Interim dividends without an auditor: conditions and procedure
The distribution of an interim dividend is a strategic option for companies wishing to remunerate their associates before the approval of the annual financial statements. This practice, which is governed by the French Commercial Code, raises specific issues when the company does not have a statutory auditor. The specific articles of association of certain corporate structures allow this distribution under strict conditions. You need to master the applicable rules and surround yourself with professional accounting services to secure this operation and avoid legal and tax risks.
What is an interim dividend without an auditor?
An interim dividend is an advance distribution of profits to associates during the financial year, prior to approval of the annual financial statements by the Annual General Meeting. This distribution is based on an interim balance sheet drawn up in accordance with the applicable accounting and bookkeeping rules, and remains provisional: the amount will be deducted from the final dividend when earnings are appropriated. In companies not required to appoint a statutory auditor, this operation requires rigorous preparation of an interim balance sheet showing sufficient distributable profit, a formal decision by the competent corporate body, and strict compliance with the rules for calculating distributable profit to protect corporate creditors.
The legal framework for interim dividends
Article L232-12 of the French Commercial Code strictly regulates the distribution of interim dividends. This law requires the presentation of a balance sheet drawn up during or at the end of the financial year, certified by a statutory auditor to guarantee the accuracy of the accounts and protect creditors. However, companies not subject to the requirement to appoint an auditor may distribute interim dividends under alternative conditions guaranteeing the same legal and financial security.
Conditions for making an advance payment without an auditor
If you wish to distribute an interim dividend without a statutory auditor, you must meet three cumulative conditions. Firstly, your company must not be legally required to appoint a statutory auditor under the thresholds applicable to its legal form. Secondly, you must draw up a rigorous interim balance sheet showing sufficient distributable profit, calculated by adding together profit for the year, retained earnings and available reserves, then deducting previous losses and compulsory appropriations. Thirdly, the amount of the interim dividend may not exceed this distributable profit. This interim balance sheet may need to be drawn up by a chartered accountant to ensure compliance with accounting principles.
The decision to distribute shares rests with the competent corporate body, depending on your legal form: management for SARLs and traditional SARLs, board of directors or management board for SAs, chairman or collegiate body for SASs. Your company’s bylaws may set out additional conditions or specific terms and conditions, which you must consult before making any distribution, to ensure compliance with internal rules of governance.
Procedure for distributing an interim dividend
The distribution of an interim dividend without a statutory auditor requires compliance with a rigorous, multi-stage procedure. This methodology guarantees the legal and tax compliance of the operation. The support of an accounting firm can prove invaluable in drawing up the interim balance sheet and accurately calculating the distributable profit.
Preparation of the interim balance sheet
This document must comply with the same accounting principles as the annual balance sheet, and its quality determines the validity of the distribution.
Calculation of distributable profit
Under no circumstances may the amount of the interim dividend exceed the distributable profit shown in the interim balance sheet, failing which the distribution will be irregular and subject to sanctions. Document this calculation precisely, and keep all supporting documents drawn up by your accounting firm to demonstrate compliance with this ceiling in the event of an audit.
Decision of the competent corporate body
Your company’s governing body (management, board of directors, management board or chairman, depending on the legal form) must formally approve the distribution of the interim dividend. This decision is recorded in detailed minutes, which mention the amount distributed, the profit available for distribution and the terms of payment. The payment is made after this formal decision, in compliance with the applicable tax formalities: compulsory deductions, single flat-rate deduction or option for the progressive scale.
Risks and precautions
Distributing an interim dividend without an auditor exposes your company and its directors to significant legal risks. If the distributable profit proves to be insufficient when the annual financial statements are approved, the distribution constitutes a fictitious dividend: the beneficiary shareholders must then return the sums received, with interest. Directors are personally liable and may be ordered to compensate the company and its creditors for any loss suffered, even in the absence of intentional fault if negligence is shown.
From a tax point of view, the tax authorities may reclassify an irregular distribution as distributed income taxable under a different regime. There is a risk ofabuse of rights if the transaction is artificial or pursues exclusively a tax purpose.
To minimize these risks, rigorously document each stage of the procedure: interim balance sheet, distributable profit calculations, minutes of decisions and payment certificates. This documentation will serve as evidence in the event of an audit or litigation.
Tax support to secure your approach
The complexity of the rules applicable to interim dividends justifies the use of specialized legal and tax support. A tax lawyer will analyze your specific situation, identify the risks inherent in your structure and secure the entire procedure. He or she drafts or verifies the necessary documents: interim balance sheet, supporting calculations, minutes of decisions.
This rigorous formalization is your best protection in the event of a tax audit or dispute. Legal support also enables you to effectively defend your interests in the event of tax adjustments or negotiations with the tax authorities. In this way, you can secure your financial decisions while limiting the legal and financial risks associated with distributing interim dividends without a statutory auditor.
Frequently asked questions
This section answers frequently asked questions about paying an interim dividend without a statutory auditor, to help you understand the legal requirements, the procedure to follow and the precautions to take.
What is an interim dividend without an auditor?
An interim dividend without a statutory auditor is an advance distribution of profits to the shareholders of a company, made before the approval of the annual financial statements, without a statutory auditor being appointed to the company. This option is available to joint-stock companies (SA, SAS, SASU) which are not legally required to appoint a statutory auditor. The interim dividend is paid on the basis of an interim accounting statement drawn up by the management body, certifying the existence of sufficient distributable profit.
What are the legal conditions for paying an interim dividend without a statutory auditor?
To pay an interim dividend without a statutory auditor, several conditions must be met. Firstly, the company must not be legally required to appoint an auditor. Secondly, an interim statement of accounts must be drawn up, showing sufficient distributable profit after mandatory reserves have been set aside. Thirdly, this situation must be approved by the competent body (Board of Directors, Management Board or Chairman). Lastly, the amount of the interim dividend may not exceed the profit earned since the end of the last financial year, after deduction of sums set aside as compulsory reserves.
What is the procedure for paying an interim dividend without a statutory auditor?
The procedure involves several essential steps. Firstly, the management body must draw up an interim accounting statement certifying the existence of distributable profit. Next, a formal decision must be taken by the Board of Directors, the Management Board or the Chairman to authorize payment of the interim dividend. This decision must specify the exact amount of the interim dividend and how it is to be distributed among the associates. Minutes must be drawn up and kept. Finally, the actual payment can be made to the associates, in the proportions defined in the bylaws or decision.
What accounting documents are required to distribute an interim dividend?
The distribution of an interim dividend requires the preparation of an interim financial statement. This document must include a balance sheet and income statement drawn up from the end of the last financial year to the date of the proposed distribution. This statement must clearly show the amount of profit earned and the profit available for distribution after the legal reserves have been set aside. It must be dated and signed by the competent management body. It is advisable to keep all supporting accounting documents to demonstrate the regularity of the operation in the event of an audit.
What are the risks of improperly distributing an interim dividend?
Irregular distribution of interim dividends exposes directors and associates to significant risks. Directors may be held personally liable and forced to reimburse sums unduly paid. They may also face criminal penalties for distributing fictitious dividends. Beneficial shareholders may be required to repay sums received if the irregularity is established. On the tax front, the tax authorities may call into question the tax treatment of distributions during a tax audit, and apply penalties. It is therefore crucial to scrupulously respect the legal conditions before making any payments.