Can the personal assets of an individual contractor be seized?

Verified 15 September 2023 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice

The individual entrepreneur (including the micro-entrepreneur) has two distinct heritage sites : a professional heritage and a personal heritage that is automatically protected. On the other hand, the individual entrepreneur with limited liability (EIRL) must have built up assets assigned to his professional activity to protect his personal property in the event of legal action against professional creditors.

What applies to you ?

The heritage professional and heritage staff of the sole trader (including that of the micro-entrepreneur) are automatically separate.

The professional heritage consists of all the elements useful to the professional activity.

The heritage staff consists of the elements not included in the occupational heritage. It includes the elements of assets (for example, principal residence and possibly other real estate) and liabilities (for example, a loan to purchase a personal vehicle).

Personal property (a second home or land) is automatically included in personal property.

The sole trader is no longer obliged to make a declaration of immunity from seizure with a notary.

Warning

The distinction between professional and personal assets makes it possible to protect the personal assets of the individual contractor. Only the professional heritage will be engaged. This protection applies to professional debts since may 15, 2022.

The personal assets of the individual entrepreneur are automatically protected to its professional creditors.

However, it may be seized where the sole trader has been convicted of tax fraud or failure to comply with its tax and social obligations.

Individual entrepreneurs may also waive the separation of their assets, for example to guarantee bank credit.

Failure to comply with tax and social obligations

Tax obligations

The tax authorities may obtain payment of their claims by seizing personal property the individual contractor where he has failed to:

Fraudulent maneuvers to avoid paying taxes (tax fraud)
Serious and repeated non-compliance with tax obligations (e.g. voluntary profit reduction over several years)

The entire heritage can also be entered for the payment of the following taxes:

Property tax on buildings used for business purposes
Income tax payable by the micro-entrepreneur who opted for the discharge payment.

The judge does not need to give his prior authorization to seize the personal assets.

Social obligations

Social security institutions may obtain payment of their claims by entering personal assets the individual contractor.

This property may be seized in cases of serious and repeated non-compliance with social security rules.

These are:

No settlement or partial settlement social contributions and contributions in excess of €1000, in the following cases:
- At least 2 of the last 4 semi-annual maturities
- At least 2 of the last 8 quarterly maturities
- At least 6 of the last 24 monthly installments
- At least 2 of the last 6 split calls (excluding maturities covered by a clearance plan or a payment schedule that has been respected for more than 3 months)
- At least 4 payment deadlines for a clearance plan or a payment schedule for outstanding social contributions and contributions
Failure to meet deadlines, deposit conditions ,incomplete or erroneous declaration which has given rise to the application of surcharges or penalties for an amount exceeding €1000. These facts must relate to at least 2 statements in the last 4 years.
Shortcomings which has led, after checks or inspections, to observations or adjustments in an amount exceeding €1000. These breaches must relate to at least 2 reports in the last 5 years.

FYI

The judge does not need to give his prior authorization for the personal assets of the individual contractor to be seized.

Waiver of the separation of assets

Professional assets are not always sufficient to obtain the necessary credits (for example, for the acquisition of expensive equipment). In that case, the EIRL may, at the request of a creditor, to renounce the protection of his personal property by signing a waiver. This waiver benefits only the creditor with which the contractor is bound by the commitment.

In the event of difficulties in repayment, the creditor concerned by the waiver may therefore seize the personal assets of the sole trader.

L'waiver the protection of personal property shall include mandatory particulars and shall be limited in time and amount.

As from the date of signature of the waiver, the individual contractor has a 7-day reflection period to change your mind. This period may be reduced to 3 free days where the sole trader so specifies by a handwritten entry at the end of the waiver.

The principal residence of the individual contractor may not be seized by creditors professional. This means that in the event of judicial liquidation of the sole trader, the liquidator cannot seize the principal residence to reimburse the professional creditors (suppliers, distributors, etc.). .

However, where part of the principal residence is used for professional activity (office, storage, workshop, medical practice, etc.), this part is included in the professional heritage. It can therefore be seized in the event of liquidation by the court.

However, the habitable remains elusive.

The rule applies regardless of the holding: en full ownership , in usufruct or bare-ownership.

In case of sale of the principal residence, the price obtained remains elusive if the money is re-used to purchase a new principal residence. However, this purchase must be made in the year of sale.

Warning

The tax administration may seize the principal residence of the entrepreneur who has committed fraudulent maneuvers or serious and repeated non-compliance with his tax obligations.

The sole trader may waive immunity from seizure of his principal residence by signing a waiver in front of a notary. This statement shall be published in RNE or at the Commercial Court Registry.

The creation of the unique status of the individual contractor since 15 May 2022 marks the gradual extinction of the status of the EIRL. The creation of an EIRL is no longer possible and the heir of an EIRL can no longer continue the activity in this form.

However, entrepreneurs who have chosen the status of EIRL before 15 may 2022 shall continue to benefit from that status.

Individual business When creating the EIRL, the entrepreneur created a trust estate dedicated only to his professional activity. This helps to protect personal assets in the event of difficulties or bankruptcy. It is no longer possible to create an assignment pool. But the allocation to an affected asset already constituted or the removal of elements from it remain possible.

Establishment of a trust fund

All property, rights, obligations, collateral necessary for the activity of the entrepreneur shall be allocated to the allocation balance sheet (e.g. goodwill, lease rights, equipment and tools, capital goods).

Each item of the assets is valued at market value (i.e. market value) or value in use. This value appears in the descriptive state which accompanies the declaration of use of the assets.

This declaration of use of the assets shall be made at the companies' formalities office.

Company Formalities Window

Warning

Since 1^er january 2023, it is no longer possible to carry out your procedures in a company Formalities Center (CFE). You must make them on the website of the company formalities office.

Performing various activities in an EIRL

If multiple different activities are carried out within an EIRL, it is possible to create an assignment pool for each activity.

Through this allocation of assets, the contractor's professional creditors (e.g. a supplier) can sue the EIRL only on the professional assets.

When the allocation balance sheet already constituted is amended either by allocation of property either by removal of assets from the affected property, the contractor must make this change at the company formalities office.

Warning

Since 1^er january 2023, it is no longer possible to carry out your procedures in a company Formalities Center (CFE). You must make them on the website of the company formalities office.

Company Formalities Window

FYI

The principal residence EIRL is automatically protected in the event of proceedings against creditors professionals (suppliers, distributors...) since it is not included in the professional (or assignment) heritage. However, it is no longer protected in the event of fraudulent tax maneuvers or serious and repeated non-compliance with the tax obligations of the EIRL.

The heritage staff is protected against professional creditors. However, it may be seized in one of the following cases:

Contractor's failure to comply with his tax or social obligations (fraudulent maneuvers or serious and repeated non-compliance with tax or social obligations)

Waiver by the contractor of the protection of his personal property

Failure to comply with tax and social obligations

Failure to comply with tax obligations

The tax administration may obtain payment of its claims by seizing the personal assets of the individual entrepreneur where he has committed the following breaches:

Fraudulent maneuvers to avoid paying taxes (tax fraud)
Serious and repeated non-compliance with tax obligations (e.g. voluntary profit reduction over several years)

The entire heritage can also be entered for the payment of the following taxes:

Property tax on buildings useful to the professional activity
Income tax due from the micro-entrepreneur who opted for the discharge payment.

The judge does not need to give his prior authorization to seize the personal assets.

Failure to comply with social obligations

Social security institutions may obtain payment of their claims by entering personal assets the individual contractor.

This property may be seized in cases of serious and repeated non-compliance with social security rules.

These are:

No settlement or partial settlement social contributions and contributions in excess of €1000, in the following cases:
- At least 2 of the last 4 semi-annual maturities
- At least 2 of the last 8 quarterly maturities
- At least 6 of the last 24 monthly installments
- At least 2 of the last 6 split calls (excluding maturities covered by a clearance plan or a payment schedule that has been respected for more than 3 months)
- At least 4 payment deadlines for a clearance plan or a payment schedule for outstanding social contributions and contributions
Failure to meet deadlines, deposit conditions ,incomplete or erroneous declaration which has given rise to the application of surcharges or penalties for an amount exceeding €1000. These facts must relate to at least 2 statements in the last 4 years.
Shortcomings which has led, after checks or inspections, to observations or adjustments in an amount exceeding €1000. These breaches must relate to at least 2 reports in the last 5 years.

FYI

The judge does not need to give his prior authorization for the personal assets of the individual contractor to be seized.

Act of waiver of protection of personal property

Professional assets are not always sufficient to obtain the necessary credits (for example, for the acquisition of expensive equipment). In that case, the EIRL may, at the request of a creditor, to renounce the protection of his personal property by signing a waiver. This waiver does not only to the creditor with which the contractor is bound by the commitment.

In the event of a repayment problem, the creditor concerned by the waiver may therefore seize the personal assets of EIRL.

L'waiverthe protection of personal property shall include mandatory particulars and shall be limited in time and amount.

From the date of signature of the waiver, the EIRL shall a reflection period of 7 days allowing him to change his mind. This period may be reduced to 3 free days if a handwritten entry at the end of the waiver so provides.