Appointment of Statutory Auditors in French SARLs

New rules on thresholds, procedures, and exceptions

The appointment of statutory auditors (commissaires aux comptes, or CACs) in French companies has undergone significant reform in recent years. The PACTE Law of 22 May 2019 and the Soilihi Law of 21 July 2019 reshaped the rules governing statutory audits across all commercial companies, including SARLs (sociétés à responsabilité limitée).

Since these reforms, the requirement to appoint an auditor no longer applies uniformly to all companies but depends on the company’s size, activity, and shareholder structure. The goal is to align audit obligations with the size and risks of the company, while reducing unnecessary administrative costs for small businesses.

1. Mandatory Appointment of Statutory Auditors in a SARL Based on Thresholds

Since the reforms, SARLs are required to appoint at least one statutory auditor if, at the close of a financial year, the company exceeds two out of three defined thresholds.

As from 1 March 2024, the thresholds are:

• €5 million in balance sheet total,
• €10 million in net turnover (excluding VAT),
• 50 employees.

If these criteria are met, the company must appoint an auditor for a classic six-year mandate.

The new thresholds apply to financial years opened on or after 1 January 2024. However, mandates of auditors already in place as of 1 March 2024 continue until their scheduled expiry.

The obligation to maintain an auditor ceases once the company has remained below two of the three thresholds for two consecutive financial years preceding the end of the current mandate.

2. Certain SARL Companies Must Appoint an Auditor Regardless of Their Size

Certain SARL companies must appoint statutory auditors irrespective of their size or thresholds:

• Public interest entities (PIEs): these entities are legally obliged to appoint at least one auditor.
• Companies required to publish consolidated accounts: these must appoint at least two auditors, and the two professionals must be fully independent from each other (i.e., they cannot belong to the same audit firm).

In addition, specific sectoral regulations may impose an obligation to appoint auditors regardless of company size.

3. Appointment Procedures of Statutory Auditors in a SARL

a. Appointment at the General Meeting of Shareholders

The appointment or renewal of a statutory auditor’s mandate must be included as a specific item on the agenda of the general meeting. It cannot be added under “miscellaneous matters.”

The Court of Cassation has confirmed that a deliberation appointing an auditor not listed in the agenda circulated beforehand is irregular (Cass. com., 14 February 2018, no. 15-16525, concerning an SARL).

b. Duration of the Mandate of the Statutory Auditors

The standard mandate for a statutory auditor remains six financial years. However, special shorter mandates exist for small enterprises, as explained below.

c. Appointment of Statutory Auditors in Small Enterprises upon Shareholders’ Initiative

For SARLs that do not exceed two of the three audit thresholds (the so-called “5/10/50 rule”), several scenarios may allow or require such an appointment.

• Appointment at the Request of Shareholders

If one or more shareholders representing at least one-third of the share capital submit a reasoned request, the company must appoint a statutory auditor.

In this case, the auditor’s mission is limited to three financial years and qualifies as a “small enterprise statutory audit” (audit légal petite entreprise or ALPE).

This mechanism, introduced by the PACTE Law and adjusted by the Soilihi Law, empowers significant minority shareholders to strengthen financial oversight without resorting to the courts.

• Voluntary Appointment by Shareholders

The shareholders may also choose, by ordinary resolution, to appoint one or more statutory auditors voluntarily.

By default, a voluntary appointment is for six financial years.

However, shareholders may decide to limit the mandate to three financial years, provided this is expressly stated in the resolution (Commercial Code, art. L.821-46).

• Appointment Ordered by the Court

Even if the mandatory thresholds are not reached, one or more shareholders representing at least one-tenth of the share capital may petition the president of the commercial court for the appointment of an auditor.

The court decides whether to grant the request, taking into account the company’s corporate interest. The judge is not obliged to appoint an auditor if the request appears abusive or unnecessary (CA Paris, 24 May 2002; CNCC, Bull. 129, March 2003).

If granted, the auditor’s mission is a standard six-year mandate.

• Occasional Appointment for Specific Operations

The reforms also recognize the need for one-off appointments of auditors to secure certain legal operations.

This is particularly relevant for companies that, due to their small size, no longer have a statutory auditor. For instance, before distributing interim dividends, an SARL must appoint an auditor for that specific operation (Commercial Code, art. L.232-12).

In this case, the auditor is appointed only for the operation in question, not for a multi-year mandate.

4. Companies Publishing Consolidated Accounts Must Appoint Two Statutory Auditors

Companies required to publish consolidated accounts must always appoint at least two statutory auditors.

Professional ethics rules further require that the two auditors be entirely independent of one another, excluding the possibility of them belonging to the same audit firm.

This obligation applies to all companies that meet the consolidation criteria set out in Articles L.233-16 and L.233-17 of the Commercial Code.

5. Obligation to Appoint Statutory Auditors in French SARLs Belonging to a “Small Group”

Even if a company, considered individually, is too small to require an auditor, it may nevertheless fall within the statutory audit regime because it belongs to a group of companies that collectively exceeds certain thresholds. The aim is to ensure that audit oversight is not avoided simply by fragmenting a business into smaller legal entities.

a. What is a “Small Group”?

A small group is defined for audit purposes as follows (Commercial Code, art. L.821-43):

• It consists of a person or entity that is not a public interest entity (PIE),
• It is not required to prepare consolidated accounts,
• It controls one or more companies within the meaning of Article L.233-3 of the Commercial Code,
• And, taken together with its controlled companies, it exceeds two of the following three thresholds in a given financial year:
  • €5 million cumulative balance sheet total,
  • €10 million cumulative turnover,
  • 50 employees (cumulative headcount).

If these conditions are met, the head of the group and certain of its subsidiaries are subject to mandatory statutory audit obligations.

b. The Concept of “Control”

Control is assessed according to Article L.233-3 of the Commercial Code, which defines it broadly. A person or entity controls another company when:

• It holds, directly or indirectly, a share of the capital giving it the majority of voting rights;
• It alone has the majority of voting rights by virtue of an agreement with other shareholders or partners;
• It effectively determines decisions at general meetings through the voting rights it holds;
• It is a shareholder or partner and has the power to appoint or remove the majority of board members or directors.

A presumption of control exists when a shareholder holds more than 40% of voting rights and no other shareholder holds more. In addition, control may be joint: if two or more persons act in concert to determine decisions in general meetings, they are considered to control the company together.

c. Thresholds: How Are They Assessed?

When determining whether a group crosses the 5/10/50 thresholds, all subsidiaries must be taken into account — not just the significant ones. Both large and small controlled companies count towards the group totals.

This ensures that groups cannot escape audit obligations by arguing that certain subsidiaries are too small to matter.

d. Professional Secrecy Between Group Auditors

The law provides for a limited lifting of professional secrecy between auditors within a small group.

• The statutory auditors of significant controlled companies may transmit their risk reports (and only these reports) to the auditor of the group head.
• However, the reverse is not permitted: the auditor of the group head cannot share documents with the auditors of the subsidiaries, absent specific legal authorization.

This limited exception facilitates oversight at group level while preserving confidentiality.

e. Appointment by the Head of a Small Group

The head of the group (the controlling person or entity) is required to appoint a statutory auditor if the 5/10/50 thresholds are exceeded.

• The standard mission is for six financial years.
• However, if the head of the group does not itself exceed two of the thresholds, it may opt for a shorter three-year ALPE mission (audit légal petite entreprise).

f. Exemption in Case of Higher-Level Audit

If the head of the group is itself controlled by a person or entity that already appoints a statutory auditor, it is exempt from appointing one.

This exemption also applies where the controlling entity is foreign and has appointed a legal auditor of accounts. In this case, the French company heading the sub-group is not required to appoint its own auditor. The French auditing profession (CNCC) has clarified that the term “statutory auditor” in the law should be understood broadly, to include any legal audit appointment abroad.

That said, this exemption only applies in the company’s capacity as head of a sub-group. The company may still be required to appoint an auditor in another capacity, for instance as a significant controlled company if it exceeds the relevant thresholds.

g. Appointment by Significant Controlled Companies

Subsidiaries that are significant controlled companies must also appoint a statutory auditor, even if the parent is exempt.

The thresholds here are lower than for the head of group. A company controlled by a group head must appoint an auditor if it exceeds two of the following three criteria (Commercial Code, art. L.821-43, para. 3; D.821-172):

• €2.5 million balance sheet total,
• €5 million turnover,
• 25 employees.

The same statutory auditor may be appointed for both the group head and its significant controlled subsidiary.

The subsidiary is released from the obligation once it has remained below two of the three thresholds for two consecutive financial years before the auditor’s mandate expires.

As with the head of the group, the standard mission is six years, but the company may choose a shorter three-year ALPE mandate if conditions allow.

Exceptions

The obligation for significant subsidiaries to appoint auditors does not apply where the group head is a public interest entity or is required to publish consolidated accounts. In these cases, stricter and separate audit obligations already apply.

6. Sanctions for Failure to Appoint or Irregular Appointment of a Statutory Auditor

Failure to comply with statutory audit obligations is not without consequences. French law provides for both civil and criminal sanctions to ensure that companies and their directors take these duties seriously.

a. Civil Sanctions

On the civil side, any deliberations taken without a regularly appointed statutory auditor — or based on the report of an auditor who was appointed or remained in office in violation of legal provisions — are considered null and void.

This nullity is, however, subject to correction. The defect may be cured if the deliberations are subsequently expressly confirmed by the general meeting, this time acting on the report of a statutory auditor who has been properly and legally appointed (Commercial Code, art. L.821-5).

This mechanism strikes a balance: while irregular appointments cannot be ignored, shareholders are given the opportunity to ratify past decisions and restore legal certainty once the irregularity is corrected.

b. Criminal Sanctions

The law also imposes criminal liability on company directors who fail to comply with their duty to initiate the appointment of an auditor.

Specifically, directors who do not ensure the appointment of a statutory auditor may be punished by:

• up to two years’ imprisonment, and

• a fine of €30,000 (Commercial Code, art. L.821-6).

These penalties underline the importance the legislator places on statutory audit as a safeguard for transparency and financial integrity. The appointment of an auditor is not merely an administrative formality — it is a cornerstone of corporate governance, and directors who neglect it expose themselves to serious personal consequences.

7. Obligation to Appoint Alternate Statutory Auditors in French SARLs

In French corporate law, the system of statutory audit is designed to guarantee continuity and reliability. To this end, in some cases the law requires the appointment of an alternate statutory auditor (commissaire aux comptes suppléant) who can step in if the principal auditor is unable to carry out their duties.

While this obligation is not systematic in all cases, it remains an important mechanism for ensuring the uninterrupted exercise of statutory audit and for avoiding irregularities in the company’s governance.

a. When is an Alternate Auditor Required?

In SARLs, an alternate statutory auditor must be appointed only when the principal auditor is either a natural person or a single-member audit firm.

In such situations, the alternate is appointed by the ordinary general meeting for a mandate of six financial years, and will replace the principal auditor in the event of:

• refusal to act,
• impediment,
• resignation, or
• death.

This rule is laid down in Article L.821-40 of the Commercial Code.

b. Voluntary Appointment of Alternate Auditor

Even where the law does not require it, the shareholders may always decide voluntarily to appoint one or more alternates, just as they may freely appoint a principal auditor.

The National Company of Statutory Auditors (CNCC) has confirmed this possibility in its official guidance. Such an appointment can be prudent, since it avoids disruption and ensures continuity in case of unforeseen events.

c. Alternates Provided for in the Articles of Association

Sometimes, the obligation to appoint an alternate arises not from the law, but from the company’s own articles of association.

According to the Coordination Committee of the Trade and Companies Register (CCRCS), if the articles expressly require the appointment of an alternate auditor, the company must comply — even if the principal auditor is a multi-member firm and the legal rule would not normally require an alternate.

In such cases, the only way to dispense with this obligation is to amend the articles of association. The CNCC has confirmed this interpretation.

d. Consequences of Non-Compliance

Failure to appoint an alternate auditor when required does not give rise to criminal sanctions. However, it constitutes a legal irregularity, which the principal auditor would be obliged to mention in their report.

From a practical perspective, not appointing an alternate creates a risk of interruption in the statutory audit, which is why companies are strongly advised to comply. In fact, if the principal auditor’s mandate ends prematurely — for example, due to resignation, incapacity, or death — the alternate automatically assumes the role of principal for the remainder of the mandate. If the impediment is only temporary, the principal auditor resumes their functions after the next general meeting that approves the annual accounts. This automatic succession ensures that the audit function is never left vacant.

Conclusion

The statutory audit framework in French SARLs has evolved into a tiered and proportionate system, carefully balancing legal oversight with the operational realities of businesses. Three main situations now need to be distinguished:

1. When statutory audit thresholds are reached

For SARLs exceeding two of the three 5/10/50 thresholds (€5 million balance sheet, €10 million turnover, 50 employees), the appointment of at least one statutory auditor is mandatory. The classic mandate runs for six years, ensuring long-term continuity and independent oversight. This obligation guarantees that companies of significant size are subject to systematic external control.

2. When SARLs belong to a “small group”

Even when an individual SARL is below the audit thresholds, it may still fall under the regime if it belongs to a small group of companies that collectively crosses the 5/10/50 criteria. In such cases, the group head must appoint an auditor, and significant subsidiaries must do so as well if they exceed the lower 2.5/5/25 thresholds (€2.5 million balance sheet, €5 million turnover, 25 employees). This prevents fragmentation of businesses into multiple entities designed to escape audit obligations and ensures transparency across the group structure.

3. The role of alternate statutory auditors

Finally, the law ensures continuity of the audit function through the appointment of alternates in certain cases. An alternate statutory auditor must be designated when the principal is a natural person or a single-member firm. Even when not legally required, shareholders may appoint an alternate voluntarily as a safeguard. In the event of vacancy or incapacity, the alternate automatically assumes the principal’s duties, avoiding interruptions in statutory oversight.