How do we prove the payment of an investment contract?

Why have some construction companies become bankrupt?
The bankruptcy of a construction company is already a common situation for the Republic of Moldova. An even more usual, but not so public, situation is the finding made in court cases that apartments have not been paid for in full against the background of tenants' claims that everything has been paid for.

The finding made in most cases by the insolvency administrators is that the company itself has not been paid in full or partially for the apartments. Although each prospective owner has at best a valid investment contract concluded, very often they have not made proper payments to the company.

- Receipt issued by director/manager that money has been received;
- Confirmation, with or without signature from the director that there are no debts;
- Release of payment information signed by director/accountant;
- Added entries in contracts, made by hand about missing debt or payment;
- Receipts on the manager's pay slip;
- Quotes from collection provisions;

Buyers claiming the absence of debts and full payment of the price for the apartment also present such entries in many cases.

Unfortunately, if such documents are used, the courts refuse to recognise them as proof of payment, and ordinary consumers who have bought apartments are forced to either give up the apartment or receive a smaller amount of what they can prove they have paid, or worse, to pay the same price a second time.
Supreme Court of Justice decision
"the potential creditors have not submitted any confirmatory evidence proving payment of the amounts claimed on the basis of the investment contracts, only a series of investment contracts having been submitted, without attaching any tax documents"

"The College considers unfounded the appellants' arguments that they have receipts issued by the administrator of the Limited Liability Company confirming the payment of the funds, whereas it would appear from the content of those receipts that the administrator has borrowed a sum of money from the appellants".

"Thus, it does not follow from them that the money was received on the account of the debtor, for the investment contract in the construction of the real estate, but establishes loan relations between two natural persons, which cannot give rise to obligations for the debtor."
It is an excerpt from one of the many court decisions refusing to recognize such payments and qualifying such evidence as documents proving certain payments between the purchasers and the director as a natural person, but not to the construction company.

Is such a position legal?

Therefore, as primary documents, confirming cash payments, only tax bills, issued in accordance with the legislation

The rationale for such a provision derives primarily from the legal provisions which operate with the notion of primary documents, those supporting documents which are required by law for certain types of economic transactions

According to art. 3 para. (1) of the Law on Accounting, a primary document is a documentary confirmation (on paper or in electronic form) that justifies the performance of an economic operation, grants the right to perform it or certifies the occurrence of an event.

According to art. 19 para. (1), (2) and (6) of the Law on Accounting, economic facts are accounted based on primary and centralizing documents. The primary documents are drawn up during the performance of the operation, and if this is impossible - immediately after the operation is performed or after the event has occurred.

The primary documents in case of cash payments, according to the legislation, are the tax bills - expressly provided for in Government Decision no. 474 of 28.04.1998.

Therefore, as primary documents, confirming cash payments, only tax bills, issued in accordance with the legislation in force, or, where appropriate, payment orders, which also constitute the basis for accounting of economic operations of cash collection, can be recognized.

What do we do if the money has been paid but the documents have not been issued?

Will you ask why the person who perhaps unknowingly did not take care of the proper completion of paperwork and confirmation of payments should suffer?

Such a situation is due to the necessary balance between creditors' guarantees and consumers' rights in relation to the same debtor. What guarantee is there that a receipt that the accountant has never seen or a confirmation that has nothing to do with the accounts proves that the money has reached the debtor's accounting?

It is natural that the construction company should be liable for non-performance of contractual obligations, but it is also natural that the director, accountant or other person should be separately liable to the consumer for money received and lost in his/her own pocket. In the latter case, it is not fair that those consumers who have taken care of the proper drafting of the documents should suffer from the increased financial burden on account of the funds that have not reached the company being taken over by persons from the management.

At the beginning of 2018, the Supreme Court of Justice was excluded from examining insolvency cases

At the beginning of 2018, a substantial reform took place in the examination of insolvency cases, where the Supreme Court of Justice was excluded from examining them. In this way, the practice in this field is already determined by the Courts of Appeal, which has been felt, including in the interpretation of the law in terms of proving payment for investment contracts.

Due to the current practice, we have a 180-degree turn of the court's position. In this case, the entire responsibility for the lack of money actually transferred to the construction company is passed on to the company.
As a result, we run the risk that the above-mentioned documents, which can also be drawn up intentionally, through fraudulent agreements between possible buyers who have not paid money and people within the company, will be used as evidence of payment, and these amounts will ultimately be passed on to all creditors, to all future home buyers.

How do we protect our money? How do we protect ourselves from construction company bankruptcy?

With the modernization of the Civil Code, so-called "investment contracts" have been excluded. From March 01, 2019, the law operates with the sale-purchase contract of the property under construction.

As a result, the future owner is the buyer and the construction company is already the seller, the rules are similar to a regular sale-purchase contract.

In this respect, a number of obligations are introduced that would guarantee the rights of the buyer in particular:
- the buyer must be informed of the construction project before the contract is concluded;
- disclosure of the identity of the contractor and other suppliers;
- information about the stage of execution of the construction.

The registration in the real estate register of the contract is maintained and renewed and the seller is prohibited from collecting any payments from the buyer until provisional registration. This ensures that it is impossible to sell the same apartment to more than one person, with small reservations.

How do we protect ourselves concerning payments?

The law is quite detailed in terms of the size of payments and the method of payment, with the introduction of instalment payments:

- 5% of the total price - after provisional registration, but until the completion of the foundation of the building in which the real estate is located;
- 35% of the total price - after completion of the foundation of the building in which the real estate is located;
- 70% of the total price - after the installation of the roof and exterior walls of the building in which the real estate is located;
- 95% of the total price - after the building in which the real estate is located has been put into service;
- 100% of the total price - after the proof of ownership or, if the buyer has made a valid claim concerning the defects of the real estate, after the defects have been removed.

Therefore, the phasing of the payment guarantees that the price cannot be collected in full and the money cannot be used contrary to its intended purpose.
Escrow account

A special aspect is also the introduction of the so-called "escrow account". This means that the parties to the contract can stipulate that all sums paid by the purchaser will be placed in an escrow account, of which the bank is the trustee.

Payments to the seller will be made upon completion of the appropriate stage of the construction work, on the order of the bank signed by both parties, or on the order of the bank by an independent third party designated by the parties by contract.

This method of payment can reduce the phenomenon of the seller collecting the amounts without including them in the accounting.


Probably most of the problems related to the insolvency of construction companies and the fraudulent mass sale of future houses could be excluded by the elementary respect of the way of payment of the funds, not before and only after the proper verification of the documents justifying the proper and legal construction of the object.
Moldova, mun. Chișinău
str. București 31
Moldova, mun. Chișinău
str. București 31