In 2019, the French legislator has revised the regulations applicable to companies, with the declared aim of boosting business growth. However, therelief granted to the company does not always apply to the director.
Small business expansion
Modification of thresholds
Law n°2019-486 of 22.05.2019 / art 47
The PACTE Act changes the definition of a small business, which is now defined as one that does not exceed two of the following three thresholds:
- 6 million euros in total assets
- 12 million euros in sales
- 50 employees
This change gives the companies concerned greater confidentiality:
- exemption from the requirement to prepare a management report
- simplified financial statements
- income statementconfidentiality
- confidentiality of the Statutory Auditor's report
In the same way, the law redefines the notion ofmedium-sized company by the following thresholds:
- 20 million euros in total assets
- 40 million euros in sales
- 250 employees
With all the attendant consequences:
- simplified presentation of the income statement
- simplified balance sheet and notes disclosure
Non-trading companies and those forming part of a group remain excluded from these provisions.
Redefining the role of the CAC
Law n°2019-486 of 22.05.2019 / art 20
The thresholds for the appointment of a Statutory Auditor have been raised as follows:
- 4 million euros in total assets
- 8 million euros in sales
- 50 employees on average over the year
To avoid abuse, the thresholds are assessed at the level of the group of companies.
A group is formed when one company holds a sufficient stake in the capital of another to exercise control.
The systematic appointment of the CAC has been abolished :
- in public limited companies
- if held by a joint stock company
The heads of "small groups "* and significant subsidiaries** will be able to opt for alight audit assignment forsmall companies (known as "ALPE ") over a 3-year period , as will companies wishing to appoint a CAC without being obliged to do so.
* when the cumulative figures of the companies exceed 2 of the above-mentioned thresholds of €4m balance sheet / €8m sales / 50 employees,
** below the above thresholds but exceeding 2 out of 3 of the thresholds of €2M in total assets, €4M in sales and 25 employees
These provisions apply from September1.
Current mandates continue until expiry.SUMMARY TABLE
| Entities concerned | CAC mandatory | Type of mission |
| Company > thresholds 4/8/50 | YES | Classic 6 years |
| Group head company > thresholds 4/8/50
|
YES | Classic 6 years |
| Société < seuils 4/8/50 mais tête d’un groupe > thresholds 4/8/50
|
YES | ALPE 3 years or classic 6 years |
| Subsidiary > thresholds 4/8/50 | YES | Classic 6 years |
| Significant subsidiary but < seuils 4/8/50
|
YES | ALPE 3 years or classic 6 years |
| Non-significant subsidiary < seuils
|
NO | Optional ALPE or classic |
| Entities required to publish consolidated financial statements | YES | Classic 6 years |
| Public interest entities | YES | Classic 6 years |
| Associations receiving grants > €153K and non-trading entities with an economic activity > thresholds €1.55M balance sheet/ €3.1M sales/ 50 employees |
YES |
Classic 6 years
|
Our legal department will be happy to provide you with any further information you may require.
Redefining the notion of Company
Corporate interest & raison d'être
Law n°2019-486 of 22.05.2019 / art 169
The Pacte Act gives shareholders the option of specifying the company's raison d'être in the bylaws, as distinct from the corporate purpose: these are the principles that the company intends to follow in developing its business, and allocating the necessary resources to achieve them. It sets the direction of management and defines the Company's strategy.
The law also requires the Company to be managed in its corporate interest, taking into consideration the social and environmental challenges of its business, and not the interests of its shareholders, which are pursued through the Company.
If these principles are breached, the executive may be held liable or even dismissed.
Mission-driven company
Law n°2019-486 of 22.05.2019 / art 176
This system enters the era of the emergence of responsible capitalism , enabling companies to make their commitments in this area visible .
It is a company with a raison d'être and social and environmental objectives that go beyond profit-making, and whose status as a company with a mission is declared to the Registrar and recognized.
The bylaws must specify the company's purpose and objectives. The achievement of these objectives will be monitored by an independent body.
Failure to meet the objectives will result in the removal of the Société à mission label.
Simplification at different levels
Greater protection for spouses
Law n°2019-486 of 22.05.2019 / art 8,9 &11
The spouse of a company director who regularly carries out a professional activity will henceforth be covered by an obligatory social status: the director will be obliged to declare his or her spouse's activity and the status chosen. Otherwise, the status of salaried spouse will apply.
In the event of an audit, failure to declare may give rise to adjustments, penalties and sanctions.
Facilitated current account contributions
Law n°2019-486 of 22.05.2019 / art 76
The PACTE Act abolishes the requirement to hold a minimum of 5% of the company's capital in order to make contributions to shareholders' current accounts. It also extends this option to general managers (including
including delegates) and Chairmen of joint-stock companies, non-affiliated corporate officers.
- It is always important to be able to justify the reason for advances, particularly from a tax point of view.
- Abolition of the three-yearly appointment. Law n°2019-744 of 19.07.2019 / art 20
Previously, every 3 years, when approving the annual financial statements of a joint-stock company, shareholders were required to vote on a capital increase reserved for company employees who were members of the company savings plan (PEE). Noting that this measure had no impact on company decisions in terms of employee savings, the legislator decided to abolish this obligation.
However, the obligation remains in the event of a decision toincrease the share capital.
Dissolution of a de facto company (SCDF)
Cass. com. n°17-28834 of 10.04.2019
A de facto partnership is the result of people acting as if they were partners, without having taken the necessary steps to form a company.
While joining forces without the constraints of complying with legal and tax obligations may be tempting, it is not without its risks.
Indeed, the judges have just accepted that only one of the partners in a SCDF can dissolve the company by simply notifying its co-partners, provided this is done in good faith, as the company is open-ended.
Dissolution requires assets to be divided between associates, with significant tax consequences.
Extended managerial liability
Failure to file annual financial statements
Cass. Com. n°17-21047 of 7.05.2019
Every year, all commercial companies are required to file their accounts with the Registrar, failing which they may be ordered to do so by the President of the Commercial Court, subject to a fine (amount due for each day's delay).
In the absence of compliance with this injunction, the judges decided thatit was up to the manager , and not the Company, to pay the astreinte.
The executive who passes the payment on to the Company is liable to be convicted of misuse of corporate assets.
Recovery of tax and social security debts
Cass. Com. n°17-22102 of 13.03.2019 / art. L267 LPF
Cass. Com. n°17-19844 of 10.04.2019
Taxes of all kinds and related penalties may be recovered from the company director or any person exercising effective management of a company guilty of failure to comply with obligations that have made it impossible to recover taxes due by the Company.
Where non-executive partners have full authority to bind the company, they may be considered as de facto managers and may be held liable in this respect.
