With the amendments to the Commerce Act, promulgated in Official Journal No. 66 of 1 August 2023, the possibility of declaring the insolvency of natural persons who have the capacity of "entrepreneurs" was introduced for the first time. This procedure is not equivalent to the personal bankruptcy of natural persons, but covers a narrower category of persons who carry on certain economic activities.

Definition of an "Entrepreneur"

An "entrepreneur" is understood to mean any natural person who carries on an economic activity, a trade, or a liberal profession, provided that his undertaking, by its subject matter and volume, does not require the conduct of its affairs in a commercial manner.

This category includes all self-insured persons. As there are various forms of economic activity, the definition of "entrepreneur" encompasses the general characteristics of the activity and provides illustrative examples. The principal difference between an "entrepreneur" and a sole trader who is a natural person, under the Commerce Act, lies in whether the volume and subject matter of the undertaking necessitate the conduct of its affairs in a commercial manner.

The Entrepreneur's Undertaking

The "entrepreneur's undertaking" comprises the aggregate of rights, obligations, and factual relations arising from the economic activity, trade, or liberal profession carried on by the natural person.

Conditions for a Declaration of Insolvency

In order to be declared insolvent, the natural person who is an entrepreneur must be in a state of insolvency.

Insolvency arises where the person is unable to meet any of the following obligations:

  • A monetary obligation arising from or connected with the economic activity, trade, or liberal profession carried on.
  • A monetary obligation connected with a commercial transaction, including matters relating to its validity, performance, non-performance, termination, avoidance, or rescission.
  • A public-law obligation owed to the State or to the municipalities, which is connected with the person's commercial activity.
  • A private state receivable.
  • An obligation to pay the wages of at least one third of the workers and employees for a period longer than two months.
Presumption That the Obligations Are Connected with the Economic Activity

The Commerce Act introduces a presumption whereby, if the entrepreneur's personal obligations cannot be distinguished, they are deemed to be connected with the activity carried on by him. This means that the entrepreneur must prove that a particular transaction or contract in respect of which no payment has been made is of a personal nature (for example, that it is connected with his personal needs or those of his family).

Procedure for Opening Insolvency Proceedings

The application to open insolvency proceedings against a natural person who is an entrepreneur is filed with the district court for the place of the entrepreneur's registration. The registration must have been effected at least six months before the filing of the application. Where the entrepreneur has no place of registration, the competent court is that of his permanent address.

The judicial acts relating to the entrepreneur's insolvency proceedings are entered in the insolvency proceedings information system of the Ministry of Justice. They are not published in the Commercial Register or the BULSTAT Register.

Conditions for the Discharge of the Obligations

Following the opening of the insolvency proceedings, the entrepreneur's obligations are deemed discharged if the following conditions are met:

  • The entrepreneur has ceased to carry on the economic activity, trade, or liberal profession that gave rise to the obligations.
  • All costs connected with the insolvency proceedings have been settled.
  • At least one third of the obligations have been paid, provided that they do not exceed the income exempt from enforcement under Article 446 of the Code of Civil Procedure, over a period of three years following the opening of the proceedings.
  • No transactions or acts prejudicial to the interests of the creditors have been carried out from the moment of the opening of the insolvency proceedings.
  • A period of three years has elapsed from the date of:
    • The entry into force of the court decision approving a recovery plan and terminating the proceedings.
    • The entry into force of the decision declaring insolvency, where the court finds that the assets do not cover the costs and terminates the proceedings.
    • The approval of a plan for the realisation of the assets or, in the absence of such a plan, from the date of the first inventory of the insolvency estate.

For the discharge of the obligations to occur, all these conditions must be satisfied simultaneously.

The discharge takes effect from the day on which the last of these prerequisites occurs. From that moment, the restrictions imposed by law on the pursuit of commercial, economic, or craft activity are removed.

Exceptions to the Discharge of the Obligations

Notwithstanding the fulfilment of the aforementioned conditions, the following obligations are not subject to discharge:

  • Receivables secured by pledge, mortgage, seizure, or distraint, registered under the procedure of the Registered Pledges Act.
  • Receivables arising from fines or pecuniary penalties.
  • Receivables for damage caused (tort).
  • Receivables for maintenance.
  • Receivables arising after the opening of the insolvency proceedings.
  • Costs incurred in the course of the insolvency proceedings.

These obligations remain in force even after the termination of the insolvency proceedings and are subject to the relevant limitation periods.

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