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BANKRUPTCY (from Lat. bancus or Fr. b...
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See also:BANKRUPTCY (from See also:Lat. bancus or Fr. banquet table or See also:counter, and Lat. ruptus, broken) , the status of a debtor who has been declared by judicial See also:process to be unable to pay his debts . Although the terms " See also:bankruptcy ,, See also:Definition . and " insolvency " are sometimes used indiscriminately, they have in legal and commercial usage distinct significations . When a See also:person's See also:financial liabilities are greater than his means of See also:meeting them, he is said to be " insolvent "; but he may nevertheless be able to carry on his business affairs by means of See also:credit, paying old debts by incurring new ones, and he may even, if fortunate, regain a position of solvency without his creditors ever being aware of his true See also:condition . And even when his insolvency becomes public and See also:default occurs, a debtor may still avert bankruptcy if he is able to effect a voluntary arrangement with his creditors . A debtor may thus be insolvent without becoming bankrupt, but he cannot be a bankrupt without being insolvent, for bankruptcy is a legal See also:declaration of his insolvency and operates as a statutory See also:system for the See also:administration of his See also:property, which is thereby taken out of his See also:personal See also:control . In See also:primitive communities bankruptcy systems were unknown . Individual creditors were See also:left to pursue their remedies by such means as the See also:law or practice of the community might See also:sanction, and these were generally of a very me drastic inethty ods . See also:character . Under the See also:Roman law of the Twelve Tables, the creditors might, as a last resort, cut the debtor's See also:body into pieces, each of them taking his proportionate See also:share; and although See also:Blackstone in quoting this law appears to See also:cast some doubt upon its too literal See also:interpretation, there can be no doubt that the See also:power of selling the debtor and his See also:family into See also:slavery was one which was habitually exercised in See also:Greece, See also:Rome, and generally among the nations of antiquity . Even among the See also:Jews, whose legislation was of a comparatively humane character, this practice is illustrated by the Old Testament See also:story of the woman who sought the help of See also:Elisha, saying, " Thy servant my See also:husband is dead . . and the creditor is come to take unto him my two See also:children to be bondmen." The See also:savage severity of these earlier See also:laws was, however, found to be inconsistent with the development of more humane ideas and the growth of popular rights; and tended, as in the See also:case of Greece and Rome, to create serious disturbance in See also:political relations between the See also:patricians, who generally composed the wealthier or creditor class, and the plebeians, in whose ranks the See also:majority of debtors were to be found . Later legislation consequently substituted imprisonment in a public See also:prison for the right of selling the person of the debtor . Under the feudal systems of See also:Europe the See also:state generally insisted on its subjects being left See also:free for military service, and debts could not therefore be enforced against the person of the debtor; but as See also:trade began to develop it was found necessary to provide some means of bringing personal pressure to See also:bear upon debtors for the purpose of compelling them to meet their obligations, and under the practice of the See also:English courts of law the right of a creditor to enforce his claims by the imprisonment of his debtor was gradually evolved (although no See also:express legal enactment to that effect appears at any See also:time to have existed), and this practice continued until comparatively See also:recent times . Without some system of enforcing See also:payment of debts it would have been impossible for the See also:commerce of the See also:world to have attained its See also:present proportions; for See also:modern com- merce is necessarily founded largely on credit, and cO11'" credit could not have existed without the power of See also:objects, enforcing the fulfilment of financial contracts . On the other See also:hand remedies against a debtor's person, and still more against the persons of his family, are not only inconsistent with the growth of See also:opinion among civilized communities, but are in themselves worse than futile, inasmuch as they strike at the See also:root of all personal effort on the See also:part of a debtor to retrieve his position and render a return to solvency impossible . Hence the See also:necessity of devising some system which is just to creditors while not unduly harsh upon debtors, which discriminates between involuntary inability to meet Obligations and wilful refusal or neglect, and which secures to creditors as between themselves an equitable share of such of the debtor's See also:assets as may be available for the payment of his liabilites . These are the objects which the bankruptcy laws have primarily in view . Another See also:object, which has not always been so fully recognized as it might appear to deserve, has marked the most recent legislation, namely, the fostering of a higher See also:tone of commercial morality and the See also:protection of the trading community at large from the evils arising through the reckless abuse of credit and theunnatural trade competition thereby engendered . It must be. admitted that these objects are of a somewhat conflicting character, and wherever the state has interfered with the view of securing an efficient system of bankruptcy legislation the task has been found to be extremely difficult . Not only have the conflicting interests of the debtor and his creditors to be taken into See also:account, but the method to be adopted in dealing with his property has also given rise to much conflict of opinion, and to a lack of uniformity and consistency in the legislation which dealt. with it . The debtor's property was naturally regarded as belonging to the creditors, but it could not be distributed among them until it was realized, and until their respective right and interests were determined by competent authority . In some cases claims to See also:rank as creditors are of doubtful validity . In others the creditor holds securities, the value of which requires investigation, or he claims a preference to which he may or may not be legally entitled .
Creditors have thus conflicting interests as between themselves, and are there-fore incapable of acting together as a homogeneous body
.
Hence the necessity for calling in the aid of professional assignees or trustees, solicitors and other agents, who made it their See also:special business to See also:deal with such matters, exercising both administrative and quasi-judicial functions, in return for the remuneration which they receive out of the property for their services
.
Professional interests, which are not always identical with the interests of the debtor or the creditors, are thus called into existence, and these interests have from time to time exercised a powerful See also:influence in shaping the course of legislation
.
While the law of bankruptcy has therefore been largely the product of commercial development, it has necessarily been of slow and See also:gradual growth, tentative in its character, and subject to oscillation between the extremes of conflicting interests according to the temporary and varying predominance of each of these interests from time to time
.
No intelligible grasp of the principles which underlie the See also:history of bankruptcy legislation in See also:England, and no satisfactory explanation of the fluctuating tendencies which have marked its progress, are possible without bearing these considerations in view
.
Bankruptcy in England
.
The subject was originally dealt with in the See also:sole See also:interest of creditors; iii was considered fraudulent for a debtor to procure
History
.
his own bankruptcy
.
Thus the earliest English See also:statute
on the subject, 34 & 35 See also: Since 1542 about See also:forty acts of See also:parliament have been passed, dealing with the many aspects of the subject, and slowly expanding, modifying and See also:building up the highly complex system of administration which now exists . The courts exercising See also:jurisdiction originally. consisted of commissioners appointed by the lord chancellor . But in 1831 See also:Court of a special court of bankruptcy was established, See also:con-1831. sisting of six commissioners with four See also:judges as a court of See also:review, and See also:official assignees attached to the court for the purpose of getting in the distributing the bankrupt's assets . Non-traders were originally excluded from thebankruptcy court, and a special court called the " court for relief of insolvent debtors " was instituted for their benefit, in which relief from the liability to imprisonment could be.obtained on surrender of their property, but they were not discharged from their debts, subsequently-acquired property remaining liable . Both of these courts were subsequently abolished, non-traders were permitted to obtain the benefit of the bankruptcy laws, including a See also:discharge, and in 1860 the system of official assignees was swept away, and a new court of bankruptcy created with one of the See also:vice-chancellors at its See also:head as See also:chief See also:judge, and a number of subordinate registrars or inferior judges under him . This court has also now been abolished, and the business is administered by a judge of the high court specially appointed for the purpose by the lord chancellor, with registrars of the high court, who deal with the See also:ordinary judicial routine of bankruptcy See also:procedure in ' the See also:London See also:district, while similar duties are performed by the See also:county-court judges throughout the See also:country . But the questions which have proved the most difficult to deal with, and which more than any others have been the cause of fluctuating and inconsistent legislation, have undoubtedly been those See also:relating to the share which the creditors. creditors ought to have in the administration of the proceedings, and to special arrangements effected between a debtor and his creditors under conditions more or less beyond the control of the court . These two questions are largely intermixed, and the history of English legislation on these points and its results throw much See also:light on the causes of the failure of the many attempts which have been made by the most eminent legal authorities to bring the law into a satisfactory condition . The right of creditors to exercise some control in bankruptcy over the realization of the debtor's property through an assignee chosen by themselves was recognized at an See also:early date, but this right was exercised subject to the supervision of the court which investigated the claims of creditors and deter-See also:mined who were entitled to take part in the proceedings .. See also:Pro-See also:vision was also made for the See also:interim protection of the debtor's property by official assignees attached to the court, who took See also:possession until the creditors could be consulted, and under the supervision of the court audited the accounts of the creditor's assignee . So See also:long as this system continued substantial See also:justice was generally secured; the claims of creditors were strictly investigated and only those who clearly proved their right before a competent court were entitled to take part in the proceedings . The bankrupt was released from his obligations, but only after strict inquiries into his conduct and under the exercise of judicial discretion . The accounts of assignees were also strictly investigated, and the See also:costs of solicitors and other agents were taxed by officers of the court . But the system was found to be cumbrous, to See also:lead to delay and too often to the absorption of a large part of the See also:estate in costs, over the incufring' of which there was a very ineffective control . Hence arose a demand for larger See also:powers on the part of creditors, and the introduction into the bankruptcy procedure of the system of " arrangements " between the debtor and his creditors, either for the payment of a See also:composition, or for the See also:liquidation of the estate free from the control of the court . At first these arrangements were carefully guarded . Under the act of 1825 a proposal for payment of a composition might be adopted only after the debtor had passed Ads his examina- 1825of , /831, tion in court, and with the consent of nine-tenths in 1842, 1849. number and value of his creditors assembled at a meeting . Upon such See also:adoption the bankruptcy proceedings were superseded . Dissenting creditors, however, were not See also:bound by the See also:resolution, but could still take See also:action against the debtor's subsequently-acquired property . These powers were not found to be sufficiently elastic and the act failed to give public See also:satisfaction . Attempts were made by the acts of 1831 and 1842 to remedy the defects complained of by a reconstitution of the bankruptcy court and its official system . But these See also:measures also failed because they were based on the See also:assumption that judicial bodies could exercise effective control over administrative action, a control for which they are naturally unsuited, and which they could only carry out by cumbrous and expensive methods of procedure . Under the act of 1849 a totally new principle was introduced by the See also:provision that a See also:deed of arrangement executed by six-sevenths in number and value of the creditors for £10 and upwards should be binding upon all the creditors without any proceedings in or supervision by the court . But the determination of the question who were or were not creditors was practically left to the debtor himself, without any opportunity for testing by See also:independent investigation the claims of those who signed the deed to control the administration of the estate .
It is not difficult to see, in the light of subsequent experience, how likely this provision was to encourage fraudulent arrangements, and to introduce laxity in the administration of debtors' estates
.
A modification of the too stringent conditions of the act of 1825, which would have enabled a bankrupt to pay a composition on his debts, with the consent of a large proportion of his See also:bona-fide creditors, and subject to the approval of the court, after See also:hearing the objections of dissenting creditors, would doubtless have proved a beneficial reform, but the act of 1849 proceeded on a very different principle
.
Instead of reforming, it practically abolished judicial control
.
By avoiding Scylla it See also:fell into Charybdis
.
To give any majority of creditors the power to See also:release a debtor from his obligations to non-assenting creditors without full disclosure of his affairs, and without any exercise of judicial discretion or any investigation into the causes of the failure, or the conduct of the debtor, would in any circumstances have been to introduce a new and mischievous principle into legislation, for it would necessarily destroy the essential feature of such arrangements, that they are voluntary contracts, the responsibility for which lies solely with the parties entering into them
.
But to give such a power to creditors whose claims were subject to no independent investigation was to invite inevitable confusion and failure
.
Yet this was the dominating principle of English bankruptcy legislation for nearly See also:thirty-five years
.
Its effect under the act 1861 of 1849 was, however, to some extent modified by
subsequent decisions of the courts that to make a composition arrangement binding it must he accompanied by a See also:complete cessio bonorum; but this qualification was removed by the act of 1861 which made such arrangements binding without a cessio and reduced the majority required to make a deed of arrangement binding on all the creditors, to a majority in number and three-fourths in value of those whose claims amounted to £10 and upwards
.
The result was an enormous increase in fraudulent arrangements
.
The See also:theft See also:attorney-See also:general, See also:Sir See also:Robert See also:Collier, in introducing an amending act in 1869, described the abuses which had grown up under the 1849 and 1861 acts, as having the effect of enabling a bankrupt to " defraud those to whom he was indebted and to set them at See also:defiance"; while Lord See also:Cairns, the lord chancellor, in the See also:House of Lords expressed the opinion that the large increase which had taken See also:place in the See also:annual insolvency of the country during the preceding years could not " be attributed to depression of trade but must be traced to the enormous facilities which are given to debtors who wish to be released from their debts on easy terms." And yet in the legislation which ensued these facts were entirely ignored or lost sight of
.
It is indeed a curious See also:illustration of the difficulties which have attended bankruptcy legislation in England that the very measure 1869
.
(the act of 1869) which was introduced to remedy this
deplorable condition of affairs, was twelve years after-wards denounced in parliament by the See also:president of the See also:Board of Trade (Mr See also:Joseph See also: Under the act of 1869, the procedure under a bankruptcy See also:petition was certainly rendered effective . Meetings of creditors were presided over and creditors' claims were, for voting purposes, adjudicated upon by the registrar of the court; the bankrupt had to pass a public examination in court, which although chiefly left to the trusteeappointed by the creditors, afforded some opportunity for investigation; and the bankrupt could not obtain his discharge without the approval of the court and in certain circumstances the consent of the creditors . An independent official, the comp-troller in bankruptcy, was appointed, whose See also:duty it was to examine the accounts of trustees, See also:call them to account for any misfeasance, neglect or omission, and refer the See also:matter to the court for the exercise of disciplinary powers where necessary . These provisions were well calculated to promote See also:sound administration, but they were, unfortunately, rendered nugatory by provisions relating to what were practically private arrangements on similar lines to those which had rendered previous legislation ineffective . In some respects the evil was aggravated . Deeds of arrangements were nominally abolished, but under sections 125 and 126 of the act a debtor was empowered to present a petition to the court for liquidation of his affairs by " arrangement," or for payment of a composition, whereupon a meeting of creditors was summoned from a See also:list furnished by the debtor, and without any judicial investigation of claims, a majority in number and three-fourths in value of those who lodged proofs of See also:debt, and who were present in person or by See also:proxy at the meeting, might by resolution agree to liquidation by arrangement or to the See also:acceptance of the composition . Such resolution thereupon became binding upon all the creditors, without any act of approval by the court, any judicial examination of the debtor, or any official supervision over the trustee's accounts . The debtor was not permitted to present a bankruptcy petition against himself, and consequently his only method of procedure was that which thus removed the matter from the supervision and control of the court, and as about nine-tenths of all the proceedings under the act of 1869 were initiated by debtors, it followed that only about one. tenth was submitted to proper investigation . It is true that the creditors might refuse to assent to the debtor's proposal, and that any creditor for 50 or upwards could present a petition in bankruptcy, but even where this course was adopted, the proceedings under the petition were, as a See also:rule, stayed by the court if the debtor subsequently presented a proposal for liquidation or composition, and the creditor was left to pay the expenses of his petition if the requisite majority voted for the debtor's proposal . So far, there-fare, as the act was concerned, every inducement was held out to the adoption of a course which took the examination of the debtor, the conditions of his discharge and the See also:audit of the trustee's accounts, out of the control of the court . The See also:establishment of a bankruptcy court, with its searching powers of investigation and its power of enforcing penalties on .misconduct, can only be defended on the ground that the administration of justice is a matter affecting the fai/ causes:+ue:ft. interests of the community at large . But apart from Acts. the injury done to these interests by reducing the administration of justice to a question of See also:barter and arrangement between the individuals immediately concerned, one of the chief reasons why the acts of 1849, 1861 and 1869 proved failures, lies in the obvious fact that the creditors of a particular estate are not, as appears to have been assumed, a homogeneous or organized body *capable of acting together in the administration of a bankrupt estate . In the case of a few special and highly organized trades it may be otherwise, but in the See also:great majority of cases the creditors have but little knowledge of each other or means of organized action, while they have neither the time nor the inclination to investigate the complicated questions which frequently arise, and which are therefore left in the hands of professional trustees or legal agents . But the See also:appointment of trustees under these acts, instead of being the spontaneous act of the creditors, was frequently due to touting on the part of such agents them-selves, or to individual creditors whose interests were not always identical with those of the general body . According to G . Y . See also:Robson, the author of a See also:standard. See also:work on the subject, the arbitrary powers conferred by the act of 1861 " led to great abuses, and in many cases creditors were forced to accept a composition, the approval of which had been obtained by a See also:secret understanding between the debtor and favoured creditors, and not unfrequently by the creation of fictitious debts." These evils were greatly aggravated by the decisions of the court relating to proofs on bills of See also:exchange, under which it was held that the holder of a current See also:bill could prove on the bankrupt estate of an indorser, although the bill was not yet due, and the acceptor was perfectly solvent and able to meet it at maturity . Thus in large See also:mercantile failures, bankers and other holders of first-class bills could prove and See also:vote on the estates of their customers, for whom the bills had been discounted, and thus control the entire proceedings, although they had no ultimate interest in the estate . But probably the greatest source of the abuses which arose under the act of 1869 was the proxy system established by the act and by the rules which were subsequently made to carry it out . The introduction of proxies was no doubt intended to give absent creditors an opportunity of expressing their opinions upon any question which might arise . But the system was too often used for the purpose of stifling the views of those who took an independent part in the proceedings . The See also:form of proxy prescribed by the rules contained no See also:limitation of the powers of the proxy-holder and no impression of the opinion of the creditor . It simply appointed the person named in it as " my proxy," and these magic words gave the holder power to act in the creditor's name on all questions that might be raised at any time during the bankruptcy . Hence arose a practice of canvassing for proxies, which were readily given under the influence of plausible representations, such as the holding out of the prospect of a large composition, but which, when once obtained, could be used for any purpose whatsoever except the See also:receipt of a See also:dividend . Thus it frequently happened. that the entire proceedings were controlled by professional proxy-holders, in whose hands these documents acquired a marketable value . They were not only used to vote for liquidation by arrangement instead of bankruptcy proceedings, but not infrequently the matter took the form of a bargain between an accountant and a See also:solicitor, under which the former became trustee and the latter the solicitor in the liquidation, without any provision for control over See also:expenditure or for any audit of the accounts . Even where a See also:committee of inspection was appointed to exercise functions of control and audit, they too were often appointed by the proxy-holders, and not infrequently shared in the benefits . On the other hand, where the amount of debts represented by the proxy-holder was insufficient to carry the appointment of a trustee and committee, the votes could be sold to swell the chances of some other See also:candidate . Hence ensued a system of trafficking in these See also:instruments, the cost of which had in the long run to come out of the estate . The result was that undesirable persons were too frequently appointed, whose See also:main object was to See also:extract from the estate as much as possible in the. shape of costs of administration . The debtor was practically powerless to prevent this result . If he attempted to do so he sometimes became a See also:target for the exercise of revenge . His discharge, which under liquidation by arrangement was entirely a matter for the creditors, might be refused indefinitely; and so largely and harshly was this power exercised under the proxy system, especially where it was supposed that the debtor had See also:friends who could be induced to come to his aid, that a special act of parliament was passed in 1887, authorizing the court to deal with cases where, under the act of 1869, a debtor had not been able to obtain a release from his creditors . On the other hand, the complaisant debtor, although he had incurred large obligations in the most reckless manner, often succeeded in stifling investigation and obtaining his release without difficulty as a return for his aid in carrying out the arrangement . The result of such a system could not be other than a failure . After the act of 1869 had been in operation for ten years, the See also:comptroller in bankruptcy reported that out of 13,000 annual failures in England and See also:Wales, there were only l000 cases (or about 8 %o) " to which the more important provisions of the act for preventing abuses by insolvent debtors and professional agents applied; the other 12,000 cases (or 92 %) escaping the provisions which refer to the examination and discharge of bankrupts, and to the accounts, charges and conduct of the agents employed." It is not to be supposed that all the cases in the latter class were marked by the abuses which have been here described . In a large number the proceedings were conducted by agents of high character and See also:standing, and with a due regard to the interests of the creditors . But the facilities for fraudulent and collusive arrangements afforded by the act, and the want of effective control over administration, inevitably tended to See also:lower the morale of the latter, and to throw it into the hands of the less scrupulous members of the profession . The demand for reform, therefore, came from all classes of the business community . No fewer than thirteen bills dealing with the subject were introduced into the House of See also:Commons during the ten years succeeding 1869 . At length in 1879 a memorial, which was authoritatively described as " one of the most influential memorials ever presented to any See also:government," was forwarded to the See also:prime See also:minister by a large body of bankers and merchants in the See also:city of London . The matter was then referred to the president of the Board of Trade (Mr Chamberlain), who made exhaustive inquiries, and in 1881 introduced a measure which, with some amendments, finally became law under the See also:title of the Bankruptcy Act 1883 . Hitherto the question had been dealt with as one of legal procedure ; it was now treated as an act of commercial legislation, the main object of which, while providing by carefully framed regulations for the equitable See also:distribution of a 011883 . Act debtor's assets, was to promote and enforce the prin- ciples of commercial morality in the general interests of the trading community . One of the chief features of the act of 1883 is the separation which it has effected between the judicial and the administrative functions which had previously been exercised by the court, and the See also:transfer of the latter to the Board of Trade as a public See also:department of the state directly responsible to parliament . Under the powers conferred by the act a new department was subsequently created under the title of the bankruptcy department of the Board of Trade, with an officer at its head called the inspector-general in bankruptcy . This department exercises, under the direction of the Board of Trade, a general supervision over all the administrative work arising under the act . It has extensive powers of control over the appointment of trustees, and conducts an audit of their accounts ; and it may, subject to See also:appeal to the court, remove them from See also:office for misconduct, neglect or unfitness . A See also:report upon the proceedings under the act is annually presented to parliament by the Board of Trade, and although the department is practically self-supporting, a nominal vote is each See also:year placed upon the public estimates, thus bringing the administration under See also:direct See also:parliamentary See also:criticism and control . The act also provides for the appointment and removal by the Board of Trade of a body of officers entitled official receivers, with certain prescribed duties having relation both to the conduct of bankrupts and to administration of their estates, including the interim management of the latter until the creditors can be consulted . These officers act in their respective districts under the general authority and directions of the Board of Trade, being also clothed with the status of officers of the courts to which they are attached . While effecting this supervision and control by a public department directly responsible to parliament, the main objects of the measure were to secure—(r) An independent and public investigation of the debtor's conduct; (2) The See also:punishment of commercial misconduct and See also:fraud in the interests of public morality; (3) The See also:summary and inexpensive administration of small estates where the assets do not exceed £300 by the official See also:receiver, unless a majority in number and three-fourths in value of the creditors voting resolve to appoint a trustee ; (4) Full control in other cases by a majority in value, over the appointment of a trustee and a committee of inspection; (5) Strict investigation of proofs of debt, with regulations as to proxies and votes of creditors; (6) An independent audit and general supervision of the proceedings and control of the funds in all cases . Besides amending and consolidating previous bankruptcy legislation, the measure also contains special provisions for the administration under bankruptcy law of the estates of persons dying insolvent (§See also:I25); and for enabling county courts to make administration orders for payment by instalments in lieu of immediate committal to prison, in the case of See also:judgment debtors whose See also:total indebtedness does not exceed £50 (§ 122) . It also provides for the getting in and administration by the Board of Trade of unclaimed dividends and undistributed balances on estates See also:wound up under previous bankruptcy acts (§ 162) . Lastly, it amends the procedure under the Debtors Act of 1869, dealing with criminal offences committed by bankrupts (which, See also:prior to 1869, had been treated as part of the bankruptcy law), by enacting that when the court orders a See also:prosecution of any person for an offence under that act, it shall be the duty of the director of public prosecutions to See also:institute and carry on the prosecution . An amending act, under the title of the Bankruptcy Act 1890 was passed in that year, mainly with the view of supple- menting and strengthening some of the provisions Act of 1890. of the act of 1883, more particularly with regard to the conditions under which a bankrupt should be discharged or schemes of arrangement or composition be approved by the court . It also dealt with a variety of matters of detail which experience had shown to require See also:amendment, with the view of more fully carrying out the intentions of the legislature as embodied in the See also:principal act . These two acts are fo be construed as one and may be cited collectively as the Bankruptcy Acts 1883 and 1890 . They are further supplemented by a large body of general rules made by the lord chancellor with the concurrence of the president of the Board of Trade, which may be added to, revoked or altered from time to time by the same authority . These rules are laid before parliament and have the force of law . Besides these general acts, various measures dealing with special interests connected with bankruptcy procedure have Special from time to time been passed since 1883, the chief of acts. which are as follows, viz., the Bankruptcy Appeals (County Courts) Act 1884; the Preferential Payments in Bankruptcy Act 1888, regulating the priority of the claims of workmen and clerks, &c. for See also:wages and salaries; and the Bankruptcy (Discharge and See also:Closure) Act 1887, dealing with unclosed bankruptcies under previous acts . It would be out of place in this See also:article to See also:attempt to See also:answer the question how far later legislation has solved the difficult problems which prior to 1883 were found so intractable, Inquiry of but it may be mentioned that in 1906 the Board of 1906 . Trade appointed a committee to inquire into and report upon the effect of the provisions of the laws in force at the time in the See also:United See also:Kingdom in relation to bankruptcy, deeds of arrangement and composition by insolvent debtors with their creditors, and the prevention and punishment of frauds by debtors on their creditors, and any points and matters upon which the existing laws seemed to require amendment . The committee received a vast amount of See also:evidence as well as documents and memoranda from See also:chambers of commerce, trade protection See also:societies and influential public bodies . The See also:scope of the inquiry was not limited to English law and procedure, but also embraced that of See also:Germany, See also:France, See also:Australia, See also:Scotland and See also:Ireland . The report of the committee was issued i11 1908 (Cd . 4068), and reference may be made to it for much valuable See also:information . The committee reported that the result of their inquiry did not disclose any dissatisfaction on the part of the commercial community with the main features of the existing law and procedure . But there were certain special incidents of the law and branches of its administration upon which the committee made recommendations . One was the prosecution and punishment of debtors who had committed fraud on their creditors or caused loss to them by improper and reckless trading . The existing procedure was complained of as being See also:dilatory, cumbersome and expensive, and the committee were of an opinion that where a debtor had committed an offence for which he could and ought to be prosecuted, prosecution and conviction, with adequate punishment, ought to follow speedily and decisively, and the chief recommendation of the committee was that, while the existing procedure should be left untouched, offences ought also to be punishable on summary conviction before magistrates and justices, and the provisions of the Summary Jurisdiction Acts applied to them, and that where an See also:order for a prosecution is made on an application by the official receiver of a bankruptcycourt and based on his report, that court should have power to order the official receiver to conduct the prosecution before the court of summary jurisdiction . The committee also reported that numerous delinquencies by insolvent debtors in the conduct of their affairs, or which had contributed to the losses sustained by their creditors, were not punishable or even cognizable by courts having bankruptcy jurisdiction unless or until a debtor who had a receiving order against him, or became a bankrupt, applied for an order sanctioning a composition or See also:scheme of arrangement with his creditors, or for an ordeu discharging him from his debts . The most prominent of these delinquencies which were brought to the See also:notice of the committee were—failure by a debtor to keep any books or any proper or adequate books of account in his business; trading with knowledge of insolvency; gambling and See also:speculation leading to, or contributing to, the debtor's insolvency or bankruptcy; failure properly to account for any substantial deficiency of assets . The committee received a large body of evidence in favour of making delinquencies such as have been described punishable by imprisonment . Evidence was also given as to the laws in force in Germany, France and Scotland, from which it appeared that such delinquencies, especially that of keeping no books of account, can be severely dealt with as criminal offences . After carefully weighing the evidence on both sides the committee recommended that the failure or omission by a debtor who becomes bankrupt to have kept any books of account, or proper books of account, within two years next preceding his bankruptcy, in a trade or business carried on by him, if without excuse, should be made by law an offence punishable on summary conviction by imprisonment, subject to four important limitations, namely, that the law should define what books of account a person carrying on a trade or business must keep, following in this respect the law in force in France and Germany; that failure or omission by a debtor to have kept the required books should only be punishable in the event of a debtor becoming bankrupt and of the liquidated debts proved in the bankruptcy exceeding £200 in amount; that no prosecution of a debtor for failure or omission to keep books of account should take place before the See also:lapse of two years from the passing of the law; that a debtor should not be punished if he could show that his failure or omission to keep proper books was honest and excusable and did not contribute to his insolvency, and that no prosecution should be instituted for the offence except by order of the bankruptcy court . The committee made recommendations of much the same character with regard to punishing some of the other delinquencies mentioned above . There were also recommendations by the committee as to trading b'r undischarged bankrupts, as to the realization of estate on bankruptcy, as to the operation of the law of relation back of a bankruptcy trustee's title, as to the law relating to the after-acquired property of an undischarged bankrupt, and dealings with such property, and with respect to married See also:women and their liabilities under bankruptcy law . The committee also reported on the law and practice relating to voluntary deeds of arrangement between a debtor and his creditors and on the compulsory regulation of assignments of See also:book debts, and of agreements for the hire and See also:purchase of chattels . In addition to this report the annual reports of the Board of Trade, which are accompanied by elaborate tables of See also:statistics, and by copious illustrations both of the working of the system and of the characteristic features and causes of current insolvency, are published as parliamentary papers, and may be usefully consulted by those interested in the subject . It appears from these reports that the total number of insolvencies dealt with under the bankruptcy acts during the ten years ending 31st See also:December 1905, was 43,141, involving estimated liabilities amounting to £61,685,678, and estimated assets amounting to £26,001,417 . It may also be pointed out that according to the official figures, the cost of bankruptcy administration under the present system has very considerably decreased as compared with that under the act of 1869 . Estates are also closed at much shorter intervals, and, what is more important from a public point of view, it appears Results of legislation . that while the estimated liabilities of bankrupt estates during the ten years ending 1883 amounted on an See also:average to £22,380,000 per annum, the estimated liabilities during the ten years ending 1905 only averaged £6,168,567 per annum . But during the latter See also:period there was an annual average of 3426 private arrangements involving a further estimated annual liability of £4,166,354 entered into outside of the Bankruptcy Acts by insolvent debtors . There are no means of ascertaining the corresponding amount of liabilities on private arrangements outside of the Bankruptcy Acts prior to 1883, and therefore a complete comparison is impossible; but it is evident that on any method of computation there has been a very great diminution in the trading insolvency of England and Wales, while it is also clear as a matter of general knowledge in commercial circles, that a great decrease in the proportion of fraudulent trade and reckless speculation has been a marked feature of private trading during the period in question . The cost of bankruptcy administration is provided for: (1) by fees charged to bankrupt estates, (2) by interest on balances at the credit of such estates with the bankruptcy estates account, and (3) by interest on unclaimed funds at the credit of estates under former Bankruptcy Acts . Out of this are paid the salaries of all the officers of the department, including the official receivers; the remuneration due in respect of bankruptcy services to the county court registrars; See also:pensions, &c., payable to retired officers under the present and previous Bankruptcy Acts; cost of bankruptcy prosecutions; and rents, See also:stationery, travelling and other incidental expenses . The system is self-supporting and involves no See also:charge upon the tax-payers of the country . It has been objected that inasmuch as the act professes to be based on the principle of enforcing commercial morality in the interests of the general community, the cost of administering it should not be charged entirely to the bankruptcy estates concerned . But when it is considered that a large part of the See also:revenue of the department is derived from funds to which estates administered under the present act have contributed nothing, this objection does not appear to be well founded . For the convenience of readers who may require more detailed information, the accompanying summary of some of the more important provisions of the law relating to bankruptcy procedure is submitted . It must be See also:borne in mind, however, that the subject is in some of its branches extremely intricate, and that both the law and the procedure are being constantly affected by a considerable body of judicial interpretation, while the acts also contain detailed provisions with regard to many questions incident to the ad-ministration of bankruptcy . A reference to the latest See also:text-books or competent professional See also:advice will always be advisable for those who have the misfortune to be practically interested either as debtors or as creditors in bankruptcy proceedings . The Deeds of Arrangement Act 1887, although not falling strictly within the scope of the bankruptcy law, may also, in consequence of its important bearing upon the question Deeds of of insolvency in England and Wales, be here noticed . arrange- See also:mew . It has been pointed out that, under the Bankruptcy Acts of 1849 and 1861, non-official arrangements by deed between a debtor and the general body of his creditors were not only officially recognized, but were in certain circumstances made binding on all the creditors, including those who refused to assent to them . Under the act of 1869, although such deeds were no longer recognized or made binding on non-assenting creditors, the proceedings under the " liquidation by arrangement " and " composition " clauses were practically private arrangements by resolution instead of deed, and were proved by experience to be open to the same abuses . It has also been shown that under the act of 1883 no arrangements either by deed or by resolution have any force against dissenting creditors, unless confirmed after full investigation and 'approval of the bankruptcy courts . Private arrangements, therefore, cease to. form any part of the bankruptcy system . But they are, nevertheless, binding as voluntary contracts between the debtor and such creditors as assent to them . Being, however, in the natureof assignments of the debtor's property, they are either deemed fraudulent if the benefit of the See also:assignment is limited to a portion of the creditors, or, if it is extended to all they become acts of bankruptcy, and, like any other voluntary assignment, are liable to be invalidated if made within three months prior to the petition on which a receiving order is made against the debtor . Treated as voluntary assignments, which are not binding on those who do not assent to them, such arrangements, where honestly entered into and carried out by capable administration, in many cases form a useful and expeditious method of liquidating a debtor's affairs, and where the debtor's insolvency has been brought about without any See also:gross misconduct they will probably always be largely resorted to . The danger attending them is that even in cases where the debtor has been guilty of misconduct, a private arrangement may be used to See also:scr |