Bankruptcy Law

As in the case of safeguard, the opening of a receivership procedure may concern both “merchants” stricto sensu  and “any person carrying on a commercial activity” , even if they do not usually do so . This is the case for de facto traders, i.e. persons who are not registered in the company and trade register or those who carry on a commercial activity regardless of an incapacity, a prohibition or an incompatibility. The reference to a “commercial activity” refers to the performance of commercial acts by nature listed in Articles L. 110-1 and L. 110-2 of the same code, as opposed to commercial acts by accessory or by form, which do not allow the person who performs them to benefit from a insolvency procedure .  The status of trader is presumed in two cases.

First, Article L. 123-7 of the Commercial Code provides that "the registration of a natural person [in the company and trade register] carries with it a presumption of merchant status. The presumption is rebuttable against third parties and government agencies, but it is irrebuttable against the registrant, unless the registrant establishes that the third parties in question were aware that the registration did not reflect his real activity . The presumption also applies to a debtor who does not prove that he ceased to carry on business after his business was leased and who claims that he remained registered only in the capacity of lessor of the business . On the other hand, it does not apply to a person registered in the company and trade register as a collaborating spouse and not as a trader . Removal from the company and trade register does not result in the debtor's liabilities arising from his previous commercial activity being transferred to the provisions relating to the overindebtedness of individuals .

Secondly, a person may be classified as a trader regardless of the activity he carries on. According to Article L. 210-1 of the Commercial Code, "general partnerships, limited partnerships, limited liability companies and joint stock companies are commercial by virtue of their form and whatever their purpose. The exception extends to general partners  and active partners .

While company managers act in principle on behalf of the company and cannot in this capacity be subject to insolvency procedure in their personal capacity , this is not the case when they perform commercial acts in their personal name and on their own account, on a regular basis . However, the mere fact of presenting oneself as the head of a company and not as a representative of a company, receiving several invoices from suppliers at one's personal residence and paying a fine imposed on the company on one's personal account does not imply the performance of commercial acts . In addition, a person acting on behalf of a company in formation, without legal personality, may be subject to insolvency procedure provided that he has performed commercial acts on behalf of the company . On the other hand, the mere fact of having taken the necessary steps to start the business  or of having been named in the articles of association as manager  is not sufficient to justify the opening of personal insolvency procedure against the founder.

An insolvency procedure may be initiated against a debtor who contracted a civil debt prior to the exercise of his commercial activity, provided that the debt continued to encumber his assets when he became a trader . Similarly, the exclusion of traders from the benefit of the provisions relating to the overindebtedness of individuals also applies after the cessation of this activity, provided that their indebtedness is made up, in part, of professional debts incurred during this activity .

Cass. com., 27 April 1993, LawLex202100005700JBJ (LJ), holding that the partner of a de facto partnership can only be the subject of insolvency procedure if it is shown that he has carried out commercial acts and made them his usual profession or that he himself has operated the commercial enterprise, the object of the partnership.

Cass. com. 23 May 1989, LawLex202100003653JBJ (RJ). See also Cass. com., 30 March 1993, LawLex202100005699JBJ (RJ), for two brothers who had exploited the family business and had ensured its effective management by substituting themselves for their elderly mother in the exercise of a commercial profession, on a regular basis.

Cass. com., 4 October 2005, LawLex202100003651JBJ (RJ).

Cass. com., 15 January 1991, LawLex202100005819JBJ (RJ).

Cass. com., 18 November 1986, LawLex202100005817JBJ (LJ).

Cass. com., 2 May 1989, LawLex202100005818JBJ (LJ).

Cass. com., 22 Juin 2013, LawLex202100001899JBJ (RJ).

Cass. 2e civ., 6 May 2010, LawLex202100003648JBJ (RJ).

CA Lyon, 13 June 2013, LawLex202100003623JBJ (LJ), holding that a court-supervised liquidation procedure may be opened with respect to a debtor who engages in a commercial activity, such as the rental of professional furnished accommodation, without the need to have the status of a merchant or to habitually perform commercial acts.

See in particular Cass. 2e civ. 20 April 2017, LawLex202100005838JBJ (RJ), holding that the commercial nature of the debt guaranteed by a surety is not sufficient to confer merchant status on the surety.

See, for a debtor registered with the RCS but claiming to be a farmer, without succeeding in demonstrating that his creditors had knowledge of his actual activity, Cass. com., 27 September 2016, LawLex202100002164JBJ (LJ).

Cass. com., 23 November 2004, LawLex202100005909JBJ (LJ).See also Cass. com., 17 February 2015, LawLex202100005684JBJ (S).

Cass. 2e civ., 14 September 2006, LawLex202100005824JBJ (S).

Cass. 2e civ., 2 July 2009, LawLex202100005703JBJ (RJ) ; 22 October 2009, LawLex202100005823JBJ (RJ).

For an application, see Cass. 2e civ, 5 December 2013, LawLex202100005685JBJ (RJ), excluding the managing partner of a general partnership from the benefit of the provisions relating to the overindebtedness of individuals. See also CA Douai, 26 October 2017, LawLex202100005820JBJ (LJ), granting the benefit of the insolvency procedure regime to the founding spouses of a general partnership because of their status as partners.

286. Conduct of a commercial activity