Bankruptcy Law

The opening of compulsory liquidation procedure may concern both “merchants” in the strict sense of the term  and “any person carrying on a commercial activity ” , even if they do not habitually do so . The same applies to de facto traders, i.e. persons who are not registered in the Trade and Companies Register or those who carry on a commercial activity in defiance of an incapacity, prohibition o …

Carrying on a commercial activity

The opening of compulsory liquidation procedure may concern both “merchants” in the strict sense of the term  and “any person carrying on a commercial activity ” , even if they do not habitually do so . The same applies to de facto traders, i.e. persons who are not registered in the Trade and Companies Register or those who carry on a commercial activity in defiance of an incapacity, prohibition or 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 an insolvency procedure . Merchant status is presumed in two cases.

Firstly, Article L. 123-7 of the Commercial Code provides that “the registration of a natural person [in the Trade and Companies Register] gives rise to a presumption that the person is a trader”. While the presumption may be rebutted by third parties and government departments, it is irrebuttable by the registered person, unless he can prove that the third parties were aware that the registration did not reflect his actual 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 was only entered in the register as a lessor . On the other hand, it does not apply to a person entered in the Trade and Companies Register as a collaborating spouse rather than as a trader . Although removal from the trade and companies register removes the presumption of commerciality, it does not have the effect of bringing the portion of the debtor's liabilities arising from his previous commercial activity under the provisions relating to the excessive indebtedness of individuals . Conversely, an insolvency procedure may be opened against a debtor who contracted a civil debt prior to his commercial activity, provided that the debt continued to encumber his assets when he became a trader .

Secondly, a person may be classified as a trader irrespective of the activity in which he engages. 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 object”. The exception extends beyond the company itself to general partners  and active partners . However, a partner of a general partnership who has been disqualified from managing the company loses his status as a trader, and can therefore no longer apply to be wound up by the court .

Although company managers act in principle on behalf of the company and cannot in that capacity be the subject of an insolvency procedure in their personal capacity , the situation is different when they habitually carry out commercial acts in their personal name and on their own account . However, the mere fact of presenting oneself as the head of a business and not as the representative of a company, of receiving several invoices from suppliers at one's personal domicile and of paying a fine imposed on the business from one's personal account does not imply the performance of commercial acts . Furthermore, a person acting on behalf of a company in formation, which has no legal personality, may be the subject of an insolvency procedure provided that he or she has carried out 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 a personal insolvency procedure against the founder.

CA Lyon, 10 April 2008, LawLex202200009158JBJ (LJ).

Cass. com. 27 April 1993, LawLex202100005700JBJ (LJ), holding that the partner of a de facto company can only be the subject of an 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 business, the object of the company.

Cass. com. 23 May 1989, LawLex202100003653JBJ (RJ). See also Cass. com., 30 March 1993, LawLex202100005699JBJ (RJ), for two brothers who had operated the family business and had effectively managed it by replacing 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).

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

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

See, for a debtor registered with the RCS but claiming to be a farmer, without succeeding in demonstrating that his creditors were aware 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) ; 6 May 2010, LawLex202100003648JBJ (RJ).

Cass. com., 22 June 2013, LawLex202100001899JBJ (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 excessive indebtedness of individuals. See also CA Douai, 26 October 2017, LawLex202100005820JBJ (LJ), granting the benefit of the insolvency proceedings regime to the founding spouses of a general partnership by virtue of their status as partners.

Bankruptcy Law

624. Carrying on a commercial activity

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624. Carrying on a commercial activity

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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