(Article drafted by Georgios Gkoutsidis, Senior Associate and Dimitris Chatzimichael, Partner for Lexology on March 5, 2026)
1. Legislative background and scope of article 198A
Article 178 of Law 5259/2025, published in the Government Gazette on 12.12.2025, added Article 198A to Law 4738/2020 (Debt Settlement and Provision of a Second Chance and Other Provisions, otherwise the “Bankruptcy Code” or, in contrast to the previous regime, the “Insolvency Code”), which concerns the regulation of certain criminal implications of bankruptcy proceedings.
The above Article is a specific arrangement, according to which the suspension, as a matter of principle, and the extinction of criminal liability in cases of bankruptcy are provided for with regard to criminal prosecutions for the offences of Article 25 of Law 1882/1990 (debts to the State) and paragraphs 1, 2 and 7 of Article 1 of Compulsory Law 86/1967 (debts to social security institutions – EFKA). The adoption of Article 198A is deemed necessary on legal-policy grounds, since it has already been held by the Supreme Court that the discharge of the debtor, when the conditions of Articles 192 to 195 are met, does not entail the criminal absolution.
This regulation has substantive and procedural law implications, while at the same time it extends to the execution of sentences that have already been imposed and covers sentences that are being served or are about to be served. Therefore, it constitutes an exception which, in fact, concerns a limited and exclusive number of criminal offences.
2. Mechanism of suspension and extinction of criminal liabilit
In particular, the mechanism for protecting the debtor against criminal proceedings for the offences referred to in Article 198A unfolds in successive stages, which are directly linked to distinct milestones in the bankruptcy proceedings, each with different legal consequences. With the publication of the bankruptcy decision or the registration of the debtor in the Electronic Solvency Register in the event of lack of estate, the criminal prosecution is suspended and the execution of any penalty imposed is suspended. Subsequently, if the debtor is discharged after one (1) or three (3) years respectively, criminal liability is extinguished, while any serving of the sentence is interrupted with res judicata force. As a counterbalance to the above, an equally timed suspension and extension of the statute of limitations period by one (1) additional year is explicitly provided.
3. Relation to the reorganization procedure and legislative inconsistencies
The possibility of suspending and ultimately extinguishing criminal liability for the relevant offences is not without precedent in the existing provisions of the Insolvency Code. Already in the context of the reorganization procedure, and in accordance with Articles 60 and 61 of the Insolvency Code, it was expressly stated that criminal prosecutions for the above offences are suspended and subsequently extinguished. However, in the above reorganization process, the protection of the debtor also includes the offence of issuing a dishonored cheque (Article 79 of Law 5960/1933), an option which is absent from Article 198A. With Articles 60 and 61 and with the newly established Article 198A of the Insolvency Code, the principle of autonomy between civil and criminal liability for bankruptcy debts is bent. However, there do not appear to be any apparent reasons justifying the exclusion of the offence of issuing a dishonored cheque.
4. Persistence of criminalization of civil debts
With the enactment of Article 198A, the question resurfaces of the rationale underlying the persistence in the criminal prosecution of private debts covered by insolvency proceedings. Apart from the above, there are still existing and universally applicable legal provisions for the criminal prosecution of civil debts, such as non-payment of wages (Article 156 of Presidential Decree 62/2025) and Article 1 of Legislative Decree 3424/1955 “on the liability of buyers of agricultural products”, which often arise in bankruptcy and reorganization proceedings and are not affected in any way or included in any exceptional provisions that lead to criminal relief. In such cases, the debtor, in the position of the defendant, must rely on general principles of criminal law, such as lack of culpability, state of necessity or invoking the status of bankruptcy among other mitigating circumstances. Whether this legislative approach coheres with the “second chance” principle or complies with the doctrine of proportionality is a matter to be tested in practice.
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