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Bankruptcy fraud

The Dirty Tricks Department 

Bankruptcy fraud is a common problem, representing an estimated social cost of €2 billion a year.

What is bankruptcy fraud?

When a company’s assets are sold off to friends for a ridiculously low price just before it goes bankrupt, or if money is siphoned off, this is known as ‘bankruptcy fraud’. Other types of bankruptcy fraud include making the accounts ‘vanish’ and deliberately using a company to defraud its creditors. For example, this could involve using a company as a vehicle for selling or reselling goods without paying the suppliers. By the time the suppliers take legal action, they are likely to find that the bird has already flown.

How can you deal with bankruptcy fraud?

There are remedies under civil and criminal law for dealing with bankruptcy fraud. The civil-law approach focuses on returning the assets to the bankrupt estate. The Dutch Bankruptcy Act (Faillissementswet) contains several instruments to enable receivers to restore the estate to its former state. Criminal proceedings may be possible where citizens or society as a whole has suffered severe losses. You should report to the police if you suspect that you are the victim of bankruptcy fraud.

Prevention

Naturally, the best way of not becoming a victim of bankruptcy fraud is by preventing it from happening in the first place. This is where we can help, by performing due diligence audits, for instance. The same applies if your company gets into financial difficulty: we can help you to reorganise your business in accordance with the law or relaunch it in a lawful manner, either after bankruptcy or  as part of liquidation proceedings.

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