In times of crisis economic players face an increased risk of encountering situations where the failure of one company will lead to a cascade of knock-on effects. However, solutions do exist
European countries have progressively moved in the direction of the prevention and amicable settlement of difficulties encountered by companies. This has led to the adoption of legal measures designed to offer solutions to the failure of a company before it reaches a situation where it cannot meet its financial commitments. On the international scene, the “insolvency” regulation of May 29, 2000 has become international law applicable to relationships between Member States of the European Union. Another source of applicable law is the European Court of Human Rights and its decisions, with its requirements of a trial that is fair to all (creditors, debtors, employees, etc.), which have an influence on the law of insolvency. France has instituted amicable proceedings for the prevention or handling of difficulties (ad hoc mandate, conciliation) and legal measures (safeguard procedures).
Nothing of this sort exists in Monaco, where a company moves straight from an in bonis situation to bankruptcy, with all the harmful consequences that the personal and practical effects of bankruptcy and liquidation procedures may have on the corporate assets and those of the manager (personal bankruptcy or insolvency). The sudden change of status that accompanies the opening of receivership or liquidation proceedings puts the manager in a very difficult situation when he or she decides to file for bankruptcy, and also creates diffi - culties for the creditor who goes to court in order to have a company declared bankrupt. This situation can also call into question commitments (granting of credit, guarantees, transfer of assets, etc.) entered into with a company suffering from previously unsuspected difficulties if, as is almost always the case, the Court fixes a date for cessation of payment that pre-dates the opening of joint proceedings (up to three years previously, according to the current French Commercial Code).
As well as the absence of a legal framework for reacting in advance when companies are in diffi culty, Monaco lacks any measures comparable to the early warning procedure that was instituted in France by articles L234-1 and following of the Commercial Code, which allow statutory auditors to alert the governing bodies of a company to situations of risk that represent a threat to the continuing operation of the business (negative equity capital, payment problems, non-renewal of essential loans, excess over overdraft limits, etc).
However, even in the absence of legal measures of this type, the audit process as defined by the statutory auditors working the Principality of Monaco incorporates the principle of drawing up accounts with a view to ensuring business continuity and taking into account the risks of default.
The audit mission includes a check on the truthfulness and reliability of the financial statements drawn up according to this principle, including the financial information contained in the “memorandum of information” which provides all necessary details of the accounting principles and methods used and significant features of the accounts.
The opinion expressed in the auditor’s general report refl ects this approach, implemented according to the applicable professional standards and principles, including the principle of business continuity.