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Bankruptcy: how to avoid it

Bankruptcy is a bankruptcy offence that follows a declaration of bankruptcy to which an entrepreneur or a company may be subject.

The incriminating rules of business facts are placed within a special law, namely the Bankruptcy Law which also regulates the civil aspects of bankruptcy.

To commit a bankruptcy crime it is necessary that the subject is a commercial entrepreneur or a company, or one of the subjects (the administrator or liquidator, for example) who represent the company.

So it follows that a freelancer holding a VAT number cannot be accused of a bankruptcy crime, for example, who, instead, can commit, for example, a tax crime.

If you are interested in the topic and want to know more about how to avoid the crime of bankruptcy, I recommend you go ahead with reading this article.

In fact, we will look at the peculiar aspects of bankruptcy and how it can be avoided.

1. The crime of bankruptcy

The main so-called bankruptcy crimes are bankruptcy crimes, punishable not as such, but only when the entrepreneur is declared bankrupt.
In essence, the declaration of bankruptcy is a constituent element of the offences at issue.
The Bankruptcy Law provides for various types of crime.

The bankruptcy hypothesis is essentially divided into fraudulent bankruptcy and simple bankruptcy.

Fraudulent bankruptcy

Fraudulent bankruptcy (Articles 216 and 223 of the Bankruptcy Law) occurs when the entrepreneur distracts, conceals, conceals, destroys or dissipates all or part of his assets or, in order to prejudice creditors, exposes non-existent liabilities (it is the fraudulent bankruptcy of assets).

It may be carried out when it misappropriates, destroys or falsifies all or part of it in such a way as to procure for itself or others an unfair profit or to prejudice creditors, books or other accounting records or keeps them in such a way as not to make it possible to reconstruct the assets or movement of business (fraudulent documentary bankruptcy), or again, in order to favor some creditors over others, it makes payments or simulates pre-emption securities (we speak of preferential fraudulent bankruptcy).

With this last provision, the Legislator intended to guarantee also in criminal terms the so-called par condicio between the mass of creditors, or the possibility that each of them can be satisfied in their claims by the bankruptcy procedure that is insolvency and concerns the entire financial situation of the bankrupt debtor.

In order for the crime of fraudulent documentary bankruptcy to be realized, the specific intent of the agent is not necessary, being sufficient that the accused person has the awareness (or that he knows that the irregular holding will imply the defect of the reconstruction of the company’s assets).

The crime of simple and non-fraudulent document bankruptcy will be realized when the agent keeps the accounting records in a manner different from those required by law without awareness of making the company assets unreconstructable.

Simple bankruptcy

Simple bankruptcy (Articles 217 and 224 of the Bankruptcy Law) is attributable to the bankrupt entrepreneur who has made personal or family expenses excessive in relation to his economic condition; or has consumed a considerable part of its assets in manifestly imprudent operations, has carried out operations of serious imprudence to delay bankruptcy.

It occurs when the entrepreneur has aggravated his failure, refraining from requesting the declaration of his bankruptcy or has not satisfied the obligations assumed in a previous arrangement with creditors or bankruptcy.

Liable for simple bankruptcy is also the bankrupt who in the three years prior to the declaration of bankruptcy, or from the beginning of the company if it has had a shorter duration, has not kept the books and other accounting records prescribed by law, or has kept them irregularly or incompletely.

As you can guess, the distinction between the most serious form of bankruptcy (fraudulent) compared to the simple one consists in the fact that in the first case the agent operates with a fraudulent will and intent, in the awareness of committing conduct that will decrease the company’s assets and therefore negatively affect (also) the rights of the mass of creditors.

In the event of simple bankruptcy, however, the agent acts without malice but in a rash and imprudent manner.

Other hypotheses of crime

Another hypothesis of crime provided for by the Bankruptcy Law is that of the abusive recourse to credit that incriminates the entrepreneur who resorts or continues to resort to credit, concealing his failure, unless the conduct carried out does not constitute a more serious crime (eg fraud).

The bankrupt entrepreneur can then incur the crime of failure to declare assets to be included in the bankruptcy inventory, when he draws up an inventory of assets that is not faithful to reality.

Once again, the aim is to protect creditors who find the only way to satisfy their claims in bankruptcy proceedings – usually only partially and to a minimal extent.

The entrepreneur who declares creditors with whom you have never had financial relations commits the crime of denouncing non-existent creditors.

2. Bankruptcy: how to avoid it

As mentioned, the Bankruptcy Law provides for the obligation to resort to one of the insolvency procedures as soon as you realize the irreversibility of the corporate crisis.
From that moment on, the entrepreneur must behave in such a way as not to aggravate the failure and not to prejudice the interests of creditors.
If there is delay in resorting to the procedure and this has aggravated the failure, the entrepreneur commits a crime of fraudulent bankruptcy.

To avoid criminal liability, it will be necessary to take some precautions.

Regularize formal aspects

It is important first of all to compile and update the mandatory accounting entries.

Any lack or unreliability of accounting records is sanctioned as a crime of fraudulent bankruptcy as it makes it impossible to reconstruct the business facts and is therefore potentially a cause of prejudice to the interests of creditors.

Draw up financial statements according to legal criteria

The entrepreneur, in the phase in which the company still has expectations of being able to solve its problems, tends to draw up a balance sheet that does not negatively impress banks, suppliers and partners.

The most recurrent behaviour, therefore, concerns the retention of doubtful debts on the assets, the tendency to neglect the risk factors deriving from lawsuits in progress of uncertain outcome, the failure to post a provision for the write-down of obsolete stocks, the omission of penalties for late payments and other omissions.

The financial statements thus drawn up are misleading for creditors and the entrepreneur can incur crimes ranging from false accounting to abusive recourse to credits.

Safeguarding company assets

The company that goes bankrupt, for many reasons, can be a viable company from a commercial point of view and therefore have an interesting order book or have a qualified clientele, or it can own trademarks and have attractive know-how for the competition or for those who have the opportunity to exploit them synergistically.

All these are values that could be advantageously realized in the interests of creditors, which is not possible in the pre-bankruptcy phase.

The cessation of activity following the declaration of bankruptcy would result in its loss, to the detriment of creditors.

However, it is possible, legitimately and transparently, to enter into business lease contracts with subjects who express their intention to buy the company by formalizing in the lease contract itself or separately, a purchase offer to the bodies responsible for the bankruptcy procedure.

In the contract will be made clear mention of the crisis situation of the company and the intention to file with the court for bankruptcy on its own. On the part of the tenant of the company, the willingness to return the company will be expressed if the bodies responsible for the insolvency procedure request it.

In this way the entrepreneur, in order not to aggravate the failure, puts the curator in a position to realize the company assets that would otherwise be completely lost.

Avoid incurring the crime of preferential bankruptcy

The crime of preferential bankruptcy is recorded in the reports of the trustees with considerable frequency due to the fact that it is a crime that is difficult to recognize by the entrepreneur.

From the moment when the entrepreneur is sure that he will not be able to pay all creditors, he must strictly observe the order of privileges in order to respect par condicio.

But, in order to recognize the crime of preferential bankruptcy, as defined in art. 216, paragraph 3 of the Bankruptcy Law, it is not sufficient that the payments considered preferential take place in the context of a state of crisis but it is necessary that the state of crisis is considered irreversible by the entrepreneur and that he does not see any other outlet than the declaration of bankruptcy.

Until then, he is obliged to do everything possible to avoid it.

However, the recovery plan is a valid tool for the entrepreneur through which to realize that the difficult work of rescuing the company is failing and that the company cannot be saved.

In this case, your conduct must immediately comply with the legislative dictates.

It will therefore have to make any payments, if necessary, in strict compliance with the ranking of privileges dictated by the civil code.


In essence, as you may have noticed, trying to avoid a crime of banking is far from simple.

Often, in fact, it is not easy to decipher the numerous laws that describe and regulate a particular institution.

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