Bond financing

Assets and liabilities verification auditor in France

A joint-stock company (société par actions) that wishes to issue bonds without having two balance sheets duly approved by its shareholders must first have its assets and liabilities verified by an auditor appointed for that purpose (commissaire à la vérification de l'actif et du passif), failing which the issue is void.

The principle: a safeguard for bond subscribers

Issuing bonds means borrowing from the public or from investors in exchange for debt securities. To protect subscribers, the law normally requires the issuer to have already proved itself: two annual balance sheets duly approved by the shareholders, showing a sufficiently established financial position. A company too young to show this track record, typically one created less than two closed financial years ago, can issue bonds on one condition only: having its assets and liabilities verified by an auditor appointed for that purpose, whose report takes the place of the assurance that approved balance sheets normally provide.

When is this verification mandatory?

Article L.228-39 of the French Commercial Code (Code de commerce) sets out the principle for joint-stock companies, namely the SA (public limited company) and the SCA (partnership limited by shares): failing which the contracts concluded and the bonds issued are void, a bond issue by a company that has not drawn up two balance sheets duly approved by the shareholders must be preceded by a verification of its assets and liabilities. An SAS (simplified joint-stock company) is subject to the same requirement by virtue of the cross-reference in article L.227-1, subject to the specific conditions for bond issues by an SAS laid down in article L.227-2 (offer reserved for qualified investors or a restricted circle, or bonds with a unit nominal value of at least 100,000 euros, or a subscription of at least 100,000 euros per investor).

Exceptions to the requirement

• Bonds whose repayment and interest are guaranteed by a company that has itself drawn up two duly approved balance sheets.
• Bonds secured by security interests over securities issued or guaranteed by the French State.

This requirement, which stems from the NRE Act of 15 May 2001, ended what had until then been an almost general ban on bond issues by companies that were too young: it opened up this possibility subject to an independent verification of their financial position.

How is the auditor appointed?

The auditor responsible for verifying the assets and liabilities is appointed by the corporate body empowered to decide on or authorise the bond issue. In practice, the company's officers most often seek an appointment by order of the president of the competent commercial court (tribunal de commerce), on application, under conditions close to those applying to the contribution auditor (commissaire aux apports), a route that offers a stronger assurance of independence for future subscribers. The auditor is subject to the incompatibility rules in article L.821-31.

The report and its filing

The auditor draws up a report on the value of the company's assets and liabilities. This report must be filed with the commercial court registry (greffe) of the competent court and held at the registered office for future subscribers to consult, at least eight days before the date of the decision to issue. It is on the basis of this report, and not of approved balance sheets that the company does not yet have, that investors can assess the reality of its financial position before subscribing.

Our approach at audit france

audit france carries out assets and liabilities verification engagements with the rigour required for a report intended for bond subscribers, within timescales compatible with the timetable of the issue. The signing partner remains the single point of contact throughout the engagement.

Why choose audit france

A 100% digital firm dedicated solely to statutory audit, registered with the Haute Autorité de l'Audit (H2A) and a member of the Compagnie Nationale des Commissaires aux Comptes (CNCC) and working across mainland France and the French overseas territories.

This page is a practical guide in English, for information only. It is not legal advice, and only the French texts have legal force. Check the version in force for your own situation.