FRUSTRATION OF EXECUTION AND PUNISHABLE INSOLVENCIES

The crimes of frustration of execution and punishable insolvency are regulated in articles 257 to 261 bis of the Criminal Code, which punish certain conducts carried out by the debtor that are detrimental to the credit rights of his creditors. What is punished is not the fact of owing money to third parties, but the acts carried out by the debtor with the purpose of concealing his assets to prevent his creditors from recovering the money owed.

Frustration of execution

Arts. 257 to 258 ter of the Criminal Code regulate the crimes of frustration of execution, which punish conducts that have the purpose of preventing the creditor from being paid with the debtor’s assets. We are faced with a crime that presents the following criminal modalities:

257. In the first place, concealment of assets, which occurs when the debtor takes possession of his assets to the detriment of his creditors or, in other words, when the debtor conceals his assets to prevent creditors from being paid with his assets (art. 257.1. 1 of the Criminal Code). This type of crime is committed, among others, by the debtor who transfers money to accounts owned by a third party to prevent the creditor from collecting the money owed, as well as by the debtor who makes a donation to a relative in order to transfer various assets, thus preventing his debtors from being able to be paid with such assets.

257. Secondly, it punishes the performance of acts that hinder or impede the effectiveness of a seizure or of an executive or enforcement procedure, judicial, extrajudicial or administrative, initiated or foreseeable to be initiated (art. 257.1. 2º of the Penal Code).

257. Thirdly, it punishes the performance of acts that diminish assets or conceal part of such assets in order to evade the payment of civil liability arising from a crime (art. 257.1. 3º of the Criminal Code).

1. Likewise, the presentation, in a judicial or administrative enforcement proceeding, of an incomplete or false statement of assets, or the omission of its presentation, hindering or preventing the satisfaction of the creditor, is also punishable (art. 258 Penal Code). However, if the debtor submits a correct declaration before the official discovers the falsity of the previously submitted list of assets, the facts will not be prosecuted by criminal proceedings.
2. Finally, Article 258 bis of the Penal Code punishes the use of goods seized by a public authority that have been placed in deposit, provided that there is no authorization.

Finally, it should be taken into account that the previously described facts are punished with a higher penalty if the debt whose payment is to be avoided is of public law, if the amount defrauded exceeds 50,000 Euros, if the crime affects many people…

Punishable insolvencies

The crimes of punishable insolvency are regulated in articles 259 to 261 bis of the Penal Code and punish conducts that diminish or conceal the assets of the debtor who is in a situation of actual or imminent insolvency, that is, a debtor who is unable to pay his debts or who foresees that he will not be able to do so in the near future. This crime has several typical modalities:

1. On the one hand, Article 259 of the Criminal Code regulates the crime of bankruptcy. This crime is committed by the debtor who, being in a situation of actual or imminent insolvency, generates a real or apparent decrease in assets or prevents access to information on his assets. This is the case, for example, when the debtor destroys assets that should be included in the insolvency estate or when he fails to keep accounts. These behaviors constitute a crime whether they are committed intentionally (intentionally) or recklessly.
2. On the other hand, Article 260 of the Criminal Code punishes the favoring of creditors by a debtor who is in a situation of actual or imminent insolvency. Specifically, it penalizes cases in which the debtor pays to one of his creditors a credit that is not yet due or grants him a guarantee to which he is not entitled (for example, a mortgage), provided that the transaction has no economic justification. In addition, penalties are imposed on debtors who, being immersed in bankruptcy proceedings, carry out unauthorized transactions aimed at paying some of their creditors, postponing the payment of the rest.
3. Finally, Article 261 of the Criminal Code punishes the presentation of false accounting data in a bankruptcy proceeding, with the purpose of improperly obtaining the declaration of bankruptcy.

Criminal liability of legal persons

Finally, we must bear in mind that both the offenses of frustration of execution and the offenses of punishable insolvency can generate criminal liability of the legal person (arts. 258 ter and 261 bis of the Criminal Code). The penalty to be imposed on the latter is a fine, the amount of which varies according to the seriousness of the offense:

1. A fine of 2 to 5 years, if the crime committed by the natural person is punishable by imprisonment for more than 5 years.
2. A fine of 1 to 3 years, if the crime committed by the natural person is punishable by a prison sentence of more than 2 years not included in the preceding paragraph.
3. Fine of 6 months to 2 years, in all other cases.

The judge may also impose additional penalties on the legal entity, such as dissolution, suspension of activities, closure of premises, prohibition of future activities, disqualification from obtaining public subsidies and aid, and judicial intervention.