A new law for the self-employed that protects their homes and personal assets if their business goes bankrupt is due to come into effect in May.
Some 3.6 million people will automatically be covered by the rules, which apply to artisans, traders, micro-entrepreneurs, liberal professions, lawyers and farmers.
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They will actually have two heritages instead of the one that merges personal and business assets that currently exists.
A new article of the Commercial Code defines professional heritage such as property and buildings used exclusively for self-employed professional purposes and social security contribution debts that became active when the activity was first registered.
Personal property will be protected when the law comes into force
For heritage personal, the definition is not so clear.
Under current laws, the home may be declared off-limits to debt collectors through a recorded statement.
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The new law will automatically extend this right. It also includes personal property (or possessions), furniture, a car, stocks or other assets, and money held in personal bank accounts.
In cases where personal property such as a car, a computer or even office equipment in a second home is sometimes used for professional purposes, the lines are less clear-cut and it is likely that the banks will be able to plead their liquidation.
Tax debts and social charges will always be recovered
There are two exceptions to the separation of personal and professional heritages.
The first concerns social security contributions and tax debts.
These remain in the professional category – except proven fraud or unpaid – for example if Urssaf charges have not been paid while a company was still in operation.
In this case, the collectors of the Public Treasury will be able to seize the personal goods to recover the income tax, the social contributions and property tax.
The second exception concerns the case where a self-employed worker voluntarily renounces the right to separate his professional and personal activities, before a notaryin order to borrow more money from a bank than they would otherwise get.
Setting up a company offers additional protection
To better clarify the distinction between the private individual and the professional, it will be necessary to constitute a company – either an SARL or an SAS – which has its own legal status, and the personal liability is limited to the funds of the company.
If this has advantages, such as opening up new ways of raising capital, or even swapping self-employed status to become an employee of one’s own company (under an SAS), it also involves more costs, in particular hiring an accountant to do the annual accounts .
Loans contracted for professional purposes before May 14, 2022, the date of entry into force of the new law, will not be affected by the changes, as will other debts contracted in the 10 years preceding this date.
However, there is nothing stopping people from renegotiating existing loans after this date to secure the extra protection offered.
Worried banks will stop lending
Representative organizations of the self-employed have welcomed the new law, but there has been no reaction yet from the Fédération Bancaire Française, the banks’ commercial body.
When the law was passed, a review of its operation, including the flow of credit to individual workers, was ordered for 2024 to allay fears that banks would simply refuse to lend to individuals.
It has also been suggested that a system of public guarantees for bank loans, using mutual funds such as Bpifrance, Siagi or Socama, already in place for small businesses and which have been extended during the Covid crisis, could also apply to individuals.
So far, this has not been taken up by the government, but it has not rejected the idea either.
The self-employed in difficulty receive €800 per month
The law to improve the conditions of the self-employed also extended the rights to self-employed allowance (ATI) which, since 2019, pays €800 per month for a maximum of six months to self-employed workers if they are in compulsory liquidation or receivership.
The self-employed are not entitled to unemployment benefits in France.
ATI can now be paid if companies are simply found to be no longer viable, the definition being that they have seen a 30% or more decline in revenue.
Tax relief for managerial training in companies employing fewer than 10 people has also doubled under the law.
In addition, it has reduced by 30% the rates of compulsory insurance for accidents at work or occupational diseases for the employees of these companies.
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