Are you planning to raise funds to finance your company’s growth, develop a new project or strengthen your equity base? It’s an exciting step. But it’s also a process that involves your liability and that of your partners, and which attracts the attention of discerning investors.
In this context, many business leaders face the same question: how can they reassure investors whilst ensuring that the transaction is sound from both a legal and financial perspective? The answer often lies in three letters: CAC, which stands for statutory auditor. This is a professional who is sometimes called upon out of obligation, but who, above all, represents real added value once you understand their role.
What does raising funds actually involve?
Raising funds involves bringing money into your business in exchange for a stake in its capital. This is known as a capital increase. This process can take various forms depending on your situation: an investor providing cash, a partner contributing business assets or securities, or even profits that you decide to convert into capital rather than distribute.
For the owners of micro-enterprises and SMEs, this is often a pivotal moment: you are opening up your company’s share capital to new investors, which involves sharing financial information, valuing your business and complying with specific rules to protect all parties.
For individuals investing in a business, the issue is simpler to summarise: ensuring that the terms on which they invest are fair and that the information presented to them is reliable.
The auditor: much more than just a checker
We often have a rather simplistic view of the auditor: someone who comes along to check the figures once a year. In reality, during a fundraising round, their role is quite different. They are there to safeguard the transaction in everyone’s best interests.
It certifies the reliability of financial information
First and foremost, the statutory auditor ensures that the accounts on which the transaction is based are true and fair. This provides valuable assurance not only for investors, but also for you as a director: in the event of a subsequent dispute, you have an independent third party who has validated the company’s financial position at the time of the transaction.
It protects minority shareholders
During a capital increase, existing shareholders normally have a right of first refusal, known as the Pre-emptive Subscription Right. This mechanism ensures that their stake in the company is not diluted without them having had the opportunity to participate.
If you decide to waive this right to facilitate the entry of a new investor, the involvement of the statutory auditor becomes mandatory, including for SAS companies which do not normally have one. The auditor then draws up a special report validating the legitimacy of this decision, the price of the new shares and the impact on existing shareholders. This document protects everyone, including you.
A practical example: restructuring prior to fundraising
Let’s take the case of a regional SME, Corvelys, which wishes to open up its share capital to an investment fund in order to finance its international expansion.
To structure the transaction in the best possible way, the directors set up a holding company, Apex Participations, which will hold the shares and facilitate the fund’s entry. At the same time, the founders wish to retain a degree of control through preference shares.
At every stage, the CAC is involved: it validates the valuation of the contributions, ensures that the specific rights granted to the founders do not infringe on the rights of other shareholders, and certifies the validity of the successive capital increases. Without this support, each stage could have been challenged and the transaction delayed by several months.
After the capital raise: the statutory auditor continues to play a role
Once the funds have been raised, the statutory auditor’s role does not end. If the general meeting has delegated to the director the power to carry out a capital increase within a specified timeframe, the statutory auditor must verify that the decisions taken in this context do indeed comply with the conditions set by the shareholders. They draw up a supplementary report certifying the fairness and propriety of the transaction. This is a step that is often overlooked, but which protects both the director and the investors.
After the capital raise: the statutory auditor continues to play a role
Once the funds have been raised, the statutory auditor’s role does not end. If the general meeting has delegated to the director the power to carry out a capital increase within a specified timeframe, the statutory auditor must verify that the decisions taken in this context do indeed comply with the conditions set by the shareholders. They draw up a supplementary report certifying the fairness and propriety of the transaction. This is a step that is often overlooked, but which protects both the director and the investors.
Conclusion: plan ahead, seek expert support, and safeguard your interests
Raising capital is a tremendous opportunity for growth. But it is also a complex process that entails legal and financial liability. Engaging a competent auditor is not merely a regulatory formality: it is a strategic decision that reassures your investors, protects your shareholders and allows you to approach this stage with confidence.
At Alliés, we support the leaders of micro-enterprises, SMEs and cross-border organisations at every stage of their fundraising operations. Whether you’re preparing to raise funds or simply want to understand what this entails for your organisation, let’s discuss it.
