Commonly known as “accounting fraud”, clinic Article 290 of the Spanish Criminal Code imposes a penalty of one to three years imprisonment and a fine of six to twelve months on de jure or de facto directors of an incorporated company or one that is in process of incorporation, try who falsify the annual accounts or other documents that should reflect the legal or financial status of the company, in such a way as to cause financial harm to it, any of its partners or a third party.
“De jure directors” in a company mean those that manage it by virtue of a legally valid title and, in general terms, those that are members on the management body. “De facto directors” are all those that, without a valid title, perform duties that involve management of company on its behalf, by adopting and implementing management decisions. Therefore, it is not necessary to have been formally appointed as a director to have committed this offence.
Regarding falsification, the case law of the courts has understood that this refers to any kind of tampering, alteration or simulation of the documents required to keep the accounts. In other words, not only those related to the annual accounts (the balance sheet, profit & loss account and annual report), but also any other document that may reflect the company’s legal or economic situation, such as the management report, the proposed allotment of profits and losses, merger or spin-off plans, reports justifying proposals for statutory changes, prospectus for issuing securities, reports to obtain financing, etc.
It should be noted that the conduct described in Article 290 of the Spanish Criminal Code can be carried out by means of deliberate behaviour (in particular fictitious notes), and through concealment or omission of information that is essential to truthfully and honestly reflect the legal or financial status of the company.
Among these types of conduct, I would like to highlight the following, due to their being very commonplace, merely as examples but not limited thereto:
a. Certifying non-existent general shareholders’ meetings, falsifying the real contents of company resolutions or by stating that the accounts have been unanimously approved, when in fact this is not true.
b. Concealing income in the annual accounts obtained from operating a business on behalf of the company, to the obvious detriment of the other partners.
c. Recording a total value for real estate acquired by the company that is much higher than its real value.
d. Providing accounts that do not reflect the real volume of the billing and income, for the purpose of appropriating most of the income to his/her own benefit.
e. Using the company’s money to his/her own benefit, by increasing the liabilities in the credit account and concealing this fact from the rest of the partners.
f. Falsifying the company’s accounts to his/her own benefit, by making it seem that accounts and profits or losses are different from the real situation, to the detriment to the other partners.
g. Including defects in the annual accounts with the intention of misrepresenting the real status of the company’s equity and financial situation.
h. Failing to provide the information necessary to draw up the accounts to reflect the real equity of the company, since the director holds the position of guarantor: whoever manages the accounts of a company has the legal duty to carry out his/her work with the necessary diligence, which means he/she must be truthful about the information that he/she provides about the company. We should not forget that this offence can also be committed by omission, because concealing or deleting the company’s information is a way of failing to disclose the true facts, in other words, falsification.
As a conclusion, I should also mention the fact that the offence in question requires that the falsification must potentially cause financial harm to the company, a partner or a third party, and that the value judgement about the conduct is only based on the criteria of the judge. If we add to this fact that, in order to commit the type of crime described above, it is not necessary there is any effective financial harm caused, we can conclude that in the end, in many cases, for the decision to be adopted on whether the reported criminal conduct has been committed, the interpretation of “potential” made by the judge can be rather subjective.