In brief. Fraudulent bankruptcy — bancarotta fraudolenta — is the most serious insolvency offence in Italian law. It punishes the entrepreneur or company director who, in connection with the firm’s insolvency, dissipates, conceals or misrepresents the company’s assets or accounts to the detriment of creditors. The offence is set out in art. 216 of the Royal Decree 267/1942 (Legge Fallimentare, “L.Fall.”) and, for procedures opened from 15 July 2022, in the parallel provisions of the Codice della crisi d’impresa e dell’insolvenza (D.Lgs. 14/2019), art. 322 (art. 329 for company directors). Convictions carry three to ten years’ imprisonment and disqualification of the director from business and management roles for up to ten years. For foreign directors of Italian companies, the exposure is real and frequently underestimated.

What “fraudulent bankruptcy” means in Italian law

In Italy the criminal liability arising from a business failure is not a single offence but a family of offences keyed to the company’s insolvency. The umbrella term is reati di bancarotta — bankruptcy offences. The most serious branch is bancarotta fraudolenta (fraudulent bankruptcy), distinguished from the lesser bancarotta semplice (simple bankruptcy, art. 217 L.Fall.), which punishes mere imprudence or gross negligence in the conduct of the business.

The historic source is the Legge Fallimentare (R.D. 16 March 1942, no. 267), whose art. 216 remains the reference text for bankruptcies declared, or proceedings opened on petitions filed, before 15 July 2022. From 15 July 2022 the Codice della crisi d’impresa e dell’insolvenza (Code of Business Crisis and Insolvency, D.Lgs. 12 January 2019, no. 14) governs new procedures: the substance of the offence is carried over into artt. 322 and following of the Codice della crisi, with the word fallimento (bankruptcy) replaced by liquidazione giudiziale (judicial liquidation). The conduct punished is, in essence, unchanged.

The two forms: asset-based and documentary

Art. 216 L.Fall. punishes two distinct cores of conduct.

Asset-based fraudulent bankruptcy (bancarotta fraudolenta patrimoniale) covers the director who, before or during insolvency, distracts, conceals, dissimulates, destroys or dissipates company assets, or exposes or recognises non-existent liabilities, to harm creditors. The textbook case is the distrazione di beni — the distraction of assets: company funds, real estate, receivables or going-concern value diverted out of the firm and into the pocket of the director, a relative, or a friendly third company, leaving creditors with an empty shell.

Documentary fraudulent bankruptcy (bancarotta fraudolenta documentale) punishes the director who subtracts, destroys or falsifies the company’s books and accounting records, or keeps them in a way that makes it impossible to reconstruct the assets and the movement of business. Here the harm is not the loss of a specific asset but the opacity deliberately imposed on the firm’s financial history.

A third, separate form — preferential bankruptcy (bancarotta preferenziale, art. 216 para. 3) — punishes payments or guarantees that favour one creditor over the others in breach of the par condicio creditorum (the principle of equal treatment of creditors).

Penalties and automatic consequences

Asset-based and documentary fraudulent bankruptcy are punished with imprisonment from three to ten years (art. 216 para. 1 L.Fall. / art. 322 Codice della crisi). Preferential bankruptcy carries one to five years. The penalty is increased by up to one third for multiple acts and by up to one half where the damage is of significant gravity (art. 219 L.Fall. / art. 326 Codice della crisi).

Beyond the custodial sentence, conviction triggers accessory penalties of striking practical weight under art. 216, last paragraph: disqualification from carrying on a commercial enterprise and incapacity to hold management offices in any company, historically for a fixed term of ten years. The Constitutional Court (judgment 222/2018) struck down the rigid fixed duration, replacing it with a term of up to ten years that the judge must calibrate to the case (criteria later set by the Joint Chambers of the Court of Cassation in judgment 28910/2019) — a development the defence can use.

A precondition runs through the whole structure: there must be a judicial declaration of insolvency (sentenza dichiarativa di fallimento / opening of liquidazione giudiziale). Without that formal declaration, the conduct may amount to other offences but not to bankruptcy. The relationship between the insolvency declaration and the criminal offence — whether it is an element of the offence or an objective condition of punishability — long divided the case law; since Court of Cassation Section V judgment no. 13910/2017 the prevailing view treats it as an objective condition of punishability, so that the limitation period runs from the judgment. The timing of the diversion relative to the firm’s crisis remains fertile ground for defence argument.

Main lines of defence — and the foreign-director angle

Fraudulent bankruptcy cases turn on facts and on causation. The principal lines of defence are these.

No diversion, only a legitimate business transaction. Many distrazione charges rest on intra-group transfers, management fees or related-party transactions that were, on examination, supported by consideration and economic logic. Reconstructing the causa of each transaction — and the value actually received by the company — dismantles the inference of diversion.

Absence of harm to creditors and of dolo. Asset-based fraudulent bankruptcy requires intent (dolo). In documentary bankruptcy, consolidated Court of Cassation case law (Section V) distinguishes two forms: removal, destruction or falsification of the books requires dolo specifico — the specific aim of harming creditors or procuring an unjust profit — while keeping the books so as to make reconstruction impossible requires general intent, i.e. awareness that reconstruction is being prevented, and is not made out by mere disorder in the books. This distinction is decisive for the defence in documentary cases.

Causation and the moment of the crisis. Where the transaction predates and is unconnected to the insolvency, the link between conduct and the creditors’ loss can be severed.

The foreign-director dimension. Directors who are not resident in Italy, who relied on local managers, or who signed in a purely formal capacity are routinely swept into proceedings. Italian law distinguishes the amministratore di diritto (de jure director) from the amministratore di fatto (de facto / shadow director, who actually ran the company). A foreign director named on paper but excluded from real management may have genuine arguments on the attribution of conduct and intent. These cases also raise translation, service-of-process and dual-criminality issues that intersect with our extradition practice. The criminal exposure of company managers in insolvency is developed in our companion guide on directors’ criminal liability in insolvency.

How ILA defends fraudulent bankruptcy cases

The firm builds the defence in parallel with the insolvency proceeding itself, not after it. Three priorities drive the work:

  1. Early forensic reconstruction. We engage forensic accountants from the outset to map every contested transaction, the consideration received and the true date of the company’s crisis — the documentary spine of the defence.
  2. Engagement with the court-appointed officials. The curatore (insolvency trustee) and the report they file to the public prosecutor frequently shape the charges. Constructive, early engagement can narrow the case.
  3. Coordination across borders. For foreign clients we align the Italian criminal defence with home-jurisdiction counsel, manage Interpol and extradition risk, and ensure the client understands the Italian timeline.

FAQ

What is the difference between fraudulent bankruptcy and simple bankruptcy? Fraudulent bankruptcy (art. 216 L.Fall.) requires intentional conduct — distraction or concealment of assets, or falsification of the books — to harm creditors, and is punished with three to ten years. Simple bankruptcy (art. 217 L.Fall., now art. 323 of the Codice della crisi) punishes mere imprudence or gross negligence in running the business and carries six months to two years.

Can a foreign director be prosecuted for fraudulent bankruptcy in Italy? Yes. If they were a director of an Italian company that has been placed in judicial liquidation, foreign nationality is no shield. But a director named only on paper, excluded from real management, may have significant arguments on the attribution of the conduct and the required intent.

Does the new Codice della crisi abolish fraudulent bankruptcy? No. The Codice della crisi (D.Lgs. 14/2019) renames fallimento as liquidazione giudiziale and relocates the offence to artt. 322 and following (in force since 15 July 2022), but the substance of fraudulent bankruptcy is unchanged. The old art. 216 L.Fall. still governs bankruptcies declared, and proceedings opened on petitions filed, before 15 July 2022.

Speak to the firm

If you are a director, shareholder or professional facing a bankruptcy investigation in Italy, the time to act is before the trustee’s report reaches the prosecutor. ILA defends fraudulent bankruptcy and wider insolvency-related criminal exposure for Italian and international clients. Reach us through the Contact page or read more about the firm.