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Liability of administrators for causing insolvency. Failure to hand over accounting documents

Liability of administrators for causing insolvency. Failure to hand over accounting documents to the insolvency administrator/liquidator


A common situation in practice is the failure of the company's administrator to hand over accounting documents to the insolvency practitioner appointed to manage the insolvency proceedings once the insolvency proceedings have been opened.

The legal obligation of the company director to hand over these documents is enshrined in Articles 67 and 74 of Law 85/2014.

The consequences of failing to do so are manifold. The personal liability of the administrator is by far one of the most severe sanctions that could be imposed during insolvency proceedings.

In this regard, Article 169 of Law No 85/2014 para. (1) letter d) provides that the failure to provide accounting documents is one of the unlawful acts capable of giving rise to such personal liability of the administrator. However, the legislator did not stop there, but made it easier for the administrator to incur liability.

In this regard, it provided that the proof of such a fact (neighboring and related fact) automatically entails the presumption of fault and causality, so that the only element left to be established is the damage.

As for the proof of non-delivery of documents, this is usually easy, as the administrator/judicial liquidator can easily prove that there is a notice of non-delivery.


Thus, the only remaining condition to be determined for liability is the damage. By the way Article 169(2) is worded, the (1), the legislator wanted to emphasize that the administrator is to bear strictly "the damage causally connected with the act in question", i.e. the failure to provide accounting documents.


However, it should be borne in mind that the reason for establishing this obligation is to ensure that the insolvency practitioner is able to determine the debtor's assets, which is essential for the proper conduct of the proceedings. In the absence of essential accounting documents, the insolvency administrator/liquidator is unable to carry out his duties and any recovery of the company is compromised from the outset. The interests of creditors are also harmed, since the company's assets can thus be hidden and evaded collective enforcement.


In view of this major repercussion of making it impossible for the practitioner to fulfil his or her prerogatives, the courts consistently tend to superimpose the entire uncovered liabilities of the insolvent company on the damage caused by the failure to submit accounting documents.


In a recent case, the Timis Court ruled as follows: "Since the documents provided for in Article 67, Article 74 and Article 82 of Law No. 85/2014 have not been handed over, the judicial liquidator is unable to fully identify the assets owned by the debtor, to verify whether there are assets disposed of during the suspect period or claims to be recovered.

(...)

The acts of keeping fictitious accounts, filing accounting documents or failing to keep accounts in accordance with the legal provisions are understood to be the commission of those unlawful acts which violate the mandatory regulations of the accounting law, regardless of whether they represent crimes, misdemeanours or simple civil offences. Thus, the very fact of the debtor's failure to submit the accounting documents, in accordance with Article 67 of the law, creates a relative presumption of failure to keep accounts in accordance with the law and of the causal link between this act and the company's going into receivership.

In the light of the above, the Court, pursuant to Art. 169 para. 1 lit. d) in relation to art. 45 of Law no. 85/2014 will admit the application for the enforcement of patrimonial liability and consequently will oblige the defendant to bear from its own assets all the liabilities of the debtor resulting from the insolvency proceedings."

Having said that, we insist on the fact that this not inconsiderable obligation, which can have immeasurable consequences for the administrator at fault, must be given greater attention.


For more information you can write to us at fabian.cretu@fcretu-law.com.




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