Fraudulent bankruptcy is considered one of the most serious offences in the context of bankruptcy violations.
It’s important to distinguish between tax offences and bankruptcy offences that derive from a bankruptcy declaration whereby the subject may be a company or a businessperson. There are new incriminating norms within a special law: we’re talking about the Bankruptcy Law that also regulates the civil aspects of bankruptcy.
It’s necessary that the subject is a businessperson or a company or one of the subjects that represents it in the case of tax offences that fall within bankruptcy crimes.
A free-lance professional with VAT who commits a tax offense instead, cannot be accused with a bankruptcy offence.
Criminal proceedings begin following the notification made by the bankruptcy trustee. In fact, the bankruptcy trustee is the person appointed by the Chief Judge to lead the company toward its termination and liquidation. The trustee also has an obligation to submit to the court a detailed report on the causes and circumstances of the bankruptcy, on the scrupulousness of the insolvent person towards the company’s business, on the entrepreneur and his/her family’s private life, on his/her responsibility and on anything that may be relevant for the proceedings.
Instead, if a company is the subject of bankruptcy proceedings, the trustee will have to present the facts and extend the information also to the administrators, statutory auditors, shareholders and potential external third parties.
In this case, a report is given to the Public Prosecutor whereby the trustee must highlight certain facts that, in his/her opinion, complete the criminal offence for the examination of the Judicial Authorities.
Bankruptcy offences are among the main insolvency offences and are punishable when the businessperson is declared bankrupt. They are therefore not punishable as such, but the declaration of bankruptcy is a constitutive element of such offences.
This does not mean that if there are the requirements, the behaviors described below can be configured for other illicit actions attributable to the entrepreneur such as:
The bankruptcy case essentially involves:
1) The crime of fraudulent bankruptcy exists when the entrepreneur diverts, hides, masks, deletes or disperses in all or part of the assets or, in order to jeopardize creditors, shows nonexistent liabilities (in this case we’re talking about fraudulent asset bankruptcy); or when he/she embezzles, destroys or falsifies, in whole or in part, in such a way as to cause him/her or others an unlawful profit or to jeopardize creditors, logs or other records or keeps them so it’s not possible to reconstruct the assets or business exercises (fraudulent documentation bankruptcy), or even, in order to favor a few creditors over others makes payments or simulates pre-emptive bonds (i.e. fraudulent preferential bankruptcy).
With the latter the Legislator also guarantees the parity via penal proceedings between the mass of creditors, in other words the possibility that each of them can be satisfied in his/her own credits from the bankruptcy procedure that is insolvent and concerns the entire financial situation of the bankrupt debtor;
It is important to point out that the Supreme Court has recently confirmed (Sentence n. 30337, Section V. Refer to the news) that in order for the fraudulent document bankruptcy to be put into effect the specific fraud of the agent is not necessary, in other words that the person is particularly determined to make it impossible to recreate the company assets by irregularly handling the accounts; it is sufficient that the accused person is well aware (that he/she knows that the irregular handling of the documents implies the lack of recreating company/business assets).
The offense of simple and non-fraudulent document bankruptcy occurs when the agent handles the accounting records in a different manner from that provided by law without being aware that the company/business assets cannot be recreated.
2) simple bankruptcy attributable to the bankrupt entrepreneur who carried out personal expenses for him/herself or for the family exceeding the economic conditions; or used a large proportion of the assets for clearly careless operations, has taken serious reckless oeprations to slow down the bankruptcy; worsened his/her difficulties, refraining from requesting the declaration of bankruptcy or has not fulfilled the obligations taken on in a previous bankruptcy agreement. The person responsible of simple bankruptcy is also the bankrupt person that in the three years preceding the declaration of bankruptcy, that is, from the beginning of the business if the same had a shorter duration, has not kept the logs and other accounting records as required by law, or has incorrectly or incompletely handled them.
It is deducible that the difference between the most severe form of bankruptcy, the fraudulent one compared to the simple one consists in the fact that in the first case the agent works with a will and intent to defraud, knowingly committing behaviors that will reduce the company’s assets thus negatively influencing (as well) creditor rights.
Instead, in the case of simple bankruptcy, the agent operates without malice but in a reckless and imprudent way.
3) The abusive use of credit is another type of offence prescribed by the Bankruptcy Law. The latter incriminates the entrepreneur who perseveres with recourse to credit, concealing his/her insolvency, unless we’re dealing with a more serious crime (such as fraud).
4) Another offence is the non-declaration of goods. In this case the bankrupt entrepreneur may run up against inventory bankruptcy, when he/she draws up an inaccurate inventory of the assets. Even in this situation creditors are legally protected because in the bankruptcy proceedings they find the only way to satisfy, although typically only partially and minimally, their own credit claims.
5) The offence of reporting non-existent creditors is commited by creditors that report creditors with which they have never had any sort of asset management relationship.
International Lawyers Associates is a leading law firm for corporate assistance during the dissaray and bankruptcy phase and hence for fraudulent bankruptcy offence.