New status of individual entrepreneur: What consequences for cash collection?

The new status of sole proprietorship replaces the existing variants and clarifies the situation somewhat for their creditors, even if some inequalities are looming for them.

What is it about?

Promulgated on February 15, 2022, the law N°2022-172 in favor of the independent professional activity introduces a new status of individual enterprise regrouping from now on the EIRL and the EI under a unique status.

This new status is now mandatory for entrepreneurs starting their activity as of February 15, 2022, but also for those already in business, making the EIRL disappear, whose main advantages are taken over by this "new individual enterprise". It should be noted that for the latter, these provisions will only apply to claims arising from May 15, 2022.

A new status more protective of personal assets

The number one concern of sole proprietors until now, the protection of their personal assets becomes the rule. The new status establishes natively, and without any administrative step, nor with the possible creditors, the separation between:
  • - The professional patrimony, which is defined as being "the goods, rights, obligations and securities of which he is the holder and which are useful to his activity or to his independent professional activities" and,
  • Personal assets, which are defined as any item not included in the professional assets.
It is no longer possible to make a distinction between different professional assets (especially in the case of multiple activities), a possibility that the EIRL offered until now, as the latter is now unique and indivisible.

Finally, it should be noted that in the event of an asset seizure as part of a judicial cash collection proceeding, it is up to the entrepreneur to prove that the disputed asset belongs to one or the other patrimony.

For the creditors, a clarification of the possible recourses

These changes, reassuring for the entrepreneurs, also allow the creditors to clarify the possible recourses against one of the patrimonies according to their situation and the professional or non-professional aspect of the debt:
  • Professional creditors can thus, by default, only act on the entrepreneur's professional patrimony.
  • The personal creditors of the latter will act in priority on the personal patrimony, but, in case of insufficiency, will also be able to act on the professional patrimony within the limit of the profit realized during the last fiscal year.
This compartmentalization of assets is not totally symmetrical, since personal debts potentially expose the entrepreneur's professional assets.

In terms of guarantees and security pledges, creditors may ask the entrepreneur to waive the separation of his two assets on their claim. This will allow, for example, the entrepreneur to take out a bank loan, but it can also apply to any professional creditor, increasing, in case of unpaid debts, the possibilities of recourse to both assets. Be careful however, a certain formalism applies to this provision in order to be valid.

... but also some insecurities

The main risk to which this new operation exposes the creditors is a certain "competition" in the event of default, a competition which may, moreover, be unequal:
  • One may thus find creditors with rights on both patrimonies of the entrepreneur: Administration and social security organizations of course; professional creditors whose debts were contracted before the entry into force of the law in case of a company having started under the former status of EI; professional creditors having benefited from a security pledge granted by the entrepreneur; and, within a certain limit, his personal creditors.
  • When some of them will be limited to the professional patrimony, for the professional claims born after May 15, 2022. Moreover, the absence of separation of business assets according to activities may introduce inequalities, in particular when a defaulting IE activity has, for its dedicated operation, assets of greater value.

Exceptions aimed at limiting fraud

Although the stated objective, which is clear from the title of the law, is the protection of independent contractors, the legislator has nevertheless made exceptions to this separation of personal and professional assets in order to limit fraudulent maneuvers.
  • As a usual exception to the legislation in this area, debts relating to social security contributions, income tax, property tax and other tax and social security obligations can thus be paid out of the entrepreneur's entire assets.
  • In the event of judicial liquidation, the court may order the entrepreneur to pay outstanding debts from his personal assets if he has committed a management error that has contributed to the insufficiency of his professional assets to pay the debts.
Date: 07-05-2022 - Author: Kérin Tran for Cabinet Arc
Comment this page
Comments are subject of editor's review before publication
Do not enter sensitive data
Articles on the same topic