Obligation to appoint the supervisory body/auditor. How to calculate the average number of employees.

Article 2477, paragraph 2, c.c. has revised the limits for the appointment of the supervisory boards. It requires the mandatory appointment of a supervisory body/auditor if the company has exceeded at least one of the following limits for two consecutive years:

  1. total balance sheet assets over 4 million euros;
  2. revenues from sales and services over 4 million euros;
  3. average number of (new) employees during the year: 20 units.

The parameters must be checked with reference to the two previous years (2017 and 2018).

In case the above-mentioned limits are exceeded, during the annual shareholders’ meeting, on which occasion the company presents its annual financial statements, a supervisory body/auditor must be appointed within 30 days. If the assembly fails to do so, the auditor will be appointed by the Court, according to the request of any interested party  or considering the suggestions of the Business Register. When the requirements are met, Companies established before March 16, 2019 must appoint the supervisory body or the auditor and, if necessary, they should standardize the deed of incorporation and the articles of association, within nine months from the aforementioned date (16 December 2019).

Employees are defined as temporary or permanent workers of the company, they are registered in the company register (now called the Single Book of Labor – Lul) and they are associated with an employment contract between them and the employer, which denotes a relationship of economic dependence with contractual obligations, except when there are extraordinary layoffs. The number of employed people corresponds to the number of work-year units (ULA), ie the average monthly number of full-time employees in a year, while part-time and seasonal employees are fractions of years. The owners of the company (individual entrepreneurs) and the shareholders who carry out regular business activities and benefit from the financial advantages provided by the company are also considered employees of the company. With reference to the latter, they must receive compensation for the activity carried out in addition to the compensation for the participation in the administrative body of the company. In terms of ULA calculation, the shareholder who receives such compensation is considered an ULA, except in those cases where the contract that governs the relationship between the company and the shareholder has a duration of less than one year; in these circumstances, only the fractions of ULA will be calculated. Apprenticeship contracts, training contracts or insertion contracts shall be excluded from the calculation.

The Ministerial Decree (dated 18th April 2005) determines that the calculation must be performed on a monthly basis. The decree specifies that a fraction of at list fifteen calendar days of work shall be considered a full month.