Shareholders’ power of investigation and control: a misunderstood right

According to the Code of Companies and Associations ("CCA"), each shareholder has an individual power of investigation and control, as long as no statutory auditor has been appointed in the company. In this article, we provide an overview of the possibilities and the limits of this right, which is often undervalued by shareholders. In addition, we will explain the importance it can/may have in practice.


What is the individual power of investigation and control?

If no auditor has been appointed, each shareholder is individually authorized to consult, at any time and without conditions, all the documents useful to control the financial situation of the company and the conformity of the accounting documents with the articles of association and the CCA. The request must be sent to the company’s administrative body, which is obliged to cooperate under penalty of being sanctioned by the judge.

In other words, this audit must enable the shareholder to ensure that (i) the company’s annual accounts have been prepared in accordance with the accounting rules and (ii) the company’s articles of association and the CCA are being complied with. The power is therefore often applied to allow shareholder to approve the company’s annual accounts in full knowledge of the facts.

The shareholder’s power of investigation and control corresponds exactly to the power reserved for the auditor in the performance of his duties.

It is an absolute right from which the statutes cannot deviate.

In addition, shareholders who wish to exercise this prerogative may be accompanied or represented by an external auditor. His remuneration shall generally be borne by the shareholder requesting his intervention but shall be paid by the company if it has approved the appointment of the auditor or if the remuneration is charged to the company by court order.

What is its scope?

In theory, the power of investigation must relate to the current financial year and to the financial year for which the annual accounts have not yet been approved by the general meeting. Therefore, it expires a priori immediately after the approval of the annual accounts.

However, the judge has a discretionary power which allows him to extend or limit the scope of this individual right on the basis of certain criteria (proportionality, efficiency and abuse of rights).

It is therefore possible that, depending on the circumstances and the criteria listed above, the shareholder scope’s control may be broader and may, for example, allow him to access the accounting documents of a financial year for which the annual accounts have already been approved.

Specifically, the shareholder will be able to consult the following documents: company documents, correspondence, minutes, detailed balance sheet, loan agreement, lease agreement, etc.

What are its limits?

The limits of the power of investigation and control are also determined on the basis of the above criteria. The power should therefore be limited to its normal and careful exercise.

For example, the power may not be used for the sole purpose of collecting sensitive or inherent information to trade secret, developing a competing activity, prejudicing another shareholder or the corporate interest of the company or building up a case in the context of a legal proceeding totally unrelated to the company’s financial situation.

Moreover, given its scope, the right of investigation and control cannot relate to the management of the company as such.

The legitimacy of this right of investigation will therefore have to be determined on a case-by-case basis, depending on the circumstances.

And in practice?

In practice, the power of investigation and control is often misunderstood and underused by shareholders. It does, however, make it possible to gather important information on the (financial) management of the company, to obtain answers about the implementation of certain transactions (sale of assets, increase in management remuneration, etc.).

The exercise of this power avoids “unpleasant surprises” and the adverse consequences they may have on the continuity of the company’s business or its good management.

Moreover, the right of investigation and control is a necessary step before  introducing more coercive (legal) measures (e.g. the appointment of an expert examiner, a judicial representative or a provisional administrator) and helps, in some cases, to prevent a wider conflict from arising between shareholders and directors or management.

Deminor regularly recommends the exercise of this right if it is justified and assists the shareholder in its procedures (choice of external auditor, list of documents to be requested, contact with the administrative body of the company, etc.).


Would you like more information on the power of examination and control of shareholders? Do not hesitate to contact us.


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