Alert Procedure and the Role of Auditors in France
By Carole Hong Tran, FIDAG SARL
Statutory auditors carry out their mission with a long-term perspective and contribute to the prevention of the possible diffculties of the entity they audit. The Law of 01 March 1984, amended by the Act of 10 June 1994, established an alert procedure which consists, for the auditor, of informing company management of any facts likely to jeopardise the business continuity.
Steps of the Alert Procedure
Before the alert procedure is triggered, a meeting with management usually allows the auditor, firstly, to be informed as fully as possible of the facts identified and to avoid triggering an alert procedure that would later prove inappropriate, and, secondly, to inform the management of the various stages of the procedure set out by the law.
The alert procedure takes place in successive phases.
In the first step, the auditor must inform the management and, if necessary, the board of directors.
In the second step, if effective measures are not taken to improve the situation, the auditor must notify the president of the commercial court or the high court, as appropriate.
Finally, a special report will be communicated to the general meeting of shareholders.
End of the Alert Procedure
The procedure can be interrupted by the auditor at any stage when he or she believes that corrective actions have been taken or that solutions to financial diffculties have been found.
It may also be discontinued when a conciliation or safeguarding procedure is initiated by the management.
Complemented by the safeguard law passed in 2005, these procedures facilitate the reorganisation of an entity in order to allow for the continuation of the activity, the maintenance of jobs, and the clearing of liabilities, before termination of payment. With the economic crisis, they can help leaders to avoid bankruptcy filings and their possible collateral damage (job losses, induced bankruptcies of suppliers, etc.).
Carole Hong TranGGI member firm
Audit & Accounting, Tax, Advisory and Corporate Finance
T: +33 1 42 80 20 81
FIDAG SARL was created in 1985 and specialises in accounting, auditing, and advice to SMEs where they are engaged in international operations, particularly tax issues, social and labour law, legal problems, accounting, and the management of operations taking place in at least two different countries.
Carole Hong Tran is a Partner with FIDAG, French Chartered Accountant, and ACCA member, with considerable expertise in statutory audit and due diligence operations.
Published: Debt Collection, Restructuring & Insolvency Newsletter, No. 11, Autumn 2019 l Photo: Uwe Rieder