INTRODUCTION AND BRIEF DESCRIPTION
The Criminal Code of Canada section 397(2) states that anyone who is knowingly involved in an offense with the intent to defraud their creditors can be sentenced to up to five years in prison.
SECTION WORDING
397(2) Every one who, with intent to defraud his creditors, is privy to the commission of an offence under subsection (1) is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years.
EXPLANATION
Section 397(2) of the Criminal Code of Canada is a provision that criminalizes the act of being privy to the commission of an offence under subsection (1) with the intent to defraud creditors. Subsection (1) outlines the offence of concealing, removing, or disposing of property with the intent to defeat, hinder, or delay a creditor. In essence, this provision means that anyone who helps or encourages someone to commit the offence under subsection (1) in order to defraud their creditors can be found guilty of an indictable offence and face imprisonment for up to five years. The intention to defraud creditors is a crucial element of this offence, meaning that if the person committing the offence had no intention to defraud their creditors, this provision does not apply. The provision is aimed at preventing individuals from hiding or disposing of assets, particularly those that may be necessary for repayment of their outstanding debts. By criminalizing those who assist in such actions, the law seeks to deter individuals from engaging in fraudulent conduct that would negatively impact their creditors. Overall, Section 397(2) serves as a reminder that fraudulent behaviour related to debt and creditor obligations will not be tolerated by the law, and those who engage in such conduct will be held accountable.
COMMENTARY
Section 397(2) of the Criminal Code of Canada deals with the serious crime of fraudulently transferring property in order to avoid paying outstanding debts to creditors. The section criminalizes the actions of those who actively participate in such acts with the intent to defraud their creditors. Those who use deceitful and fraudulent tactics to avoid payment of debt can be charged under this section and can face serious consequences, including long-term imprisonment. The importance and relevance of this section cannot be overstated. Fraudulent transfer of property is a serious issue, and it can have severe consequences for those who are impacted by it. The issue of fraud arises when a debtor, who has outstanding debts, seeks to defraud creditors by transferring property in such a way that the creditors cannot enforce their right to payment. This harms the interests of innocent creditors who may have been relying on the repayment of the debts to them. It is in such cases that Section 397(2) of the Criminal Code of Canada plays a crucial role in deterring such fraudsters by punishing them for such frauds. One of the essential elements of this section is intent. It must be proven that the person who transferred the property did it with the intention of defrauding their creditors. This is an essential element of the crime and can be quite challenging to prove. However, given that fraudsters often rely on deceit and dishonesty, it is important to have a section of the Criminal Code of Canada that clearly deals with this issue. In such cases, it is important to rely on the help of legal professionals to gather evidence and prove the intent of the accused individual. Another important aspect of this section is that it makes it clear that those who are "privy" to the commission of an offence under subsection (1) are also guilty of an indictable offence and liable to imprisonment for a term not exceeding five years. This means that anyone who is knowingly involved in the fraudulent transfer of property can be held accountable under this section. By including this provision, the section ensures that those who facilitate the fraudulent transfer of property are also held responsible for their actions. The penalties associated with this section of the Criminal Code of Canada can be severe. Those who are found guilty under this section can face imprisonment for up to five years. This is an indication of the seriousness with which the Canadian legal system views fraudulent transfers of property. Imprisonment can have a significant impact on the life of the individual found guilty. It can affect their ability to work, support their family, and may even damage their reputation and social standing. In conclusion, Section 397(2) of the Criminal Code of Canada is an essential part of Canada's legal system, which seeks to protect the interests of creditors and individuals owed money. It underscores the serious nature of fraudulent transfer of property and the need for severe consequences for those involved in such activities. The section helps to ensure that all parties are treated fairly and that justice is served in cases of fraudulent transfers of property.
STRATEGY
Section 397(2) of the Criminal Code of Canada deals with the actions of individuals who intend to defraud their creditors by being privy to the commission of an offence under subsection (1). This subsection addresses offenses that involve disposing of property with the intent to defraud a creditor. For example, if an individual who is facing bankruptcy sells off their assets to an accomplice at a significantly lower price than their actual value, they would be committing an offense under subsection (1). When faced with a situation where Section 397(2) may come into play, several strategic considerations need to be taken into account to avoid any legal troubles. Some strategies that could be employed are: 1. Hire an attorney: To begin with, it is always wise to hire an attorney to deal with any legal issues related to subsection (2) of Section 397. This way, they can offer legal guidance on the best course of action to take, such as how to defend yourself in court. 2. Collaborate with creditors: When facing the possibility of bankruptcy, it is essential to collaborate with creditors rather than try to defraud them. By working with creditors, one can negotiate payment plans, payment extensions, or even debt settlements that would prevent any legal actions being taken against them. 3. Avoid selling off assets without reason: One of the most important strategic considerations one should make when dealing with Section 397(2) is to avoid selling off assets without a reason. It is essential to demonstrate that any assets sold were done for valid business or financial reasons and not solely to defraud creditors. 4. Gather and document evidence: It is essential to gather and document evidence (emails, texts, receipts, or any other information) that support your case, such as valid reasons for selling assets, negotiations with creditors, and proof of any payments made. 5. Be truthful and cooperative: When dealing with creditors or in a court case, it is crucial to be truthful and cooperative to avoid further legal troubles. Lying or being uncooperative can potentially lead to more significant repercussions. In conclusion, Section 397(2) of the Criminal Code of Canada is a serious offense that should not be taken lightly. Therefore, it is essential to carefully consider strategies that could be employed when dealing with it. Some of the strategies that can be implemented include hiring an attorney, collaborating with creditors, avoiding selling off assets without reason, gathering and documenting evidence, and being truthful and cooperative. By taking these proactive measures, one can avoid any legal actions being taken against them and maintain a good relationship with their creditors.