Self-employed in France get new law to protect home if business fails

Personal assets like property, furniture, cars and bank accounts will automatically be protected from debt collectors

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3.6 million people in France will automatically be protected from May 14
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A new law for independent workers which protects their homes and personal possessions if their business fails is to come into force in May.

Some 3.6 million people will automatically be covered by the rules, which apply to artisans, shopkeepers, micro-entrepreneurs, liberal professions, lawyers and farmers.

Read more: A guide to micro-entrepreneurs in France

They will effectively have two different patrimoines instead of the one merging personal and professional assets which exists now.

A new article in the Code de Commerce defines patrimoine professionnel as the goods and property exclusively used for independent professional reasons and the debts owed for social contributions which became active when the activity was first registered.

Personal assets will be protected when law comes into force

For patrimoine personnel, the definition is not so clear-cut.

Under existing laws, the home can be declared off limits to debt collectors through a registered declaration.

Read more: 20 proposals put forward to improve status of self-employed in France

The new law will extend this right automatically. It also includes personal property (or properties), furniture, a car, shares or other assets, as well as money held in personal bank accounts.

In cases where personal possessions such as a car, a computer or even office equipment in a second home are sometimes used for professional purposes, the lines are less distinct and it is likely banks will be able to argue a case for their liquidation.

Tax debts and social charges will still be recovered

There are two exceptions to the separation of personal and professional patrimoines.

The first concerns social security contributions and tax debts.

These remain in the professional category – unless there is evidence of fraud, or if amounts owed are outstanding – for example, if Urssaf charges have not been paid while a business was still operating.

In this case, Trésor Public collectors will be able to seize personal assets to recover income tax, social security charges and taxe foncière.

The second exception is if an independent worker voluntarily gives up the right to separate business and personal, before a notaire, in order to borrow more money from a bank than they would otherwise get.

Creating a company gives further protection

To better clarify the distinction between the personal and the professional, it will be necessary to form a company –either a SARL or an SAS – which has its own judicial statute, and personal responsibility is limited to the funds of the company.

While this has advantages, such as opening up new ways of raising capital, or even trading independent status to become a salaried employee of your own company (under an SAS), it also involves more costs, including engaging a bookkeeper to do the annual accounts.

Loans taken out for professional purposes before May 14, 2022, when the new law comes into force, will not be covered by the changes, and neither will any other debts contracted in the 10 years before that date.

There is nothing, though, to stop people re-negotiating existing loans after that date to secure the extra protection offered.

Concern banks will stop lending

Organisations representing independent workers welcomed the new law, but as yet there has been no reaction from the Fédération Bancaire Française, the banks’ trade body.

When the law was passed, a review of its operation, looking especially at the flow of credit to individual workers, was ordered for 2024 to ease fears that banks would simply refuse to lend to individuals.

There have also been suggestions that a system of state guarantees of bank loans, using mutual funds such as Bpifrance, Siagi or Socama, already in place for small companies and which were extended during the Covid crisis, could be applicable to individuals too.

So far, this has not been taken up by the government, but neither has it dismissed the idea.

Self-employed in difficulty get €800 a month

The law to improve conditions for independent workers also extended rights to the allocation des travailleurs indépendants (ATI) which, since 2019, pays €800 a month for a maximum of six months to independent workers if they face liquidation or are under administration.

Independent workers are not entitled to unemployment benefits in France.

ATI can now be paid if businesses are simply judged to be no longer viable, with the definition being that they have seen a 30% or more drop in revenue.

Tax rebates for managerial training in businesses employing fewer than 10 people have also doubled under the law.

In addition, it reduced rates for compulsory insurance for work accidents or profession-related illnesses for employees by 30% for these businesses.

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