A record 4983 bankruptcies were declared in the first half of 2013. Bankruptcy often means a personal tragedy for those directly involved, but also for employees, creditors, lenders and consumers.

The government also suffers because often no taxes were paid or social security contributions were not made by the bankrupt.

There are also financial consequences when the State has to step in financially to prop up legal entities (such as banks and housing associations) whose demise must be prevented in the public interest. Bankruptcies have a disruptive effect on the economy and contribute significantly to (the continuation of) the crisis and austerity measures. Tackling bankruptcy fraudsters has thus become a spearhead of the government. However, fraudsters are difficult to punish with current legislation. Evidence that the bankrupt deliberately disadvantaged creditors in anticipation of bankruptcy is often hard to find. Fraudsters have usually (deliberately) left incriminating documents out of the records. Under current law, however, keeping disorderly records does not yet lead to criminal liability.

The new bill seeks to change this on the basis that incomplete records can always adversely affect the rights of creditors.Failure to comply with record-keeping and record-keeping obligations will be made a criminal offence and threatened with imprisonment. Regardless of whether the company actually goes bankrupt and/or creditors are deliberately disadvantaged and regardless of whether the disadvantage is irreparable. Making completely unreasonable expenses or making extremely risky investments prior to bankruptcy will also be criminalised.

The above is therefore all the more reason for entrepreneurs to have their records in order. At the same time, the government will still have a tough job in attracting enough investigators with the necessary financial-economic expertise to effectively combat bankruptcy fraud.

Mr D.M. Penn