Insolvency in Spain: The Incoherence of Punishable Insolvency That Includes The Solvent Debtor

22 March 2021 - Marta Arroyo Vázquez

Punishable insolvency is regulated, inter alia, in Article 260 of the Spanish Penal Code. However, section two thereof contains wording which leads to decisions that contradict the legislature’s intention; this is because the wording implies that the description of the offence includes the solvent debtor.

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Article 260, section two, punishes with sentences of one to four years of prison and fines of 12 to 24 months any debtor which, once the request for insolvency has been admitted for processing, without authorisation either from the courts or the insolvency administrators, and outside of the cases permitted under law, carries out any act of withdrawal or act which gives rise to obligations, in an attempt to pay one or more creditors, privileged or not, and delaying the rest of them.

In accordance with the current wording of this article, the description of the offense includes the case in which aggravated, punishable insolvency may be committed by a solvent debtor. It must be noted that there is the possibility that the request for a declaration of insolvency may be admitted and, subsequently, no declaration of insolvency is issued, that is, the debtor is not declared insolvent in the end. Consequently, the solvent debtor should disappear from this description of the financial offence given that, if it were to pay a privileged creditor from when the request for insolvency is admitted for processing until its rejection, it would not be causing or aggravating the insolvency, given that the insolvency would not exist. He also would not be asset stripping, since it would be a payment. For all of these reasons, there would be neither fraud nor concealment of the payment.

In light of the foregoing, it is necessary to modify the terms of the description of the offense in the aforementioned article. This should be done by substituting “the admission to processing of the request for insolvency” (“la admisión a trámite de la solicitud de concurso”) with “declaration of insolvency” (“declaración del concurso”). This would prevent that the description of the most serious offence of punishable insolvency could contradict its intended purpose, which is to penalise an insolvent debtor.