Criminal defense lawyers in cases involving allegations of preferential treatment of creditors and debtors

Criminal investigations for preferential treatment of creditors and debtors – When asset transfers are subject to criminal review

Anyone who favors one creditor or misappropriates another's assets during a crisis can quickly face charges of preferential treatment of creditors (§ 283c of the German Criminal Code) or preferential treatment of debtors (§ 283d of the German Criminal Code) – often in an already precarious financial situation. § 283c of the German Criminal Code is directed against the debtor themselves. § 283d of the German Criminal Code, on the other hand, covers third parties who, with the debtor's consent or for their benefit, misappropriate, conceal, or destroy, damage, or render unusable assets belonging to the insolvency estate in an economically inexplicable manner that contradicts the principles of sound business practice.

Allegations of preferential treatment of creditors and debtors are also frequently part of a larger set of proceedings. It is not uncommon for investigations to also be conducted in this context regarding other charges, such as bankruptcy (§ 283 of the German Criminal Code), breach of accounting obligations (§ 283b of the German Criminal Code), breach of trust (§ 266 of the German Criminal Code), or fraud (§ 263 of the German Criminal Code).

As a law firm specializing in white-collar crime, our lawyers at Galen Rechtsanwälte defend clients nationwide in insolvency criminal proceedings – with forensic experience also in complex proceedings and corporate crises.

Feel free to contact us and arrange an appointment with Galen Lawyers.

Creditors and Preferential treatment of debtors – protection of the insolvency estate

• Sections 283c and 283d of the German Criminal Code (StGB) protect the equal satisfaction of all creditors and thus the debtor's assets. The legislator aims to prevent assets that would form part of the insolvency estate in the event of insolvency proceedings from being concealed from creditors. These provisions are intended to safeguard confidence in insolvency proceedings and the principle of equal treatment of creditors. Attempted violations are also punishable in both cases.

When is preferential treatment of creditors a criminal offense? – Requirements according to § 283c of the German Criminal Code

Anyone who favors individual creditors at the expense of others shortly before or during insolvency proceedings may be liable to prosecution for preferential treatment of creditors. Unlike preferential treatment of debtors, this offense is directed exclusively against the debtor himself. 

It is a criminal offense to grant a creditor security or satisfaction that the creditor could not demand at the relevant time, or not in that form. Typical examples from practice:

• A creditor receives a payment shortly before insolvency, even though his claim was not yet due.
• A supplier subsequently receives security (e.g. a mortgage or guarantee) for an already existing, unsecured claim.
• One creditor is fully satisfied, while others go away empty-handed.

Congruent performances – that is, those to which the creditor had a due and enforceable claim – are generally not covered by Section 283c of the German Criminal Code. However, the distinction between congruent and incongruent performance is often unclear in practice and offers important avenues for defense.

The perpetrator can only be the debtor. However, third parties who participate in the preferential treatment can be criminally liable as instigators or accomplices. The favored creditor is generally not criminally liable under Section 283c of the German Criminal Code (StGB) simply by accepting a benefit.

The debtor must be certain of their impending insolvency (direct intent). Conditional intent is insufficient in this respect – often a key defense argument. Furthermore, Section 283c of the German Criminal Code (StGB) – like Section 283 StGB (bankruptcy) and Section 283d StGB (preferential treatment of debtors) – is only fulfilled if one of the following objective conditions of criminal liability is met:

• The debtor has stopped making payments.,
• the insolvency proceedings were opened or
• An application to open proceedings was rejected due to lack of assets. 

This condition must be examined independently of intent and can be decisive in individual cases as to whether criminal liability is even a possibility.

When is preferential treatment of debtors a criminal offense? – Requirements according to § 283d of the German Criminal Code

Anyone who, as a third party, helps to shield the assets of a debtor at risk of insolvency from creditors can be prosecuted for preferential treatment of the debtor. In principle, any external person can be a perpetrator – for example, relatives, employees, or business partners of the debtor. The debtor himself is not a suitable perpetrator under Section 283d of the German Criminal Code (StGB); however, he may be liable under Section 283 of the StGB (bankruptcy).

The law covers four possible courses of action:

• RemoveAssets are relocated or legally reassigned – for example, through transfer of ownership, assignment, pledging, or relocation abroad.
• ConcealAssets are concealed from the knowledge of creditors or the insolvency administrator – for example, through false statements or deliberate concealment.
• Destroy, damage, or render unusableThese variants are only criminally relevant if they are carried out in a manner that contradicts the requirements of a proper economy – such as the destruction of stocks or the manipulation of machines without objective justification.

The crucial point is always: the action must either be carried out with the consent of the debtor or in his favor. 

Only assets that would form part of the insolvency estate in the event of bankruptcy are covered. Whether an item belongs to the debtor or is legally attributable to a third party – for example, due to retention of title, security assignment, or rights of segregation – must be carefully examined. This is precisely where important defense strategies arise in practice, as the criminal assessment depends on complex preliminary questions of civil law.

The law distinguishes between two variants, with different requirements regarding intent: 

• Option 1: The perpetrator acts with certain knowledge of the debtor's impending insolvency. Here, the law requires certain knowledge in the sense of direct intent – mere suspicion or consideration of possibility is insufficient. This can be an important point for the defense. However, with regard to the other elements of the offense – such as the debtor's consent or benefit to the debtor – conditional intent suffices.
• Option 2: The act occurs after a cessation of payments or during ongoing insolvency or opening proceedings. In this case, conditional intent is sufficient.

Preferential treatment of debtors is only punishable if one of the following objective conditions of criminal liability is met: 

• The debtor has stopped making payments., 
• Insolvency proceedings were opened against his assets or
• An application to open proceedings was rejected due to lack of assets.

This requirement must be examined independently of intent and can be decisive in individual cases as to whether criminal liability is even a consideration.

How are preferential treatment of creditors and debtors detected?

Investigations into allegations of preferential treatment of creditors and debtors are typically initiated in the context of insolvency proceedings. Common triggers include notifications from the insolvency court, information from the insolvency administrator, criminal complaints from creditors, or even tips from employees (whistleblowers).

In these proceedings, the public prosecutor's office regularly deploys specialized economic crime investigation units. Typical investigative measures include account and payment flow analyses, evaluation of emails and messenger communications, and witness interviews within the company. Searches and seizures at the suspect's premises, at the company, or at the premises of third parties (Sections 102, 103 of the Code of Criminal Procedure) are primarily considered when documents or digital data are deemed relevant as evidence.

ImportantIf you learn of a search or investigation, you should seek legal advice immediately – before making any statements to investigating authorities.

Penalties for preferential treatment of creditors and debtors – imprisonment, especially serious cases and confiscation

Preferential treatment of creditors (§ 283c StGB): The basic offense provides for imprisonment of up to two years or a fine. 

Preferential treatment of debtors: The basic offense (§ 283d para. 1 of the German Criminal Code) provides for imprisonment of up to five years or a fine. In particularly serious cases (§ 283d para. 3 of the German Criminal Code), imprisonment of six months to ten years is possible. Typical examples include acts motivated by greed or when many people are knowingly placed at risk of financial loss or economic hardship. Whether a particularly serious case exists must be examined on a case-by-case basis; the typical examples mentioned in the law are not exhaustive.

In addition to the main penalty, the following secondary consequences should be considered:

• Confiscation (§§ 73 ff. StGB) – also provisional asset protection by arrest (§ 111e StPO)
• Inability – i.e., the loss of suitability to assume managing director or board positions (Section 6 Paragraph 2 GmbHG, Section 76 Paragraph 3 AktG)
• professional consequences (e.g. for tax advisors, auditors or lawyers)
• Professional disqualification (§ 70 StGB)
• Corporate liability risks and resulting conflicts for company executives 

The economic and professional consequences of an investigation can be significant even before a conviction – early criminal defense is therefore crucial.

We support you in cases involving allegations of preferential treatment of creditors or debtors – Galen Lawyers 

The lawyers at Galen Rechtsanwälte advise and defend clients nationwide in proceedings related to white-collar crime and insolvency law. We have forensic experience in complex white-collar crime cases and in supporting companies and their governing bodies in crisis situations.

We pursue an early, structured, and discreet approach. We clarify the initial situation, request access to the files, and analyze the public prosecutor's investigative approaches and the evidence.

Key points of the defense are often:

• Examination to determine whether insolvency actually existed – and from what point in time
• Reconstruction of the liquidity situation and the maturity structure, including deferrals, installment agreements and the question of whether receivables were actually due and enforceable.
• Evaluation of restructuring and continuation attempts: Was a reliable continuation forecast available, was financing secured, were assumptions documented?
• Classification of the subjective accusation: Are there reliable indications of intent?
• Integration of parallel proceedings and risks, in particular possible confiscation or attachment measures, professional consequences, liability issues pursuant to Section 15b of the German Insolvency Code (InsO), possibly in coordination with colleagues from other disciplines.

What you should do immediately if you learn of an accusation:

Exercise your right to remain silent immediately. Do not make any statements about the matter without first consulting a lawyer! Seek legal counsel immediately to protect your rights. Ill-considered statements – to authorities or in professional settings – can significantly complicate your defense later on. 

We advise you on your decision regarding testimony and how to deal with investigating authorities, and we accompany you during searches and interrogations. Our goal is a legally sound defense that considers evidentiary issues, procedural rights, and economic consequences equally.

Have you received a summons or a summons for a hearing, or is your company in crisis? Feel free to contact us to schedule an appointment.