in England or Wales may make a receiving order against a debtor, whether a trader or not, either on his own petition or on that of a creditor or creditors whose claims aggregate not less than £50. In the case of a creditor’s petition proof must be given of the debt, and of the commission of an act of bankruptcy within three months preceding the date of the petition. An act of bankruptcy is committed if the debtor fails to satisfy the creditor’s claim upon a bankruptcy notice; if he makes an assignment for the benefit of his creditors generally; if he absconds or keeps house; if he gives notice of suspension of payments; if his goods are sold or seized under execution; if he files in court a declaration of inability to pay his debts; or if he grants a fraudulent preference or conveyance. These acts are here enumerated in the order in which they most frequently occur in practice.
Object and Effect of Receiving Order.—The object of the order is to protect the debtor’s property until the first meeting of creditors, and to bring the debtor and his affairs within the jurisdiction of the court. Its effect is to stay all separate action against the debtor, and to constitute the official receiver attached to the court receiver of the debtor’s property, although the legal title still remains in the debtor. Where there is an estate or business to be managed the official receiver may appoint a special manager, who receives such remuneration as the creditors, or failing them the Board of Trade, may determine. As a consequence of the order the following obligations are imposed upon the debtor:—He must make out and submit to the official receiver within a prescribed period a statement of his affairs, containing the names and addresses of his creditors, the amount of their claims and the securities held by them, and the nature and value of his assets; and accounting for his deficiency. Any material omission or false statement of his losses or expenses is a misdemeanour under the Debtors Act, unless he can prove that he had no intention to defraud. The statement is open to the inspection of creditors. He must also in every case submit to a public examination in court, in which the official receiver, the trustee and any creditor who has proved his debt may take part. His evidence may be used against him. He may further be specially examined by the court at any time with reference to his dealings or property. He must attend the first meeting of creditors, wait upon the official receiver, trustee and special manager, and give all necessary information, and generally do all acts which may reasonably be required of him with the view of securing a full investigation of his affairs. He may be arrested if there is reasonable ground for believing that he is about to abscond, destroy papers or remove goods, or if he fails without good cause to attend any examination ordered by the court. The court may also for a period of three months order his letters to be re-addressed by the post-office to the official receiver or trustee. With regard to persons other than the debtor, any person capable of giving information respecting the debtor, his dealings or property, may be examined by the court, and a summary order may be made against such person for delivery of any property belonging to the debtor.
First Meeting of Creditors.
This meeting is summoned by the official receiver, notice being given in the London Gazette and in a local paper, and sent by post to each creditor. A summary of the statement of affairs should accompany the notice, with any observations by the official receiver which he may think fit to make. The object of the meeting is to decide whether any proposal for payment of a composition or for a scheme of arrangement submitted by the debtor is to be entertained, or whether an application should be made to the court to adjudicate the debtor bankrupt. In the latter case the meeting may by an ordinary resolution appoint a trustee with or without a committee of inspection. It may also give any directions as to the administration of the estate. The meeting should be held at the place most convenient for the majority of the creditors. It is presided over by the official receiver or his deputy, who, subject to appeal to the court, admits or rejects proofs for the purpose of voting. For the transaction of business three creditors qualified to vote, or all the creditors if fewer than three, must be present or represented. Only persons who have proved their debts are entitled to vote, and detailed regulations respecting proofs and the valuation of securities are laid down in the first and second schedules to the act of 1883. One of the chief alterations in the law on this point is the condition imposed on creditors on bills of exchange to deduct from their claims the value of the liability of prior obligants before voting, thus cancelling the power of controlling the proceedings previously possessed by persons who had no real interest in the estate. Votes may be given in person or by proxy, and stringent regulations are laid down with the view of preventing the abuse of proxies. General proxies entitling the holder to exercise all the powers which the creditor could exercise if present may be given to the official receiver or to any person in the regular employment of the creditor. Special proxies may be given to any person to vote for specified resolutions, or for the appointment of specified persons as trustee and committee. Only official forms can be used, and the blanks must be filled up in the handwriting of the creditor or some person in his regular employment, including the authorized agent of a creditor resident abroad. A proxy must be lodged with the official receiver not later than four o’clock on the day before the meeting or adjourned meeting at which it is to be used. Resolutions are ordinary, special or extraordinary. An ordinary resolution is carried by a majority in value of the creditors voting; a special resolution by a majority in number and three-fourths in value of such creditors. The only instance of a resolution other than these is that required for the approval of a composition or scheme which requires a majority in number and three-fourths in value of all the creditors who have proved. The majority of questions arising at a meeting are decided by an ordinary resolution.
Adjudication.
If the creditors so resolve, or if a composition or scheme of arrangement is not proposed by the debtor or entertained by the creditors, or if entertained is not approved by the court, or if without reasonable excuse the debtor fails to furnish a proper statement of his affairs, or if his public examination is adjourned sine die, the court adjudicates the debtor bankrupt and thereupon his property vests in a trustee, and, subject to the payment of the costs and fees of administration, is divisible among his creditors until all his debts are paid in full with interest at the rate of 4% per annum.
Effect on Bankrupt.—The bankrupt is bound to aid the trustee in his administration, and if he wilfully fails to deliver up any part of his property he is guilty of contempt of court. He is also liable to criminal prosecution under the Debtors Act if with intent to defraud he conceals or removes property to the value of £10 or upwards; or if he fails to deliver to the trustee all his property, books, documents, &c.; or if he knowingly permits false debts to be proved on his estate without disclosure; or mutilates, falsifies, destroys or parts with books or accounts; or attempts to account for his property by fictitious losses; or if within four months next before presentation of a bankruptcy petition, he obtains property on credit by false representation; or pledges or disposes of, otherwise than in the ordinary way of his trade, any property which has not been paid for; or by misrepresentation obtains the assent of his creditors to any agreement with reference to his affairs. He is also under the act of 1883, guilty of misdemeanour if before his discharge he obtains credit for more than £20 from any person without informing such person that he is an undischarged bankrupt. It is the duty of the official receiver to report any such facts to the court, and if the court is satisfied that there is a reasonable probability of conviction, it is required to order a prosecution which is then conducted by the director of public prosecutions.
Disqualifications.—A bankrupt cannot during his bankruptcy or until five years after his discharge, unless the bankruptcy is annulled or he obtains his discharge with a certificate by the court that the bankruptcy was caused by misfortune without misconduct, act as a member of the legislature, or as a justice of the peace, mayor, alderman, councillor, guardian or overseer of the poor, member of a sanitary authority, school, highway or burial board, or select vestry in any part of the United Kingdom.
Annulment.—An order of adjudication may be annulled if the court is of opinion that it should not have been made, or that the bankrupt’s debts are paid in full, or if a composition or scheme of arrangement is approved by the court after adjudication.
Discharge.—The court may also at any time after the conclusion of the bankrupt’s public examination, and after hearing the official receiver, the trustee and any creditor, to all of whom previous notice of the application must be given, grant the bankrupt a discharge either absolutely or under conditions, but subject to the following qualifications, viz.:—(1) If the bankrupt has committed a criminal offence connected with the bankruptcy, the application must be refused unless for special reasons the court determines otherwise. (2) If the assets are not equal in value to ten shillings in the pound of the unsecured liabilities (unless the bankrupt can show that he is not responsible); or if proper books have not been kept; or if the bankrupt has traded after knowledge of insolvency; or has contracted debts without reasonable probability of payment; or failed to account for his deficiency; or contributed to the bankruptcy by rash speculation, gambling, culpable neglect or by unjustifiable expenses; or has taken or defended legal proceedings on frivolous grounds; or has within three months preceding the receiving order given an undue preference; or has increased his liabilities with the view of making his assets equal to ten shillings in the pound; or has previously been bankrupt or made an arrangement with creditors; or has been guilty of any fraud or fraudulent breach of trust; then the court shall, on proof of any of these facts, either (a) refuse the discharge, or (b) suspend it for a period of not less than two years, or until a dividend of not less than ten shillings in the pound has been paid; or (c) qualify the order by the condition that judgment is entered up against the bankrupt for payment of any unpaid balance of his debts, or of part of such balance out of his future earnings or property. The bankrupt may, however, after two years apply to the court to modify the conditions if he is unable to comply with them. An order of discharge releases the debtor from all his obligations except debts due to the crown, and other obligations of a public character which can only be discharged with the consent of the Treasury, debts incurred by fraud, and judgment debts in an action for seduction or as a co-respondent in a matrimonial suit or under an affiliation order, which are only released to such extent and subject to such conditions as the court may expressly order. The release of the bankrupt does not operate as a release
