Insolvency fraud, also known as "fraudulent bankruptcy," is a crime aimed at deceiving creditors and avoiding obligations by artificially bankrupting a company. Article 207 of the Criminal Code of Georgia (Causing Insolvency) explicitly prohibits actions by a company manager or founder that intentionally lead to the company's financial collapse. This may include transferring assets without compensation, entering into unprofitable deals, or acknowledging fictitious debts. As a result, the company can no longer pay real debts, while directors try to escape liability. Such charges pose a serious threat to a businessman's reputation and freedom. The defense strategy relies on proving that the bankruptcy was caused by objective economic factors (market changes, exchange rates) and not by the malicious intent of the management.
What does Insolvency Fraud Defense service cover?
Lawyers experienced in bankruptcy law offer:
- Analysis of financial status: Conducting economic expertise to determine what caused the company's financial crisis (objective vs. subjective reasons).
- Defense against Article 207 charges: Presenting evidence that management decisions were within reasonable business risk.
- Negotiation with creditors: Proposing a restructuring plan to avoid the initiation of a criminal case.
- Justifying transactions: Proving that disputed transactions did not serve to embezzle assets.
- Protecting the director's personal assets: Preventing the company's liabilities from extending to the director's personal property (unless fraud is proven).
Common Situations and Scenarios
Legal problems often arise in the following situations:
- Asset stripping: Moving assets to a new company and leaving the old one with debts.
- Fictitious loans: Loading the company with non-existent debts so that real creditors receive nothing.
- Intentional bankruptcy: Signing artificially unprofitable contracts.
- Hiding documentation: "Losing" accounting books to make an audit impossible.
Georgian Legislation and Legal Framework
The main article is Article 207 of the Criminal Code. The Law "On Rehabilitation and Collective Satisfaction of Creditors" applies. The law strictly separates "business failure" from "intentional insolvency." Criminal liability arises only if intent is proven. The lawyer's role is to convince the investigation that the company's collapse was the fault of bad management or the market, not a crime.
Service Delivery Process
The lawyer studies the materials of the insolvency case and financial documentation. If the case is still in civil court, the lawyer tries to achieve a rehabilitation regime. If the case is with the Prosecutor's Office, the focus is on refuting the expert conclusion.
Why choose a specialist on Legal.ge?
Insolvency fraud is a complex category of cases requiring deep knowledge of economics and law. Specialists represented on Legal.ge will help you cope with creditor pressure and legal problems. Protect your rights with professionals.
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