Insolvency procedure – annulment of fraudulent acts concluded by the debtor prior to the opening of proceedings
Just as important as holding the administrator or those responsible for initiating the insolvency proceedings accountable is the institution of annulling fraudulent acts concluded by the debtor before the opening of insolvency proceedings, acts that aim to defraud creditors.
This action can be initiated by the judicial administrator and aims to annul fraudulent acts or operations concluded in the two years prior to the opening of the proceedings. Such acts or operations are considered the following:
➡️ gratuitous transfer acts, carried out in the 2 years prior to the opening of the proceedings; humanitarian sponsorships are exempt;
➡️ operations where the debtor’s performance is clearly disproportionate to what was received, carried out in the 6 months prior to the opening of the proceedings;
➡️ acts concluded in the 2 years prior to the opening of the proceedings, with the intention of all parties involved to remove assets from creditor pursuit or otherwise harm their rights;
➡️ property transfer acts to a creditor for the settlement of a prior debt or in their favor, carried out in the 6 months prior to the opening of the proceedings, if the amount the creditor could obtain in the event of the debtor’s bankruptcy is less than the value of the transfer act;
➡️ the establishment of a preferential right for a claim that was unsecured, in the 6 months prior to the opening of the proceedings;
➡️ advance payments of debts, made in the 6 months prior to the opening of the proceedings, if their maturity was set for a date after the opening of the proceedings;
➡️ transfer acts or assumption of obligations made by the debtor in a period of 2 years prior to the date of the opening of the proceedings, with the intention of hiding/delaying the state of insolvency or defrauding a creditor.
Additionally, the law explicitly states that acts concluded with persons in legal relations with the debtor can also be annulled:
➡️ with a general partner or an associate holding at least 20% of the company’s capital or, as the case may be, voting rights in the general meeting of associates, if the debtor is a limited partnership, an agricultural company, a general partnership, or a limited liability company;
➡️ with a member or administrator, when the debtor is an economic interest group;
➡️ with a shareholder holding at least 20% of the debtor’s shares or, as the case may be, voting rights in the general meeting of shareholders, if the debtor is a joint-stock company;
➡️ with an administrator, director, or a member of the supervisory bodies of the debtor, cooperative society, joint-stock company, or, as the case may be, agricultural company;
➡️ with any other natural or legal person holding a position of control over the debtor or its activities;
➡️ with a co-owner or joint owner of a common good;
➡️ with the spouse, relatives, or in-laws up to and including the fourth degree
Both categories imply the debtor’s intention to defraud creditors by concluding legal acts through which the company’s assets are protected and will no longer be subject to liquidation.
The action to annul fraudulent acts can be initiated by the insolvency practitioner within one year from the expiration date set for drafting the report on the causes and circumstances that led to the onset of insolvency, but no more than 16 months from the date of opening the proceedings. Additionally, the action can be initiated by the creditors’ committee or the creditor holding more than 50% of the value of claims registered at the creditors’ table.
If the request is granted, the third party acquirer within an annulled asset transfer will have to return the transferred asset to the debtor’s estate or, if the asset no longer exists or there are any impediments to its recovery by the debtor, the third party will return its value as of the date of the transfer carried out by the debtor, established through expert appraisal.
Our company has the necessary experience in filing requests to annul fraudulent acts, as well as formulating the necessary defenses against such actions.
For further information or any additional inquiries, please do not hesitate to contact us:
➡ Phone: (+4) 031 426 0745
📧 Email: office@grecupartners.ro
We are here to assist and provide legal support for all your needs. We look forward to discussing with you.
Daniel Pavelescu – Attorney at Law
