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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Directors and officers of a debtor will be liable for double the value of the property sold, embezzled or disposed of or double the amount of the transaction involved, whichever is higher to be recovered for the benefit of the debtor and the creditors, if they willfully commit the following acts:
- Dispose or cause to be disposed of any property of the debtor other than in the ordinary course of business, or authorize or approve any transaction in fraud of creditors or in a manner grossly disadvantageous to the debtor and/or creditor
- Conceal or authorize or approve the concealment, from the creditors, or embezzle or misappropriate, any property of the debtor
(Section 10, Financial Rehabilitation and Insolvency Act (FRIA) of 2010)
The law says –
Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship, Partners in a Partnership, or Directors and Officers. – Individual debtor, owner of a sole proprietorship, partners in a partnership, or directors and officers of a debtor shall be liable for double the value of the property sold, embezzled or disposed of or double the amount of the transaction involved, whichever is higher to be recovered for benefit of the debtor and the creditors, if they, having notice of the commencement of the proceedings, or having reason to believe that proceedings are about to be commenced, or in contemplation of the proceedings, willfully commit the following acts:
(a) Dispose or cause to be disposed of any property of the debtor other than in the ordinary course of business or authorize or approve any transaction in fraud of creditors or in a manner grossly disadvantageous to the debtor and/or creditors; or
(b) Conceal or authorize or approve the concealment, from the creditors, or embezzles or misappropriates, any property of the debtor.
The court shall determine the extent of the liability of an owner, partner, director or officer under this section. In this connection, in case of partnerships and corporations, the court shall consider the amount of the shareholding or partnership or equity interest of such partner, director or officer, the degree of control of such partner, director or officer over the debtor, and the extent of the involvement of such partner, director or debtor in the actual management of the operations of the debtor.
Criminal liability may also result if it is shown that this prohibition was knowingly violated.(Section 10, Financial Rehabilitation and Insolvency Act (FRIA) of 2010)
Read also: WHAT IS OPTION TRADING?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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