The Taichung Branch of the Taiwan High Court rendered the 104-Shang-Yi-405 Criminal Decision of February 4, 2016 (hereinafter, the “Decision”), holding that when a creditor secures grounds for compulsory enforcement, if the debtor has indeed engaged in any act that sabotages, disposes of or conceals his assets, the offense of impairing the creditor’s rights is constituted.
According to the facts underlying the Decision, the Defendant and the Plaintiff had sued each other in a US court over their investment disputes. The US court subsequently ruled that the Defendant should pay damages to the Plaintiff, who sought compulsory enforcement of such US court decision. The Supreme Court subsequently rendered a partially final decision which allowed the compulsory enforcement of part of such amount in Taiwan with the rest of the decision remanded to the Taichung Branch of the Taiwan High Court. The Defendant subsequently disposed of his assets by withdrawing money from his accounts or wiring the same to his spouse’s accounts and pledging the stocks registered under his name. The Plaintiff subsequently retained a lawyer to request investigation and indictment by prosecutors.
According to the Decision, the offense of impairing the creditor’s rights under Article 356 of the Criminal Code is preconditioned by the debtor’s damaging, disposing of or concealing assets in an attempt to impair the creditor’s rights when the debtor is facing compulsory enforcement. The expression “facing compulsory enforcement” is preconditioned by the grounds of enforcement obtained by the creditor not by the creditor’s application to the court for compulsory enforcement. After grounds of enforcement are obtained by the creditor, the debtor’s assets are likely to be subject to compulsory enforcement. If the debtor who is obviously aware of this while disposing of his assets in an attempt to impair the creditor’s rights, the constituting criteria for such offense are satisfied. In addition, if a debtor’s act results in the creditor’s inability or difficulties in debt recovery, it should be deemed that the creditor’s right is impaired, and this is not limited to circumstances where the debtor becomes financially incapable because of his acts. It was further held in the Decision that since the Defendant, who was subjectively and clearly aware of the imminent compulsory enforcement, still disposed of his assets held in his name and committed this offense, he was sentenced to 8 months imprisonment with two-year probation.