In brief
- Concealment of assets from creditors, now termed the offence of frustration of enforcement, punishes schemes designed to prevent or hinder a creditor from recovering a debt from the debtor’s property and rights; it is mainly governed by Articles 257 et seq. of the Spanish Criminal Code.
- It is not limited to cases where an attachment already exists: it may also be committed where the debtor knows that a claim or enforcement is imminent.
- The debtor need not become completely insolvent, nor need the creditor permanently lose its money; the debt may be private or public, and a single affected creditor is sufficient.
- Concealment of assets is punishable by imprisonment of one to four years and a fine of twelve to twenty-four months; imprisonment rises to one to six years for certain public-law debts.
- The company may be criminally liable, with fines of up to five years and other penalties for the legal person.
Concealment of assets from creditors (alzamiento de bienes), now termed the offence of frustration of enforcement, punishes schemes designed to prevent or hinder a creditor from recovering a debt from the debtor’s property and rights.
It is not limited to cases where an attachment already exists. It may also be committed where the debtor, knowing that a claim or enforcement is imminent, strips its assets, conceals assets, fraudulently transfers property or assumes obligations in order to prevent them from being attached.
The main provisions are found in Articles 257 et seq. of the Spanish Criminal Code.
What is concealment of assets from creditors?
The offence is committed by anyone who removes or conceals their assets to the detriment of their creditors. The conduct may consist of concealing, transferring, donating, encumbering or diverting property and rights in order to feign an insolvency that prevents or hinders recovery.
It is also an offence to dispose of assets or incur obligations that delay, hinder or prevent the effectiveness of an attachment or of judicial, out-of-court or administrative enforcement or collection proceedings, whether already commenced or foreseeable.
The debtor need not become completely insolvent, nor need the creditor permanently lose its money. It is sufficient that the scheme significantly reduces the chances of enforcement or places the assets beyond the effective reach of the recovery proceedings.
For example, an offence may be committed where the director of a company, after receiving a demand for payment, transfers machinery, vehicles or real estate to a related company without any genuine economic justification and leaves the debtor company without sufficient assets to meet its liability to the creditor.
The debt may be private or public and may have any origin: an unpaid contract, a trade debt, wages, compensation, taxes, Social Security contributions or obligations towards a public authority. An offence may also exist even where only one creditor is affected.
Forms of the offence of frustration of enforcement
1. General concealment of assets
Concealing or diverting assets to the detriment of creditors is punishable. The conduct may be direct (for example, selling an asset) or carried out through intermediary companies, trusted persons, third-party accounts, sham transfers or fictitious transactions.
The debtor cannot escape liability simply by arguing that the transaction was formalised by a deed, a contract or an invoice. What matters is whether the transaction was genuine, whether it had an economic justification and whether it resulted in a reduction in assets or a concealment aimed at frustrating recovery.
2. Frustration of an attachment or enforcement proceedings
It is an offence to carry out any act of disposal or to assume obligations that significantly affect an attachment or enforcement or collection proceedings that have been commenced or are foreseeably imminent.
This form may exist even where the debtor does not become fully insolvent. For example, selling an unencumbered property when the imminence of enforcement proceedings is already known, transferring company funds to personal accounts or assuming a fictitious debt that places another creditor ahead may be criminally relevant conduct if it effectively frustrates the means of recovery.
Not every sale made by a company in debt is an offence. Business activity allows assets to be sold, the business to be reorganised and some assets to be replaced by others. The transaction must be assessed in light of whether it was genuine, its price, its economic justification, where the money went and its effect on enforcement.
3. Evading payment of civil liability arising from an offence
It is also an offence to dispose of property, incur obligations, reduce one’s assets or conceal assets in order to avoid paying the civil liability arising from an offence committed by the offender or by someone for whom the offender is answerable.
This form may affect, among other things, compensation for loss and damage, restitution of property or payment of sums ordered in a criminal judgment.
4. Incomplete or false statements of assets
In judicial or administrative enforcement proceedings, it is an offence to submit an incomplete or untruthful statement of property or assets where this delays, hinders or prevents satisfaction of the creditor.
The statement is incomplete, in particular, where the judgment debtor uses or enjoys assets formally belonging to third parties and does not sufficiently explain the right that allows it to use them or the terms of that use.
The duty to disclose extends to the property and rights that can cover the enforcement, including relevant charges and encumbrances. In a business context, the information must be especially rigorous where enforcement is directed against a company and the request must be answered by its directors or representatives.
5. Failure to submit a statement of assets
An offence is also committed where the debtor, having been required to do so, fails to provide any statement of property or assets.
The absence of attachable assets does not allow the request to be ignored. If the judgment debtor lacks sufficient assets, it must state this fully and truthfully, with the necessary explanations. Failure to respond may in itself be criminally relevant.
The offence will not be prosecuted if, before the authority or official discovers that the statement was false or incomplete, the offender comes forward and submits a truthful and complete statement.
6. Unauthorised use of attached property
Art. 258 bis punishes anyone who, without authorisation, uses property attached by a public authority that has been placed in custody. This may affect, for example, a person in charge of a company who, although a machine, vehicle or other asset has been placed in custody, uses it, hands it over to another person or moves it without authorisation.
The property need not disappear for criminal liability to arise. What matters is that property held in public custody is used without authorisation.
This form is punishable by imprisonment of three to six months or a fine of six to twenty-four months (day-fine system), unless the facts are punishable by a more serious penalty under another criminal provision.
What is the penalty for concealment of assets from creditors?
Concealment of assets and the main forms in Art. 257 are punishable by:
Imprisonment of one to four years.
A fine of twelve to twenty-four months.
Where the debt being evaded is a public-law debt and the creditor is a public-law legal person, or where pecuniary obligations arising from an offence against the Public Treasury or Social Security are involved, the prison sentence becomes one to six years, with the fine of twelve to twenty-four months remaining unchanged.
The penalty is imposed in its upper half where any of the circumstances in paragraphs 5 or 6 of Art. 250.1 of the Criminal Code applies. These include cases where the value of the fraud exceeds €50,000 or affects a large number of people, and cases involving abuse of personal relationships or of particular business or professional credibility.
The value of the concealed or diverted assets is not necessarily the same as the total amount of the debt. They are different concepts: the debt is the precondition for the conduct, while the assets placed beyond the reach of enforcement make it possible to assess the loss caused by the scheme.
Submitting a false or incomplete statement of assets, or failing to submit one, is punishable by imprisonment of three months to one year or a fine of six to eighteen months.
Can a company be criminally liable for concealment of assets?
Yes. Where the acts are committed in the name or on behalf of a legal person and for its direct or indirect benefit by its directors or representatives, the company may be criminally liable under the corporate criminal liability regime.
The company may also be liable where the acts occur because of a lack of due control over persons subject to the authority of its directors or representatives, on the terms laid down in the Criminal Code.
The penalty for the legal person for the offences in this chapter is a fine of:
Two to five years, if the offence committed by the natural person carries a prison sentence of more than five years.
One to three years, if the penalty for the natural person exceeds two years but not five.
Six months to two years, in all other cases.
In addition, the court may impose other penalties on the legal person, such as dissolution, suspension of activities, closure of premises, a ban on carrying out certain activities, disqualification from obtaining grants or entering into public-sector contracts and judicial administration, always subject to the legal requirements and the seriousness of the case.
The company’s liability does not exclude that of the natural person who ordered, carried out or allowed the transaction. A de facto director may be liable even if not formally registered as a director, if they actually controlled decisions concerning the assets.
Civil liability and effects on assets
Civil liability arising from the offence aims to restore the asset position that existed before the scheme. As a rule, it may include:
Restitution of the concealed or transferred property.
A declaration that the fraudulent transactions are void or ineffective.
Return of diverted sums or assets.
Compensation for additional damage where restitution is not possible.
A criminal conviction does not automatically replace the original debt, nor does it allow the same claim to be recovered twice. The original obligation continues to be claimed under the instrument that gave rise to it and through the corresponding enforcement proceedings.
The purpose of civil liability in criminal proceedings is to recover the assets that were removed, make good the damage caused by the scheme and enable creditors to enforce their right to payment.
The offence may be prosecuted even if insolvency proceedings (concurso de acreedores) are subsequently opened. Where there are insolvency proceedings, any civil liability must be coordinated with them and, where applicable, added to the insolvency estate.
Example in a business context
A company has an overdue debt with a supplier and receives a demand for payment. Before enforcement is sought in court, its director transfers the available funds to another company he controls, sells the company’s vehicles at a price well below market value and fails to respond to the court’s request for information about its assets. If these transactions do not have a genuine business reason and are intended to prevent recovery, they may amount to several forms of frustration of enforcement.
Losses, liquidity difficulties or a delicate business situation do not in themselves make a transaction an offence. The decisive factor is knowing conduct aimed at concealing or reducing the assets available for enforcement, significantly frustrating the creditor’s rights.
Frequently asked questions
Does there have to be a prior attachment for concealment of assets to be committed?
No. The offence is not limited to cases where an attachment already exists: it may also be committed where the debtor, knowing that a claim or enforcement is imminent, strips its assets, conceals assets, fraudulently transfers property or assumes obligations in order to prevent them from being attached.
What is the penalty for concealment of assets from creditors?
Concealment of assets and the main forms in Art. 257 of the Criminal Code are punishable by imprisonment of one to four years and a fine of twelve to twenty-four months. If the debt is a public-law debt and the creditor is a public-law legal person, or the debt arises from an offence against the Public Treasury or Social Security, imprisonment is one to six years.
Is it an offence to sell the assets of a company that has debts?
Not every sale made by a company in debt is an offence. The transaction must be assessed in light of whether it was genuine, its price, its economic justification, where the money went and its effect on enforcement.
Is it an offence not to submit a statement of assets when the court requests it?
Yes, it may be: an offence is committed where the debtor, having been required to do so, fails to provide any statement of property or assets, and it is punishable by imprisonment of three months to one year or a fine of six to eighteen months. If the debtor lacks sufficient assets, it must state this fully and truthfully.