criminal law in creditor protection | In Principle

According to analysts, only 10% of startups are successful. Almost 90% of them fail—20% in their first year. On the record, such failures are often attributed to the founders’ failure to identify the customers’ needs, i.e. a real gap in the market, or blamed on competition and the uniqueness of the service or product. In less guarded moments, e.g. in online forums, much heavier accusations have been levelled against founders, such as the claim that most startups are designed to defraud investors or launder money.

The Supreme Court of Poland regards protection of the creditor’s financial interests as the main purpose of punishing the debtor (and his supporters, if any) for behaviour preventing or diminishing the satisfaction of creditors. Therefore, persons handling the debtor’s affairs can be jointly and severally liable to the creditor.

It often happens that a creditor in a civil relationship is also harmed by the debtor’s action that may qualify as a crime. In such cases, in addition to pursuing claims through civil proceedings, the creditor can also take action against the debtor in criminal proceedings.

Dishonest debtors display great ingenuity in evading their obligations. They may also turn to advisers who, for a hefty fee, provide “sophisticated” ideas to lead creditors astray. Often such ideas involve the creation of legal entities (sometimes a whole group or “chain”) to hide components of the debtor’s business from creditors. Such actions constitute abuse of legal personality for the purpose of harming creditors. Can dishonest debtors and their supporters (including advisers) who knowingly use such methods really rest easy?

In its judgment of 10 February 2021 (case no. I CSKP 33/21), the Supreme Court of Poland considered a cassation appeal by a claimant seeking to prove that it was wronged as a creditor in a fraudulent transfer claim against a third party (governed by Art. 527 and following of the Civil Code). The Supreme Court raised important issues in this debatable decision from the point of view of the safety of participants in commerce, including creditors. Among other things, the court pointed out that the assessment of whether a creditor was harmed within the meaning of Art. 527 §2 is affected by whether the consideration obtained by the debtor was used to satisfy other creditors.

During a crisis, the risk of running a business increases, and not just for “natural” reasons. There is also a growing number of unlawful behaviours by businesses, from incurring obligations they cannot honour to evading their existing liabilities. Too many businesses treat hard times as a great opportunity to shift the risk of their operations to counterparties who aren’t as “clever.”

The possibility of seeking damages from a person who has knowingly benefited from a wrong done to another may offer the victim the only practical chance of obtaining even partial recompense. Often the immediate wrongdoer is insolvent, while someone else gains from the unlawful act.

Liability for money laundering in the case of persons assisting in actions taken by dishonest debtors to the detriment of creditors.

Legal measures for amicable resolution of a criminal case initiated by a creditor to enforce a receivable against assets depleted by the unlawful acts of the debtor.

Sham encumbrance of assets to convince third parties of non-existent legal consequences may constitute a crime. Incurring fictitious obligations is an example.

The penal sanction of the duty to redress loss or provide satisfaction for injury, which may be imposed on a dishonest debtor by the criminal court, protects the interests of creditors.

A debtor can be guilty of hindering enforcement of a court order even when the order does not exist yet.