposes.

3. Issuance

Preferred shares may be issued:

• To specifically identified persons: this triggers the intervention of the auditor[28];
• To a category of persons defined by specified characteristics: in such case, the auditor does not intervene.

Where two categories of preferred shares are issued simultaneously, a single auditor is appointed, but the report must distinguish between the different categories.

4. Transactions Affecting Preferred Shares

• Conversion;
• Cancellation.

D. Relevant Provisions of the French Commercial Code

• SA:

Article L.225-8 (incorporation with public offering)

Article L.225-12 (referring to L.225-8 for incorporation without public offering)

Article L.225-14

• SCA: Reference to the SA regime under Article L.226-1
• SAS: Article L.227-1

In civil companies, as well as in SARL, SNC, and SCS, ownership is represented by ownership interests (parts sociales) rather than shares (equity securities). Such interests cannot carry preferential rights. Consequently, no auditor for special advantages is required.

[1] C. com., Art. L.821-31 to L.821-33

[2] C. com., Art. L.821-10

[3] C. com., Art. L.821-6 & L.821-27

[4] C. com., Art. L.228-15

[5] C. com., Art. L.821-37

[6] C. com., Art. L.821-7

[7] C. com., Art. L.821-8

[8] C. com., Art. L.821-70 & L.821-71

[9] C. com., Art. L.228-15

[10] C. com., Art. L.236-10

[11] C. com., Art. L.224-3

[12] This relates to the merger by absorption of a subsidiary or sister company that is at least 90% owned by the absorbing company.

[13] Decree No. 2024‑152 of 28 February 2024

[14] C. com., Art. L.821-43

[15] C. com., Art. L.823-2-2

[16] C. com., Art. L.821-47

[17] C. com., Art. L.821-6

[18] C. com., Art. L.821-5

[19] C. com., Art. L.223-35 (SARL), L.225-218 (SA), L.226-6 (SCA) & L.227-9-1 (SAS)

[20] C. com., Art. L.221-9 (SNC) & L.222-2 (SCS)

[21] C. com., Art. L.821-44

[22] C. com., Art. L. 821-46

[23] C. com., Art. L.821-49

[24] C. com., Art. L.821-50

[25] C. com., Art. L.225-147

[26] C. com., Art. L.223-9 & L.227-1

[27] C. com., Art L.225-16-1

[28] C. com., Art. L.228-15