Print Posted By Lost in France on 22 Sep 2005 in Living in France - Business and employment in France

La declaration d'insaisissabilite - protect your French home

La declaration d'insaisissabilite is a declaration that, as its name suggests, puts your main home beyond the reach of your creditors by making it "unseize-able".
 
The facility to make such a declaration was introduced in a law of August 2003 (la loi Dutreil) and incorporated into the Code de Commerce at L. 526-1 to 3. It allows the individual entrepreneur, who does not have the protection of limited liability, to put his main home beyond the reach of his potential professional creditors.
 
It is obvious that one of main deterrents to starting a business is the possibility of losing one's home. This law removes such deterrent, but with the caveat that the declaration has to be made and publicised before the event - to quote: - the declaration can only be used to shield the home from debts incurred after its publication. This allows the creditor to make an honest assessment of his debtor's creditworthiness before, for example, lending to him or going into business with him.

{loadposition contentad}It would therefore seem that the best time to make such a declaration is either when you buy the French property or before the business starts up, whichever is earlier, although any potential downside, such as the reduced creditworthiness of the business and/or the adverse effect on the business's credibility (the owner arguably lacks confidence in his own business) must be taken into account.
 
The declaration is relatively easy to make. You must show proof of your ownership of the property and the notaire will then take around a month to verify this ownership. If you make the declaration when you buy the property this ought to be addressed as part of the buying process. The notaire then drafts a deed which is signed by the businessman (and his spouse, if applicable) and then sent to the Mortgage Registry, the Business Registry and other relevant bodies for publication.
 
The French loi de finances rectificative of 2004 has made this declaration even more accessible by reducing the publication stamp duty from 75 to just 15 euros and the previously floating additional publication fee has been fixed at 15 euro.
 
If the businessman later sells the home, the declaration attaches to the sale proceeds and then to a new home bought with them, to the extent that the proceeds are used to finance this. This allows you to move home without losing the benefit of the declaration.
 
Although not expressly set out in the legislation, it appears that this declaration is only available to those who are French tax resident, since for most legal purposes it is not possible to have one's main home in France without being tax resident there (for example, private residence relief from capital gains tax where the same terminology is used).
 
But if your main residence is in France and you face claims from UK creditors who seek to have your French home sold to pay your UK debts, it is likely under EU law that the French courts will have jurisdiction and will apply French law. This means that the registration of the declaration might be a bar to any UK creditor. The material date for deciding which court has jurisdiction is the date any bankruptcy petition is presented, not the date any contract which created the debtor's liability was entered into.
 
It is difficult to see, therefore, that it will of any use to UK residents, but for those who move to France to set up a business there, it's certainly worth thinking about, particularly if the prospect of losing your home is putting you off.
 
Please note that taxation, insolvency and law in general are complex subjects. You should not take or refrain from taking any step without full independent advice on the particular facts of your case. The content of this article is of a general nature and no liability is accepted in connection with it.

By Saul Brownstein, tax solicitor and Susanna Heley, trainee solicitor, at Sykes Anderson LLP. Sykes Anderson advises on all aspects of French personal taxation. You can contact them at [email protected] or on 020 7398 4700. or at http://www.sykesanderson.com

 

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