Corporate Governance and Directors' Duties: France

A Q&A guide to corporate governance law in France.

The Q&A gives a high level overview of board composition, the comply or explain approach, management rules and authority, directors’ duties and liabilities, transactions with directors and conflicts, company meetings, internal controls, accounts and audit, institutional investors and reform proposals.
To compare answers across multiple jurisdictions, visit the Corporate Governance Country Q&A tool.
The Q&A is part of the PLC multi-jurisdictional guide to corporate governance law. For a full list of jurisdictional Q&As visit
Adrien Cadieux, De Pardieu Brocas Mafféi

Corporate entities

The main limited liability corporations used in France are the:

  • Société anonyme (SA). This is the most commonly used corporate structure for large businesses in France. The SA has a minimum share capital of EUR 37,000 (as at 1 April 2011, US$1 was about EUR0.7). It must have at least seven shareholders.

  • Société par actions simplifiée (SAS). The SAS is a highly flexible corporate governance structure and is generally chosen by groups for their wholly-owned French subsidiaries. The bye-laws of an SAS can specifically provide for pre-emptive rights and specific management boards.

    There is no minimum required share capital. Shares cannot be publicly traded. There may be a sole shareholder. The only mandatory governing body is the president, who may be a legal entity.

  • Société à responsabilité limitée (SARL). This structure is generally used by small and medium-sized businesses. There is no minimum share capital. There may be a sole-shareholder (it is then known as an EURL) but no more than 100 shareholders.

  • Société en commandite par actions (SCA). The main feature of the SCA is the two categories of shareholders:

    • general partners (commandités) with joint, unlimited liability for corporate debts;

    • limited partners (commanditaires) whose potential liability cannot be greater than their contributions.

This corporate form is now rarely used. It allows capital to be raised from public offerings (since shares can be listed) while restricting management to a restricted group. The SCA is therefore generally considered to be a suitable anti-takeover structure.

A European company (Société Européenne) (SE) can also be used, generally in the form of an SA.

Since corporate governance issues mainly arise in SAs the following chapter focuses on the SA structure.


Legal framework

1. What is the regulatory framework for corporate governance and directors' duties?

Directors' duties and corporate governance in France are principally governed by:

  • The Commercial Code (Code de commerce).

  • The company's bye-laws.

In addition, specific regulations apply to listed companies:

  • Certain provisions of the Monetary and Financial Code (Code monétaire et financier).

  • The regulations of the Financial Markets Authority (Autorité des Marchés Financiers) (AMF).

  • Binding corporate governance principles adopted by certain companies and usually set out in the internal rules of the board.

  • EU recommendations (2004/913/CE of 14 December 2004, 2005/162/CE of 15 February 2005 and 2009/385/CE of 30 April 2009).

2. Has your jurisdiction adopted a corporate governance code? If yes:
  • What is the name of the code? What areas are covered by it (for example, board composition and committees, remuneration, audit and risk)?

  • How is the code structured (for example, a set of rules or principles and provisions)? What type of companies must comply with the code?

  • Is the code based on the comply or explain principle? How are companies required to report their application and compliance with the code (for example, in their annual report)?

  • What are the consequences of non-compliance with the code?

  • What has been the general response of companies, regulators and shareholder groups to the comply or explain approach? Has it been popular or controversial? Are there plans to reform it?

Two corporate governance codes apply in France:

  • The corporate governance code for listed companies of December 2008 established by professional associations (usually referred to as the AFEP-MEDEF Code). It provides a set of recommendations for listed companies relating to board composition, the role of independent directors, board committees, and the remuneration of directors and of general managers.

  • The Middlenext corporate governance code for small and medium companies of December 2009 (usually referred to as the Middlenext Code). It applies to listed companies with a market capitalisation of less than EUR1 billion. Its structure and scope are similar to that of the AFEP-MEDEF Code.

Both codes are based on the comply or explain principle. For each company which refers to either of the codes, the annual report relating to internal controls and risk management presented by the chairman of the board to the shareholders must state which recommendations from the code have not been applied and the rationale for not applying them.

If a listed company elects not to refer to either of the codes, the chairman's report must state what rules have been applied by the company relating to corporate governance and why it has elected not to apply either of the two codes. Non-compliance with the codes bears no other consequences.

The AMF issues an annual report relating to corporate governance. The 2010 report (issued in July 2010) provides that, out of a panel of 60 large listed companies, 100% refer to the AFEP-MEDEF Code. It may be considered therefore that the corporate governance codes are widely accepted. There are no plans to reform the corporate governance codes in France.


Board composition and remuneration of directors

3. What is the management/board structure of a company? In particular:
  • Is there a unitary or two-tiered board structure?

  • Who manages a company and what name is given to these managers?

  • Who sits on the board(s)?

  • Do employees have a right to board representation?

  • Is there a minimum or maximum number of directors or members of the managerial and supervisory bodies?

Board structure

The governance of an SA can be organised as a unitary or a dual structure.

Unitary structure. This most widely-used structure consists of a board of directors (conseil d'administration), headed by a chairman and a chief executive officer (CEO) (directeur général) who runs the company. Both positions can be held by the same individual.

Dual structure. This structure consists of a management board (directoire) composed of up to five members running the company, and a supervisory board (conseil de surveillance) that oversees the management board. The management board's members and its chairman are appointed and dismissed by the supervisory board, whose members are appointed by the shareholders.


Unitary structure. The CEO, appointed by the board of directors, manages the company. He may be assisted by one or several deputy CEOs (directeurs généraux délégués), also appointed by the board.

Dual structure. The management board carries out the day-to-day management.

Board members

Unitary structure. The board of directors consists of three to 18 directors appointed by a shareholders' meeting and of employees' elected representatives. Directors can be individuals or legal entities (which must designate a permanent representative, subject to the same obligations and liabilities as an individual). The statutory auditor attends board meetings when the board approves the accounts, otherwise his attendance is optional.

Dual structure. The supervisory board consists of individuals or legal entities (except for its chairman) appointed by a shareholders' meeting and employees' representatives. The management board consists exclusively of natural persons elected by the supervisory board.

Employees' representation

In companies having over 50 employees, workers' council representatives sit on the board without voting rights.

In listed SAs where employees hold more than 3% of the share capital, one or more representatives must be elected to the board by the shareholders. These directors have the same status, obligations and liabilities as other directors.

Unlisted SAs' bye-laws may also authorise employee-elected directors to sit on the board without voting rights. The maximum number of such directors is four (or five for listed companies) and cannot exceed one-third of the total number of other directors. Employee directors have the same status, obligations and liabilities as directors appointed in shareholders' meetings.

Number of board members

Unitary structure. The number of directors is set in the bye-laws and must be between three and 18 (24 following a merger of SAs).

Dual structure. The management board consists of up to five members for an unlisted company or seven for a listed company. The number of supervisory board members is set in the bye-laws and must be between three and 18 (24 following a merger of SAs).

Employee-elected representatives are not taken into account for the calculation of the total number of directors.

4. Are there any age or nationality restrictions on the identity of directors?

Age restrictions

Unitary structure. Except when otherwise provided for in the bye-laws, the number of directors aged over 70 cannot exceed one-third of the total and the age limit for the chairman and CEO is 65.

Dual structure. Except when otherwise stated in the bye-laws, the number of directors aged over 70 cannot exceed one-third of the total and the age limit for members of the management board is 65.

Nationality restrictions

European citizens. Citizens of the EU and of Iceland, Liechtenstein, Norway and Switzerland are exempt from any formalities (except if resident in France, in which case they must complete local registration formalities).

Other non-French nationals. A national of any other country who wishes to become chairman, CEO, deputy CEO or chairman of the management board of a French company must:

  • If a resident of France, be in possession of a temporary residency permit (carte de séjour temporaire) authorising commercial and professional activities.

  • If a non-resident of France, file a declaration with the préfet of the administrative area in which the company's registered office is located.

Unless otherwise provided for in the bye-laws, these formalities are not required for:

  • A director who is not also the CEO.

  • Members of the management board not authorised to represent the company with third parties.

Gender restrictions

Listed companies. From 28 January 2011, if one gender is not represented on the board, one person of this unrepresented gender must be appointed at the next general meeting which has a director appointment on its agenda. By 1 January 2014, each gender must be represented by at least 20% of the board. By 1 January 2017, each gender must be represented by at least 40% of the board.

Unlisted companies. From 1 January 2017, for companies with revenues or a balance sheet over EUR50 million and employing at least 500 persons for three consecutive years (that is, in 2020), each gender must be represented by at least 40% of the board.

From 1 January 2017, if the board of directors consists of no more than eight members, the difference between the number of directors of each gender should be no higher than two.

5. In relation to non-executive, supervisory or independent directors:
  • Are they recognised?

  • Does a part of the board have to consist of them? If so, what proportion?

  • Do non-executive or supervisory directors have to be independent of the company? If so, what is the test for independence or what makes a director not independent?

  • What is the scope of their duties and potential liability to the company, shareholders and third parties?

  • Recognition. There are no obligations regarding independent directors. However, the corporate governance codes of best practice (see Question 1) recommend their appointment to guarantee the overall independence of the board. In practice, numerous listed companies have appointed independent directors in recent years.

  • Board composition. Board members in unitary structures are all executive directors, in particular, the chairman of the board, when he also acts as CEO, is the legal representative of the company. In dual structures, members of the management board are all executive directors and members of the supervisory board are all non-executive directors.

  • Independence. Independence is not defined by the law. The AFEP-MEDEF code defines an independent director as someone having no other relationship of any kind whatsoever with the company, its group or its management that could compromise his freedom of judgement. It is recommended that at least one-third of board members (one half in widely-held companies with no controlling shareholder) should be independent directors.

  • Duties and liabilities. There is no legal distinction between executive, non-executive and independent directors in terms of duties and liabilities.

6. Are the roles of individual board members restricted? For example, can one person be the chairman and chief executive?

Unitary structure

Depending on the bye-laws, the roles of chairman and CEO can be separated or held by the same person. A natural person can only hold one position as CEO (two under certain circumstances) and cannot hold more than five offices of director at any one time, although directorships with a parent company and its unlisted subsidiaries count as one. This limitation does not apply to legal entities; however, the position of permanent representative is taken into account. Although a director cannot enter into an employment agreement with the company, an employee can become a director and continue working as an employee under certain conditions.

Dual structure

The same restrictions apply to members of the supervisory board. A management board member cannot simultaneously sit on the supervisory board of the same company. One person cannot hold more than one seat on a management board at the same time (a second office can be held in a controlled company).

7. How are directors appointed and removed? Is shareholder approval required?

Appointment of directors (unitary and dual structures)

The first directors are appointed in the articles of incorporation. In listed companies, the first directors are appointed by the shareholders' meeting.

In both listed and unlisted companies, directors (other than those elected by employees) are subsequently elected by the shareholders' meeting. Where there are vacancies due to death, dismissal or resignation, the board can co-opt a director. This decision must be ratified by the shareholders' meeting.

Supervisory and management board members are appointed under the conditions described above.

Removal of directors

Directors can be removed with immediate effect and without justification at any time by the general shareholders' meeting. The dismissed director has no right to compensation but may be awarded damages if the dismissal is deemed to be harmful or offensive, and golden parachutes may be granted if duly approved.

Supervisory and management board members can be dismissed under the same conditions as directors.

8. Are there any restrictions on a director's term of appointment?

Unitary structure

Unless otherwise stipulated in the bye-laws, the maximum term of appointment is:

  • Unlisted companies: three years for initial directors, and six years for directors appointed thereafter.

  • Listed companies: six years in all cases.

Directors can be reappointed.

Dual structure

The term of appointment of supervisory board members is the same as for directors. Management board members are appointed for terms of between two and six years, as determined by the bye-laws.

9. Do directors have to be employees of the company? Can shareholders inspect directors' service contracts?

Directors employed by the company

Unitary structure. A director is prohibited from entering into an employment contract. However, an employee can, under certain circumstances, be appointed as director. The employment contract must correspond to an actual position and cover specific non-managerial duties for which the relevant person is in a subordinate position with regard to the company. The number of directors employed by the company is limited to one-third of the total.

Dual structure. An employee can become a member of the company's management board and vice versa. The employment contract must correspond to an actual position and cover specific non-managerial duties for which the relevant person is in a subordinate position with regard to the company. Up to one-third of supervisory board members can simultaneously hold employment contracts. A supervisory board member can enter into an employment agreement with the company before or after becoming a member of the supervisory board.

For listed companies, the AFEP-MEDEF code recommends that a manager should terminate his employment contract on becoming a director or board member.

Shareholders' inspection (unitary and dual structures)

Directors' employment contracts and any material amendments to them, as regulated agreements, require the prior approval of the board of directors or supervisory board and disclosure to the statutory auditors. A shareholders' meeting subsequently ratifies the agreements.

10. Are directors allowed or required to own shares in the company?

There is no legal requirement for directors or supervisory board members to own shares in their company, although this may be required by the bye-laws.

11. How is directors' remuneration determined? Is its disclosure necessary? Is shareholder approval required?

Determination of directors' remuneration

To comply with professional corporate governance guidelines, many (mostly listed) companies have established compensation committees to determine the criteria applicable to the remuneration of corporate officers.

Unitary structure. A lump-sum amount of fees (jetons de présence) for the entire board is approved each year by the shareholders' meeting, which the board then divides among its members. Board members cannot receive any other compensation for their board activity. The board may also allocate exceptional remuneration to certain directors for special assignments.

The compensation of the chairman and CEO is set by the board of directors.

Dual structure. The remuneration of management board members is set by the supervisory board. The fees payable to supervisory board members are allocated in a similar manner to directors' fees.

In listed companies, the AFEP-MEDEF code stipulates that remunerations and benefits of any kind (including golden parachutes) granted to the chairman, CEO, deputy CEO or a member of the management board must be disclosed to the shareholders and linked to the beneficiary's performance, and that golden parachute arrangements are not acceptable in distressed companies.


Companies with more than 200 employees must disclose the global amount of compensation paid to the five highest-paid individuals, as certified by the statutory auditors, before the general shareholders' meeting.

Shareholder approval

Fees paid to directors and supervisory board members are approved each year by the general shareholders' meeting.

In listed companies, bonuses and golden parachutes for corporate officers and board members must comply with the procedure applicable to related-party agreements and be approved by the board and ratified by shareholders.


Management rules and authority

12. How is a company's internal management regulated? For example, what is the length of notice and quorum for board meetings, and the voting requirements to pass resolutions at them?

The procedures for convening board meetings are freely defined in the bye-laws and the frequency of such meetings is not determined by law. Directors can either agree to meet at regular intervals or allow the chairman to call meetings as necessary. However, the supervisory board must meet at least four times per year in order to examine the management board's quarterly report.

A quorum of at least half of the present (including via videoconference) board of directors or supervisory board members is required.

Decisions are adopted on the basis of a simple majority of members present or represented, although a higher majority can be stipulated in the bye-laws for matters of particular importance.

The quorum of the management board can be freely determined in the bye-laws.

Except in certain circumstances (for example, the approval of the company's accounts) or unless prohibited in the bye-laws, directors or supervisory board members can attend board meetings via video or telephone conferencing.

13. Can directors exercise all the powers of the company or are some powers reserved to the supervisory board (if any) or a general meeting? Can the powers of directors be restricted and are such restrictions enforceable against third parties?

Directors' powers

Unitary structure. The board of directors determines the company's strategic direction and supervises its implementation. The CEO has all powers to act in the company's name under all circumstances and represents the company in its relations with third parties.

Dual structure. The management board has all powers to act in the company's name under all circumstances and its chairman represents the company in its relations with third parties. The supervisory board operates as a permanent supervision body over the management board.


The powers of the CEO or management board can be restricted by the bye-laws or via board resolutions. However, such restrictions are unenforceable against third parties.

14. Can the board delegate responsibility for specific issues to individual directors or a committee of directors? Is the board required to delegate some responsibilities, for example for audit, appointment or directors' remuneration?

In both unitary and dual structures, the board of directors and supervisory board can delegate responsibility for specific issues to specially-created committees whose members may or may not be directors or supervisory board members. These committees cannot be involved in the company's management or indirectly limit the statutory powers of the relevant board or the CEO. In accordance with corporate governance codes of conduct, many listed companies have created committees of this kind (for example, audit and compensation committees).


Duties and liabilities of directors

15. What is the scope of a director's duties and personal liability to the company, shareholders and third parties? Please distinguish between civil and criminal liability under each of the following (if relevant):
  • General duties.

  • Theft and fraud.

  • Securities law.

  • Insolvency law.

  • Health and safety.

  • Environment.

  • Anti-trust.

  • Other.

General duties

CEOs, members of the management board or directors can be held liable towards the company and/or the shareholders for any breaches of applicable laws, regulations or of the bye-laws, and for mismanagement.

Directors only have individual liability towards third parties if they have personally committed a fault separate from their corporate duties.

Supervisory board members have no liability toward the company and/or third parties other than for personal negligence, tortious acts in the performance of their duties or mismanagement. They have no liability for managerial acts and their consequences.

Theft and fraud

In addition to general rules of criminal law, CEOs, directors and management board members can incur specific criminal liability, for instance, for:

  • Misuse of corporate assets or power.

  • Payment of fictitious dividends.

  • Presentation of false corporate accounts.

Supervisory board members can incur liability for any offences committed by management board members and not disclosed to the shareholders' meeting.

Securities law

CEOs, members of the management and supervisory boards, and directors incur civil and criminal liability for breaches of the securities law, whether intentional or resulting from negligence, including:

  • Disclosure of false or misleading information.

  • Insider trading.

  • Failure to declare the crossing of certain shareholding thresholds.

  • Stock price manipulations.

  • Violation of black-out periods.

Insolvency law

CEOs, directors and members of the management board can incur liability for corporate losses in cases of mismanagement and can also be subject to measures preventing them from holding management positions.

Health and safety

CEOs and members of the management board can be held liable for any breach of health and safety regulations, whether intentional or resulting from negligence. Directors are bound to ensure the strict enforcement of health and safety regulations and can incur personal criminal liability if they do not take all appropriate measures, regardless of whether any incident actually occurs.


CEOs, directors and members of the management board can be held liable for any breach of environmental regulations, whether intentional or resulting from negligence.


CEOs, directors and members of the management board can be held liable for any breach of anti-trust regulations.

16. Can a director's liability be restricted or limited? Is it possible for the company to indemnify a director against liabilities?

Directors' liability cannot be limited by the bye-laws nor by any board or shareholder's decision.

Under certain circumstances, officers can be exempted from criminal liability in cases of valid power delegation to someone having the necessary qualification, authority and means to perform the delegated tasks.

17. Can a director obtain insurance against personal liability? If so, can the company pay the insurance premium?

Directors can be insured against the financial consequences of any civil liability incurred by them, but not against fraud or criminal acts. A director's civil liability insurance covering actions carried out in the company's name, in his official capacity and in the absence of any separate personal fault, is frequently paid for by the company.

18. Can a third party (such as a parent company or controlling shareholder) be liable as a de facto director (even though such person has not been formally appointed as a director)?

Any person de facto managing a company under the cover of, or in place of, its legal representatives, incurs the same civil and criminal liability as the official directors. This includes having to contribute to corporate losses in case of insolvency proceedings.


Transactions with directors and conflicts

19. Are there general rules relating to conflicts of interest between a director and the company?

Directors' decisions must comply with the company's interests; otherwise liability can be incurred for mismanagement.

For prohibited and regulated agreements see Question 20.

20. Are there restrictions on particular transactions between a company and its directors?

Any direct or indirect agreements entered into between a company and its CEO, chairman, directors, supervisory or management board members, or any shareholder owning more than 10% of the voting rights, are governed by a specific disclosure and review procedure.

There are three categories of related-party agreements:

  • Prohibited agreements (for example, borrowing or obtaining a guarantee from the company).

  • Unrestricted agreements, which are agreements entered into in the normal course of business and under normal conditions.

  • Other agreements that are subject to prior approval by the board of directors or the supervisory board.

A special report on these agreements drafted by the statutory auditors is submitted to the shareholders' meeting for further approval. Rejected agreements remain in force except in cases of fraud.

21. Are there restrictions on the purchase or sale by a director of the shares and other securities of the company he is a director of?

In listed companies, any purchase or sale by directors of the company's securities using insider information is subject to criminal penalties.

The chairman, CEO and board members must register or hold in nominative form all company shares they own.

A transaction carried out involving company shares by board members and the CEO must be declared to the AMF within four days, which discloses it to the public.

More generally, listed companies usually adopt guidelines stating that managers and directors must abstain from any trading activities during a certain period before the publication of interim and annual results (black-out period).

Options cannot be granted:

  • Within ten trading sessions before and following the date on which the consolidated (or annual) accounts are made public.

  • Between the date on which the company's corporate bodies are informed of a fact which, were it to be made public, could have a material impact on the price of the company's securities, and a date equivalent to ten trading sessions following that on which the information was made public.


Disclosure of information

22. Do directors have to disclose information about the company to shareholders, the public or regulatory bodies?

Information that must be provided by the board of directors or the management and supervisory board to shareholders before a general shareholders' meeting includes but is not limited to:

  • The agenda.

  • The annual accounts (the consolidated accounts, if applicable) of the last financial year, including details of the allocation of profits.

  • The statutory auditors' reports.

  • Reports by the board of directors (or management or supervisory board).

  • Draft resolutions.

Shareholders can also access certain documents at any time, including:

  • The annual accounts (or consolidated accounts, if applicable) for the last three fiscal years.

  • The list of board members (or management or supervisory board members).

  • The global amount, certified by the auditors, of remuneration paid to the five or ten highest-paid individuals, according to whether the number of employees is greater than 200 or not.

In addition, companies must file each year accounts for the previous financial year with the clerk of the commercial court that has jurisdiction over their registered office, which are then made available to the public.

Before a shareholders' meeting, any shareholder can raise any question in writing to the board of directors or management board.

Several specific disclosure obligations apply to listed companies. Any initial disclosure or disclosure of a material change made to any previously disclosed information must be made as soon as possible.


Company meetings

23. Does a company have to hold an annual shareholders' meeting? If so, when? What issues must be discussed and approved?

An ordinary shareholders' meeting must take place at least once per year, within six months of the end of the financial year, for:

  • The approval of the last fiscal year accounts.

  • The allocation of profits and calculation of the dividend.

The ordinary shareholders' meeting is also in charge of:

  • The appointment, replacement and/or dismissal of directors.

  • The approval of any related-party agreement.

  • The calculation of the remuneration allocated to the board.

A criminal penalty of six months' imprisonment or a EUR9,000 fine may be incurred by the chairman or board members if no meeting is convened within the six-month period.

24. Can shareholders call a meeting or propose a specific resolution for a meeting? If so, what level of shareholding is required to do this?

In principle, the shareholders' meeting is called by the board. A general meeting can also be convened by a representative appointed by the court at the request of one or several shareholders representing at least 5% of the share capital.

In listed companies, a shareholders' meeting can also be convened by shareholders owning a majority of the capital or voting rights after a public takeover bid or the sale of a controlling interest.

The shareholders can propose specific resolutions to the meeting provided they own 5% of the share capital if the total share capital is less than EUR750,000 or a lesser percentage if the capital is greater.


Minority shareholder action

25. What action, if any, can a minority shareholder take if it believes the company is being mismanaged and what level of shareholding is required to do this?

If a minority shareholder believes the company is being mismanaged, he may:

  • Submit questions in writing to the board, to be answered during the next shareholders' meeting.

  • At any time, if holding alone or jointly at least 5% of the shares, submit questions in writing to the chairman of the board or the management board on the company's management transactions. If no response is given within one month or if the response is unsatisfactory, the shareholder(s) can request a summary judgment ordering the appointment of an expert entrusted with drawing up a report on the relevant management transactions (management expertise procedure).

  • One or more shareholders, or an association of shareholders (meeting certain requirements), representing at least 5% of the share capital can submit written questions to the chairman of the board of directors or the management twice a year on any matter that may threaten the continuing operations of the company. The reply must be sent to the auditors.

  • Bring an action against the managers in the event of criminal law offences (for example, misuse of corporate assets).

  • Request, under certain conditions (see Question 24), that a shareholders' meeting be convened.

  • Seek indemnification from directors on behalf of the company through derivative legal action. If so, any damages awarded by the court are paid to the company itself.

  • Bring individual legal action against the directors, when having suffered a loss distinct from that suffered by the company.

  • In the event of serious difficulties preventing normal operations of the company, ask the courts to appoint an interim administrator to temporarily carry out the management of the company's business.

  • Ask the courts to order a preventative pre-trial expertise procedure (expertise in futurum) to gather or preserve factual evidence with a view to future legal proceedings. These preventive expertise measures are available to any shareholder, with no minimum ownership requirements.


Internal controls, accounts and audit

26. Are there any formal requirements or guidelines relating to the internal control of business risks?

In listed companies, the chairman of the board of directors (or supervisory board) must provide at the shareholders' meeting a report on the company's internal control and risk management procedures. The statutory auditors draft a report summarising their observations on the chairman's report on internal controls.

27. What are the responsibilities and potential liabilities of directors in relation to the company's accounts?

The company's accounts must be accurate and fairly represent the assets, financial situation and results of the company, otherwise, management can incur criminal penalties (a five-year prison sentence and a EUR375,000 fine).

In listed companies, any irregularity in the annual accounts also exposes the company and its management to financial penalties imposed by the AMF.

28. Do a company's accounts have to be audited?

An SA must have at least one statutory auditor responsible for:

  • Auditing the company's accounting documents.

  • Ensuring compliance with applicable accounting standards.

  • Ensuring the accuracy of the information provided in the management report and documents provided to shareholders on the company's financial situation.

Companies publishing consolidated accounts and listed companies must appoint at least two statutory auditors.

29. How are the company's auditors appointed? Is there a limit on the length of their appointment?

Statutory auditors are appointed for six financial years. In unlisted companies, they can be reappointed indefinitely.

Statutory auditors are appointed (or their appointments are renewed) by the shareholders' meeting, further to a proposal from the board or, under certain circumstances, the shareholders. In listed companies, when the board of directors selects the proposed statutory auditors, the CEO and deputy CEO(s) abstain from voting if they are also directors.

The AMF is notified of proposals for the nomination or renewal of the appointment of the statutory auditors made by listed companies.

30. Are there restrictions on who can be the company's auditors?

Only legal entities or natural persons registered on a special list can act as statutory auditors. This list provides for several conditions regarding professional integrity and qualification, among others.

There are several restrictions, for example:

  • The office of statutory auditor is incompatible with any employment, commercial business activity or activity that may restrict the auditor's independence.

  • Any former managers or employees of a company within the last five years cannot be appointed as statutory auditors of that company.

31. Are there restrictions on non-audit work that auditors can do for the company that they audit accounts for?

Statutory auditors are prohibited from providing any company audited by them, or any company controlled by or controlling that company, with any consulting or other services not directly covered by the scope of their assignment as statutory auditor.

32. What is the potential liability of auditors to the company, its shareholders and third parties if the audited accounts are inaccurate? Can their liability be limited or excluded?

Statutory auditors are liable to the company and third parties for any prejudice caused by misconduct and negligence committed in the performance of their duties. They are bound by a best efforts obligation.

Statutory auditors may incur criminal liability in the following cases:

  • Breach of professional secrecy.

  • Non-disclosure of criminal acts to the state prosecutor (procureur de la république).

  • Issuance or confirmation of false information on the company's situation.

  • Failure to mention major investments or acquisitions of other companies located in France in their report.

  • Issuance of inaccurate information in the report submitted to the shareholders' meeting called to vote on the deletion of shareholders' preferential subscription rights.

  • Performance of acts that may infringe their independence or breach of the applicable legal incompatibilities.

If they breach their obligations, statutory auditors can also be subject to disciplinary penalties (for example, a temporary ban or formal exclusion). They can subscribe to professional liability insurance, although their liability cannot be limited in any way.


Corporate social responsibility

33. Is it common for companies to report on social, environmental and ethical issues? Please highlight, where relevant, any legal requirements or non-binding guidance/best practice on corporate social responsibility.

In listed companies the board's report to the shareholders' meeting must include information on how the company deals with the social and environmental impacts of its business activity. For fiscal years closing after 1 January 2011, in listed companies, this board report must also detail the company’s undertakings regarding sustainable development. For certain large unlisted companies, the same details will also have to be given but the decree regarding the thresholds for being a “large” company has not been released yet.

In practice, listed companies often also publish ethical codes of conduct on social or environmental matters.


Company secretary

34. What is the role of the company secretary in corporate governance?

There is no requirement for a company secretary (secrétaire général) to be appointed. In practice it is unusual for the company secretary to sit on the board of directors.


Institutional investors and shareholder groups

35. How influential are institutional investors and other shareholder groups in monitoring and enforcing good corporate governance? Please list any such groups with significant influence in this area.

Institutional investors and other shareholder groups, representing over 80% of the shareholders of CAC 40 companies, are influential in monitoring and enforcing best practice in corporate governance. Their growing strength as shareholders of French listed companies has led to the adoption of new corporate governance codes.

ADAM, led by Colette Neuville, is the main organisation in France dedicated to protecting the rights of listed companies' minority shareholders.



36. Is there statutory protection for whistleblowers (persons who disclose criminal activity or other serious malpractice within a company)?

Subject to criminal penalties, statutory auditors must disclose to the state prosecutor any criminal facts revealed to them in the context of their assignment and must inform the authorities of any fact or decision justifying their intention to refuse to grant certification for the accounts.

The Data Protection Authority (Commission Nationale de l'Informatique et des Libertés) (CNIL) publishes a list of guidelines giving conditions for whistleblowing mechanisms. Companies must:

  • Restrict the scope of such proceedings to a specific field (particularly accounts and anti-corruption measures).

  • Not encourage anonymous denunciations.

  • Set up a specific organisation to gather and handle alerts.

  • Inform the person concerned as soon as any evidence has been saved.

Any employee alerting either his employer or the authorities regarding corruption he discovered in the course of the performance of his duties is protected by law against any penalties, dismissal or other discriminatory measures.



37. Please summarise any proposals for reform and state whether they are likely to come into force and, if so, when.

There are currently no proposals for reform.


Contributor details

Adrien Cadieux

De Pardieu Brocas Mafféi

T +33 1 53 57 71 71
F +33 1 53 57 71 70

Qualified. France, 1995.

Areas of practice. Corporate law and M&A.

Recent transactions

Advising numerous funds or investors relating to the legal management of their investment in listed companies, particularly from the corporate governance perspective.

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