The decree on the new thresholds for the mandatory statutory audit has been published
Implementation of the new statutory audit thresholds for new and current mandates – The entry into force of the new rules for appointing auditors provided by the law relating to the growth and transformation of companies, known as PACTE (act 2019-486 of 22 May 2019, Official Journal (OJ) of 23, art. 20) was conditional on the publication of a decree to implement and set out the new thresholds for compulsory legal certification. That has now been done (decree No. 2019-514 of 24 May 2019, OJ of 26).
These new rules apply in metropolitan France to financial year ending after 26 May 2019 (the date of the decree’s publication) (aforementioned law art. 20, II, al. 1). However, it should be remembered that the mandates for the auditors that are current on the effective date of the decree (27 May 2019) will continue until their expiry date (law mentioned above, s. 20, II, al .2). As auditors are appointed for a six-year term (c. com art. L.823-3), the new regulations for the appointment of auditors will take effect in a deferred manner depending on the stage of the mandate.
Immediate application of the exemption for the appointment of the auditor whose mandate is up for renewal: transitional provisions – However, in the event that the 6th financial year of the auditor’s mandate is closed as of 31 December 2018, the exemption for the appointment of an auditor for the 2019 accounts applies since 27 May 2019 provided that (aforementioned law, art. 20, II, al. 3; c. com. art. D. 221-5 new):
-the company did not cross, upon the closing, two of the three new audit thresholds (total balance sheet 4 million euros, tax-free amount of turnover 8 million euros and a workforce of 50) (see below);
-and the deliberation of the General Meeting ruling on the accounts for this 6th financial year and the appointment of an auditor did not take place before that date.
Summary of mandatory appointment thresholds for auditors – Below are the new thresholds for mandatory legal audit that apply in commercial companies and in some companies because they belong to groups.
|Auditor appointment thresholds in commercial companies and in certain small group companies: significant controls and subsidiaries|
|Two out of three criteria||Total balance sheet||Revenue amount excluding tax||Number of employees|
|> 4 million euros||> 8 million euros||> 50|
Commercial companies, of any form (excluding Public Interest Entities – PIEs) (3):
-Limited Companies (c. com. art. L. 225-218 and D. 225-164-1 by reference to D. 221-5)
-Partnerships (c. com. art. L. 221-9 and by reference to D. 221-5)
-Limited Liability Companies (c. com. art. L. 223-35 and D. 223-27 by reference to D. 221-5)
-Joint Stock Companies (c. com. art. L. 227-9-1 and D. 227-1 by reference to D. 221-5)
|Two out of three criteria||Total cumulative balance sheet (1)||Cumulative revenue amount excluding tax (1)||Cumulative average number of employees (1)|
|> 4 million euros||> 8 million euros||> 50|
Companies, head of commercial company groups (excluding PIEs).
Companies that control other companies as provided by article L. 233-3 appoint an auditor, as soon as the parent and its subsidiaries exceed the enhanced audit thresholds and regardless of the obligation to establish consolidated accounts.
(c. com. art. L. 823-2-2, al. 1 and D. 823-1 by reference to D. 221-5)
Exemption of appointment of an auditor for: controlling companies, themselves controlled by a company that has appointed an auditor (c. com. art. L. 823-2-2, al. 2)
|Two out of three criteria (2)||Total balance sheet||Revenue amount excluding tax||Number of employees|
|> 2 million euros||> 4 million euros||> 25|
Significant subsidiaries of commercial groups.
These companies are controlled directly or indirectly by the controlling people and entities above mentioned.
(c. com. art. L. 823-2-2, al. 3 and D. 823-1-1)
(1) The cumulative total of the balance sheet, the cumulative amount excluding tax of turnover and the cumulative average number of employees are determined by adding up the total balance sheet, the amount of turnover excluding tax and the average number of employees of the entities included in the group they form with the companies they control (i.e. art. L. 823-2-2, al. 1; and art. D. 823-1).
(2) These are the thresholds that were announced by rapporteur Sommer during the 2nd reading of the PACTE bill at the French National Assembly.
(3) PIEs are required to appoint an auditor without threshold conditions (i.e. art. L. 823-2-1).
Crossing thresholds – Companies that exceed thresholds at the end of a financial year are required to appoint an auditor (c. com. art. L. 225-218).
Companies, business group heads or significant subsidiaries are no longer required to appoint an auditor, as long as they have not exceeded the thresholds in the two years prior to the expiry of the auditor’s mandate (c. com. art. D. 823-1).
Decree No. 2019-514 of 24 May 2019 setting the thresholds for the appointment of auditors and the deadlines for developing the standards for professional practice, OJ of 26, text 4.