Actio Pauliana

Actio Pauliana: protection against the detriment of creditors

When a debtor siphons off assets shortly before bankruptcy or acts preferentially towards a specific creditor, other creditors may be harmed as a result. The Actio Pauliana is a legal instrument to reverse such actions. This can occur both outside bankruptcy by an individual creditor and within bankruptcy by the trustee. 

Outside bankruptcy: protection of individual creditors 

Even in the absence of bankruptcy, a creditor can contest a detrimental legal action by invoking its annulment. This is regulated in Article 3:45 of the Dutch Civil Code. Conditions include: 

• It concerns a non-obligatory legal action (there was no enforceable obligation for that legal action); 
• The creditor is actually harmed; 
• The debtor knew or should have known that this action would lead to detriment. 

For example: a debtor gifts goods to an acquaintance while there are still outstanding debts. In such a case, the legal action can be successfully annulled. 

Within bankruptcy: exclusive for the trustee 

After declaration of bankruptcy, only the trustee is authorized to invoke the bankruptcy Actio Pauliana. There are two forms: 

1. Annulment of non-obligatory legal actions 

The trustee can annul legal actions that: 

• Were performed prior to the declaration of bankruptcy; 
• Were not mandatory and could therefore not be enforced by the other party; 
• Harmed other creditors, while the debtor knew (or should have known). 

If the transaction was carried out within one year prior to bankruptcy with an affiliated party or without consideration, the burden of proof is reversed and knowledge of detriment is presumed, unless proven otherwise.

     2. Annulment of mandatory legal actions 

This concerns actions that were legally enforceable, such as paying outstanding invoices. These can only be annulled under exceptional circumstances: 

• The payment was made after bankruptcy had already been requested; or 
• The payment resulted from negotiations aimed at preferring one creditor over others. 

Practical advice on fraudulent actions 

Are you a creditor and fear that you have been harmed? Or are you involved in a transaction that might be contested by a future trustee? We assist you with: 

• Assessing risks in transactions in distress; 
• Initiating a claim under the Actio Pauliana; 
• Defending against claims from a trustee; 
• Strategic actions in the lead-up to bankruptcy. 

Would you like to know more about this? Please contact our specialists for targeted legal advice.