Bankruptcy Law

Under the terms of Article L. 621-2(3) of the Commercial Code, applicable to the receivership procedure by virtue of Article L. 631-7, “one or more other assets of the debtor may be merged with the assets covered by the procedure, in the event of a merger with the latter”. This text was amended by the Ordinance of 15 September 2021  which abolished the status of individual limited liability entrep …

Merger of personal and dedicated assets

Under the terms of Article L. 621-2(3) of the Commercial Code, applicable to the receivership procedure by virtue of Article L. 631-7, “one or more other assets of the debtor may be merged with the assets covered by the procedure, in the event of a merger with the latter”. This text was amended by the Ordinance of 15 September 2021  which abolished the status of individual limited liability entrepreneur (EIRL), replacing 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 set up an EIRL.

Until the PACTE Law , the merger of assets was also incurred in the event of “serious breach of the rules set out in the second paragraph of Article L. 526-6 or of the obligations set out in Article L. 526-13, or [of] fraud with regard to a creditor holding a general lien on the assets covered by the procedure”. Pursuant to Article L. 526-6, which lays down the rules governing the composition of the dedicated patrimony, the Court of Cassation ruled that the sanction should apply to a sole trader who had filed a declaration of dedicated patrimony without a description of the assets, rights and obligations assigned to his professional activity, in kind, quantity and value, even if he had used the acronym EIRL to open a bank account dedicated to his professional activity and registered the vehicle intended for the latter, and even if the declaration had been accepted by the registry . Similarly, it had been ruled that failure to comply with the essential provisions of the EIRL statute 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 fraudulent evasion of employees' rights by means of bank transfers to his close relations in order to avoid having to pay them, justified the merger of the debtor's personal and professional assets and the extension to the latter of the insolvency procedure opened against the EIRL . On the other hand, while the unenforceability of an EIRL's declaration of dedicated patrimony against its creditors, due to its failure to comply with its obligation to inform them, enabled them to take legal action against the unappropriated assets, it did not have the effect, in the absence of fraud, of extending the procedure initiated against the debtor to all his assets .

In order to increase the use of dedicated assets, and to punish only wilful irregularities, the PACTE law has removed the reference to Article L. 526-6 from Article L. 621-2(3) and now refers only to 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 provides that “[t]he professional 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 obligation to draw up independent accounts, kept by a person registered as a chartered accountant, for his business assets, notably by failing to produce the annual financial statements, which include the balance sheet and income statement, the merger of his personal and business assets is justified . Similarly, the late and incomplete preparation of accounts by a sole proprietor with limited liability, who only produced 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 accurate accounting, which justifies the combination of the debtor's private and personal assets . On the other hand, the fact that an EIRL did not mention the assets required for his professional activity in his declaration of dedicated patrimony, as he had not yet acquired them on the day of its establishment, does not characterize a serious breach of the rules govern accounting that would justify the merger of his professional and private assets .

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

Law No 2019-486 of 22 May 2019 on 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).

Bankruptcy Law

310. Merger of personal and dedicated assets

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310. Merger of personal and dedicated assets

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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