Abusive Resort to Credit

Abusive resort to credit punishes the entrepreneur who obtains or continues to obtain credit while concealing his state of financial collapse or insolvency. It is governed by Article 325 of the Crisis Code and punished with imprisonment from six months to three years; ancillary penalties are governed by Article 326.

The offence does not penalise the search for liquidity in a phase of difficulty, which is normal business conduct, but the concealment of the company's real situation from the lender.

The prerequisite: insolvency, not mere crisis

The provision requires the entrepreneur to be in a state of financial collapse or insolvency. A situation of crisis, financial tension or temporary illiquidity is not in itself equivalent to that prerequisite. The distinction is decisive: the technical reconstruction of the economic and financial situation at the date of each disbursement is the first area of defence work.

The concealment

The typical conduct consists in concealing the company's state. Untruthful representation of the asset and financial situation, transmission of outdated or altered accounting data, omission of relevant information requested by the lender and the presentation of unsustainable economic prospects may all be relevant. Not every forecasting optimism amounts to concealment: it must be checked which information was provided, which was owed and what representation was actually conveyed to the counterparty.

Obtaining credit and attempt

The offence presupposes resort to credit, that is, the actual establishment or continuation of the relationship. Where the assessment does not result in disbursement, the question of an attempt may arise under general principles. The conduct of those who continue to obtain credit — for example by using lines already granted or through renegotiations — while concealing a situation that has since arisen, is also relevant.

The lender's position: knowledge and knowability

If the lender already knew of the state of insolvency, the concealing conduct may be inadequate to constitute the offence. However, actual knowledge must be distinguished from mere knowability: the availability of information in databases or credit registers is not automatically equivalent to knowledge of the company's real situation. The assessment concerns the documentation of the credit assessment, the information requested and that actually transmitted.

Persons liable

The provision refers to the entrepreneur. For companies, Article 331 identifies the persons to whom, among others, Article 325 applies, according to the criteria and within the limits set out therein. The assessment therefore concerns the role actually exercised by whoever managed the relationship with the lender, participation in preparing the documentation transmitted and awareness of the company's situation.

Subjective element

Intent is required, comprising awareness of the state of insolvency and the will to conceal it from the lender. The perception of difficulty or an error of judgement regarding restructuring prospects is not sufficient, especially where continuing the business was supported by a documented plan.

Relevant distinctions

Bankruptcy from fraudulent transactions

Abusive resort to credit has an autonomous structure and does not require proof that the financing caused or aggravated insolvency. Where instead the charge is based on the aggravation of insolvency produced by particular management conduct, the relevant provision is Article 329(2).

Abusive granting of credit

Abusive granting of credit concerns the lender's position and is traditionally framed in terms of civil liability: it is a distinct issue from the criminal offence under Article 325, which concerns the conduct of the party obtaining credit.

Situations requiring attention

• requests for new finance where an unreported asset imbalance exists
• transmission of outdated financial statements or accounting positions
• renegotiations and use of credit lines after insolvency has emerged
• apparent guarantees and capitalisations to support the credit assessment
• forecast plans lacking documentary support

Defence strategy

1. technical reconstruction of the economic and financial situation at the date of each disbursement
2. distinction between crisis, financial tension and insolvency
3. analysis of the documentation transmitted to the lender and of the credit assessment carried out
4. verification of the information actually known to the lender
5. reconstruction of the restructuring prospects documented at the time of the request
6. identification of each person's role in managing the relationship

Frequently asked questions

Back to the general framework of fraudulent bankruptcy →