THE BOTTOM LINE
- You Don’t Need the Title to Do the Time: Individuals who control a company’s policy and operations can be held criminally liable as de facto (“shadow”) directors, even without a formal board seat. Exercising ultimate control means you bear ultimate responsibility.
- Asset Transfers Under Scrutiny: Transferring significant funds from a financially distressed company to personal or related entities just before bankruptcy is a classic sign of fraudulent bankruptcy. Courts will disregard justifications like “management fees” if they lack a clear and legitimate commercial basis.
- Bookkeeping is a Legal Shield, Its Absence a Sword: Deliberately failing to maintain proper financial records is a separate criminal offense. It obstructs the work of bankruptcy trustees and signals an intent to conceal wrongdoing, leading to harsher penalties.
THE DETAILS
A Dutch court has sentenced an individual to 18 months in prison for acting as the de facto director of a now-bankrupt tech company and orchestrating the fraudulent transfer of over €723,000 to benefit himself and others. The ruling serves as a stark reminder that courts will look beyond official titles to identify the true decision-makers. The defendant, while not a formal director on paper, was found to be the company’s operational and strategic leader. The court based this on extensive evidence, including testimonies from employees, clients, and formal directors, all of whom identified him as the person in charge. He controlled sales, purchasing, personnel decisions, and, crucially, had access to and made decisions regarding the company’s bank accounts.
The core of the criminal case revolved around a series of payments made from the company to the defendant’s personal holding company and other related parties in the period leading up to its bankruptcy in 2020. The prosecution successfully argued that these transfers constituted fraudulent bankruptcy—the deliberate draining of assets to prejudice creditors. The court determined that the company’s financial distress was evident and the prospect of bankruptcy was foreseeable from at least early 2019. The defendant’s claims that the payments were legitimate “goodwill” or “management fees” were dismissed as they lacked any legal or commercial foundation in the company’s agreements and financial records.
Compounding the fraud, the court also found the defendant guilty of failing to maintain proper company administration. From October 2019, after the company’s accounting software license was revoked for non-payment, bookkeeping effectively ceased. This left the bankruptcy curator unable to reconstruct the company’s financial position or trace its assets and liabilities, thereby severely hindering the bankruptcy process. The court viewed this not as mere negligence but as a deliberate act that supported the fraudulent scheme. In addition to the prison sentence, the defendant was ordered to repay over €711,000 to the bankruptcy estate.
SOURCE
Source: Rechtbank Overijssel
