Bankruptcy Law

Article L. 645-1(1) of the Commercial Code sets up a procedure for professional recovery without liquidation, open to all debtors, individuals carrying on a commercial , craft or agricultural activity, and to any other individual carrying on an independent professional activity, including a liberal profession subject to a legislative or regulatory status or whose title is protected, as well as to  …

Substantive requirements

Article L. 645-1(1) of the Commercial Code sets up a procedure for professional recovery without liquidation, open to all debtors, individuals carrying on a commercial , craft or agricultural activity, and to any other individual carrying on an independent professional activity, including a liberal profession subject to a legislative or regulatory status or whose title is protected, as well as to any legal entity under private law. The former manager of a company that has been the subject of a court-supervised liquidation procedure may not be denied the benefit of professional recovery solely on the basis of this status . Article L. 645-1 also requires that the debtor has not ceased trading for more than one year .

Further, the debtor must produce evidence  that he or she is in suspension of payments and that receivership is manifestly impossible . In order to establish this situation, the debtor may refer to non-business debts, provided that he or she is not eligible for overindebtedness due to his or her status as a sole trader . The debtor may also, even without producing any accounting documents, demonstrate his difficulties by providing statements of everyday business and personal accounts grouping together all his available funds, and his latest tax assessment showing the absence of taxable income, insofar as his only income consists of alimony payments .

In addition, the debtor must not have employed any salaried staff in the last six months , and must not have been involved in any current labor court proceedings in respect of any of his assets . Declared assets must be less than EUR 15,000 . In order to verify that the legal threshold for the debtor's assets has been met, the court must assess their realizable value on the day of the ruling, and not their acquisition value . Trade claims held by a debtor who applies to open a professional recovery procedure must be taken into account in calculating the value of his assets, since the law does not distinguish between available and unavailable assets . The Ordinance of 15 September 2021 , provided that assets which the law declares to be exempt from seizure ipso jure must not be taken into account when determining the value of the debtor's assets. Thus, the debtor's principal residence, which is an asset that cannot be seized ipso jure, cannot be taken into account in determining this value .

Prior to the entry into force of the Law of 14 February 2022 , Article L. 645-1(2) prevented a debtor who had set aside assets separate from his personal assets for a business in difficulty, in application of Article L. 526-6, from benefiting from the professional recovery procedure. The text now stipulates that the purpose of the professional recovery procedure is to simplify the treatment of the liabilities encumbering the patrimony or patrimonies of the individual debtor. Where the debtor has several assets, the EUR 15,000 threshold is exceeded by taking into account all the debtor's assets. The aim is to open up the professional recovery procedure to sole traders, and to deal with the liabilities arising from their assets as a whole in a single procedure.

Article L. 645-1 of the Commercial Code does not make the opening of the procedure conditional on the debtor's good faith . The court cannot justify its refusal to grant a self-employed entrepreneur's request to open a professional recovery procedure on the grounds of inaccurate declarations or late declaration of his state of cessation of payments, since the debtor's good or bad faith does not constitute a condition for opening such a procedure, but rather a case of forfeiture of its continuation . However, this view was not shared by the Paris courts, who considered that a person living on an extremely comfortable salary and housing, who had tried to obtain debt relief by artificially creating the status of auto-entrepreneur in a jurisdiction other than that in which his previous court-ordered liquidations had been processed, should be refused the opening of professional recovery proceedings on the grounds of bad faith .

Lastly, Article L. 645-2 of the Commercial Code stipulates that the recovery procedure may not be opened against a debtor who, for less than five years, has been the subject of a court-supervised liquidation procedure for any of his assets, or of a decision to close a professional recovery procedure.

T. com. CA Valenciennes, 1 December 2014, LawLex202100006082JBJ, excluding recovery if acting as an individual who was not engaged in commercial activity.

CA Versailles, 14 April 2016, LawLex202300006110JBJ.

CA Paris, 30 March 2023, LawLex202300007933JBJ.

Ordinance 2021-1193 of 15 September 2021 concerning amendments to Book VI of the Commercial Code.

CA Toulouse, 15 June 2022, LawLex202300002312JBJ. Comp. when the principal residence has been divided into two lots, CA Grenoble, 19 January 2017, LawLex202300004505JBJ.

L. 2022-172 of 14 February 2022 in favor of independent professional activity.

CA Aix-en-Provence, 22 October 2015, LawLex202300004506JBJ.

CA Pau, 27 April 2021, LawLex202300004504JBJ.

CA Paris, 28 May 2020, LawLex202300006409JBJ.

CA Grenoble, 11 June 2020, LawLex202300007792JBJ, holding that a debtor who cannot prove that he has not been in business for less than a year on the day the court rules cannot benefit from the professional recovery procedure.

CA Orléans, 1 December 2022, LawLex202300007932JBJ.

C. com., art. L. 645-1, para. 1. For an opening refusal against a contractor convicted of concealed work, see CA Paris, 16 June 2016, LawLex202200010642JBJ.

C. com., art. R. 645-1. This threshold, initially EUR 5,000, was raised by the order of 15 September 2021. On the refusal to order reinstatement under the old threshold, see CA Paris, 16 June 2016, LawLex202200010642JBJ. On the opening of the procedure under the thresholds, see CA Aix-en-Provence, 22 October 2015, LawLex202300004506JBJ.

Bankruptcy Law

963. Substantive requirements

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

963. Substantive requirements

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise