Métamorphose vs TotalEnergies

On July 6, 2023, many TotalEnergies’ shareholders sued the company TotalEnergies for unlawful dividends (article L232-12 of the French commercial code) and insincere accounts. Dividends are considered unlawful when they are distributed while profits are insufficient. Therefore, erroneous accounting can have an impact on the distribution of dividends. More specifically, erroneous information on distributable profit and on the real value of assets has a direct influence on the shareholder's assessment of whether to grant all or part of the profit to redistribution. If the dividend is recognized as unlawful, the shareholders must return it, as provided for by the article L. 232-17 of the French Commercial Code. The distribution might also engage the liability of directors and auditors, if they have been negligent in the performance of their duties and this negligence has caused the unlawful distribution of dividends. As recommended by the French Markets Authority, the risks arising from climate change have to be taken into account in the evaluation of cash flows and the discount rate of the assets. This conclusion is also reached on the basis of IFRS global accounting standards (IAS 36 – International Accounting Standards –Impairment tests). The plaintiffs claim that TotalEnergies has erroneously valuated the future price of carbon and has not properly accounted for its GHGs emissions and that this has led to an overevaluation of its assets. According to the plaintiffs, first, the company does not consider the depreciation of its assets due to the future cost of carbon. Indeed, TotalEnergies uses a carbon price well below the values defined by France Stratégies which apply to entities under French law engaged in a Net Zero Emission trajectory (as TotalEnergies is). Second, TotalEnergies does not account correctly for its Scope 3 emissions and largely underestimated them. This erroneous calculation has an important impact on assets’ valuation. Following the rules and accounting standards, Total should depreciate many of its assets: therefore, its profits are over-evaluated and the distribution of dividends made on this valuation is unlawful. The plaintiffs claim that, as provided for by the law, Total should void that resolution that distributes dividends and claim the reimbursements of those dividends.