Bankruptcy Law

Under Article L. 621-2(3), of the Commercial Code, “one or more other patrimonies of the debtor as an individual entrepreneur may be merged with the assets covered by the procedure, in the event of merger with the latter”. This text was modified by the Ordinance of 15 September 2002 , which abolished the status of individual entrepreneur with limited liability (EIRL) and replaced it with a single status of individual entrepreneur. EIRLs existing on 15 February 2022 may continue to operate under this corporate form, but individual entrepreneurs may no longer create an EIRL.

Until the PACTE Law , the reunification of assets was also incurred in the event of “serious breach of the rules provided for in the second paragraph of Article L. 526-6 or of the obligations provided for in Article L. 526-13 or even [of] fraud with regard to a creditor holding a general pledge on the assets covered by the procedure”. Pursuant to Article L. 526-6, which lays down the rules for the composition of the patrimony by assignment, the Court of Cassation had held that the reunification should apply to an individual entrepreneur with limited liability (EIRL) who had filed a declaration of assignment without a description of the assets, rights and obligations assigned to his professional activity, in kind, quantity and value, even though he had used the acronym EIRL in order to open a bank account dedicated to his professional activity and to register the vehicle destined for this activity, and even though the declaration had been accepted by the court registrar . Similarly, it had been ruled that failure to comply with the essential provisions of the EIRL status by an entrepreneur who had not allocated all the equipment used by the company to his professional activity, including that acquired after the declaration, and had made no reference to it in the identity of his bank account, as well as the fraud of the employees' rights by means of bank transfers to his family in order not to have to pay them, justified the reunion of the debtor's personal and professional patrimonies and the extension to the latter of the insolvency proceedings opened against the EIRL . On the other hand, if the inopposability of the declaration of assignment of an EIRL to its creditors, due to the failure to respect its obligation to inform them, allowed them to sue on the unassigned patrimony, it did not have the effect, in the absence of fraud, of extending the proceedings opened against the debtor to all of its patrimony .

In order to develop the use of the fiduciary trust and to sanction only voluntary irregularities, the PACTE Law has removed the reference to Article L. 526-6 within Article L. 621-32(3), and now only targets fraud against creditors' rights. However, serious failure to comply with the accounting obligations set out in Article L. 526-13 of the Commercial Code, which states that “the business activity to which the assets are assigned is subject to independent accounting”, also remains. Thus, if a sole proprietor with limited liability has seriously failed to comply with his obligations to establish independent accounts, kept by a person registered as a chartered accountant, for his fiduciary trust, in particular in the case of failure to produce annual accounts, which include the balance sheet and profit and loss account, the reunification of the personal and patrimony by assignments is justified . Similarly, the late and incomplete preparation of his accounts by an individual entrepreneur with limited liability, who only produces a simplified balance sheet and a list of entries at the appeal stage, and the discrepancy between the liabilities declared and those resulting from the simplified balance sheet, demonstrate the absence of autonomous, regular and sincere accounting that justifies the reunification of the debtor's private and personal patrimonies . On the other hand, the fact that an EIRL did not mention the assets necessary for its professional activity in its declaration of assignment, because it had not yet acquired them on the day of its establishment, does not characterize a serious breach of the rules for the establishment of accounts that would justify the reunification of its professional and private patrimonies .

Ordinance No 2021-1193 of 15 September 2021 amending Book VI of the Commercial Code.

Law No 2019-486 of 22 May 2019, relating to the growth and transformation of businesses.

Cass. com., 7 February 2018, LawLex202100004187JBJ (LJ).

CA Caen, 8 September 2016, LawLex202100005119JBJ

CA Versailles, 3 April 2014, LawLex202100005007JBJ (LJ).

CA Nîmes, 7 April 2021, LawLex202100005000JBJ (LJ). See also CA Lyon, 26 April 2018, LawLex202100005005JBJ (LJ).

CA Lyon, 9 October 2014, LawLex202100005008JBJ (LJ).

CA Angers, 5 July 2016, LawLex202100005117JBJ (LJ).

56. Reunification of personal and assigned patrimony