87T 



BANKRUPT LAWS OF SCOTLAND. 



BANKRUPT LAWS OF SCOTLAND. 



878 



creditors to the requisite value petition, although he was not notour 

 bankrupt. But if he was not, or unless his representatives consent, 

 six months must elapse after his death before the award of sequestration 

 (the adjudication) can take place. 



It is not necessary to show that the debtor has assets to any particular 

 amount. But if in the course of the proceedings it appears that the 

 assets fall short of 100Z., the court has power, on application of a 

 majority of the creditors, to order that the discharge (certificate) shall 

 be equivalent only to a discharge in a cessio, which, as already mentioned, 

 leaves the debtor's after-acquired property still liable. 



One of the most valuable improvements made in the recent act, lies 

 in the authority given to the sheriffs of counties (judges of county 

 courts) to award sequestration in the case of debtors who have resided 

 or carried on business for a year within their jurisdiction. Formerly 

 it could be awarded only in the Court of Session. In all cases, indeed, 

 it still may, and where the debtor has not spent the requisite time in 

 one county it still must be applied for in that Court. Yet it appears 

 from the returns for the first year after the change was introduced 

 (1856-7), that seventy-five per cent, of all the sequestrations awarded 

 were applied for to sheriffs of counties ; and it is understood that the 

 proportion is still increasing. But in whatever court the sequestration 

 is awarded, the whole of the subsequent judicial procedure takes place 

 in the county in which the debtor resided or carried on business, or 

 which may be most convenient for the creditors. This is determined 

 by the Court of Session, when the preliminary proceedings have taken 

 place before it. 



If the petition is by the debtor, or with his consent, no service is 

 requisite, and sequestration is at once awarded ; but if by creditors 

 without the debtor's consent, it must be served upon him with notice 

 to appear on a day fixed, not less thnn six nor more than fourteen days 

 after service. In the event of his being out of Scotland, service is 

 effected by publication in a register for that purpose kept in Edinburgh, 

 and twenty-one days are allowed for appearance ; in either case, notice 

 is also given by advertisement in the ' Edinburgh Gazette." On the 

 day appointed, the debtor may oppose the petition on legal grounds, or 

 may pay the petitioning creditors' debts, together with the debts of 

 any other creditors who have appeared. But if he do not, or if his 

 opposition be not well founded, sequestration is awarded. No appeal 

 lies against this order, and the procedure consequent on it cannot be 

 delayed ; but any creditor, or the debtor himself (if he had not con- 

 sented), may, within forty days, apply to the Court of Session to recall 

 the sequestration. In considering this application the Court exercises 

 a large discretion ; not only in respect to the strict legality of the pro- 

 ceedings, but in respect to their fitness. Even after the forty days, 

 nine-tenths of the creditors have the power, at any time, of applying 

 for recall. 



The award of sequestration vests the estate in the creditors ; but it 

 must be instantly advertised in both the London and Edinburgh 

 ' Gazettes,' and a notice of it must be inserted in a register of rights 

 affecting land kept in Edinburgh. This last operates as notice to all 

 persons dealing with the debtor's real estate. The personal property 

 may, if it is thought necessary, be taken possession of by an officer 

 appointed by the court, and held by him till the first meeting of 

 creditors. 



This meeting is fixed in the judge's order awarding sequestration, 

 and must take place not le.-s than six nor more than twelve days after 

 the appearing of the advertisement of sequestration in the Gazettes ; 

 the place and time for holding it are notified in the same advertisements. 

 At this meeting the creditor^ e (by a majority of four-fifths 



in amount of the claims) to wind up the estate under a deed of 

 arrangement ; if they do so, they apply to the sheriff for an order to 

 stay proceedings for a period not exceeding two months. Within this 

 period they must present to the sheriff a deed of arrangement, signed 

 by four-fifths in number and value of the creditors ; and the sheriff 

 after ordering such intimation as he may think requisite, and hearing 

 any parties who oppose, may approve or disapprove of it. If he approves, 

 the deed is rendered binding on all the creditors, and the sequestration 

 is at an end ; if he disapproves, the sequestration proceeds. 



But if the creditors do not resort to this course, the first business of 

 the meeting is to elect a trustee (assignee) ; this is done by a majority (in 

 value of debts) of those present, or represented by proxies. The trustee 

 may be a credit ir, provided he has no special interest opposed to that 

 of the general body of creditors ; in the larger bankruptcies an accountant 

 is generally selected. The debts of the creditors voting are proved in 

 the presence of the meeting itself, by being stated in writing in the 

 statutory form, and accompanied with proper vouchers and with an 

 affidavit of their truth. Priml facie proof is all that is at this stage 

 required. The decision of the meeting is liable to review by the sheriff, 

 either on the ground of objection to the candidate elected, or on the 

 ground of votes in his favour having been wrongly admitted. Frequently 

 the sheriff's decision is obtained on the spot, for it is in the power of 

 any two creditors by previous requisition to obtain his attendance at 

 the meeting ; but if the question be of difficulty, or he is not present 

 at the meeting, his judgment may be obtained within a few days after. 

 No appeal lies from his judgment. No costs come out of the estate ; 

 they are paid by the unsuccessful parties. 



In like manner the creditors next proceed to elect a sort of council 

 of the trustee, consisting of three persons, necessarily creditors, who 



are designated commissioners. They may next, if they think fit, decide 

 (by a majority in number and value) on granting or renewing a pro- 

 tection from arrest to the bankrupt. Up to this period, the bankrupt 

 may have enjoyed such protection granted by the sheriff, on cause 

 shown ; but from the date of the first meeting of creditors, the question 

 of continuing it rests wholly with them. Lastly, the meeting may (by 

 a majority of four-fifths in value) vote an allowance to the bankrupt 

 till th time for payment of the second dividend, not exceeding tho 

 rate of three guineas per week. 



When the trustee's election has been duly declared, he must give a 

 bond of security to such amount as shall have been previously fixed by 

 the meeting of creditors, and with sureties approved by them. When 

 this is done, he obtains from the sheriff a formal appointment to his 

 office, which serves for his title in all suits and other proceedings. He 

 may be removed at any time by a majority in number and value of the 

 creditors, or by the Court of Session, on application of one-fourth in 

 value of the creditors, and on sufficient cause shown. The commissioners 

 may, in like manntr, be removed by the creditors. On such an event 

 occurring, a new trustee or commissioner is elected in the same manlier 

 as at the first election. 



The trustee's first duty is to take possession of the whole of the 

 bankrupt's estate, and to make out an inventory, list of creditors, fo-. 

 In this he has the assistance of a statement by the bankrupt of his affairs, 

 which he is bound to submit to the first meeting of creditors. But 

 neither the trustee nor the bankrupt are entitled to professional 

 assistance in performing this duty, at least at the cost of the estate. 

 The trustee must also apply to the sheriff to name an early day for the 

 bankrupt's examination. The day and place are advertised, and the 

 examination is conducted in presence of the creditors, any of whom 

 may put questions ; but it does not, except on special application, take 

 place in public. The bankrupt may correct his statement of affairs, 

 and must then swear to its truth. Any of his family, clerks, shopmen, 

 or other persons who may be supposed able to give information as to 

 the estate, may likewise at any time be examined. The examination 

 is before the sheriff, and on oath. 



The trustee then proceeds to realise the bankrupt's estate ; in this 

 he is bound to follow any directions the creditors may think fit to give, 

 and he is aided by the advice of the commissioners. At the same time 

 he takes preparatory steps for the payment of the dividends. These are 

 made at fixed periods, without any order of court. The first is made 

 six months after the sequestration, the second ten months, and each 

 succeeding dividend three months after that preceding. Claims must 

 be given in to the trustee two months before the time for payment of 

 the first dividend, a period of which ample notice is given by advertise- 

 ments and circular letters. They must be accompanied with an affidavit, 

 and sufficient legal proof of the debt ; but personal attendance of the 

 creditor is not necessary, unless his proof be so defective as to' make it 

 necessary that the trustee should examine him. The trustee considers 

 the proofs of each debt, admits or rejects them, or calls for further 

 evidence, as he may think proper, and notifies the result to each creditor. 

 A creditor may appeal either against his own rejection, or against the 

 admission of another ; such appeal is taken either to the sheriff or 

 Court of Session. The commissioners audit the trustee's accounts, and 

 fix the sum applicable to dividend. Tnis is paid, on the day appointed, 

 to those whom the trustee has admitted ; a proportion being retained 

 to meet the cl.-iinis which he has rejected, and on which appeal has been 

 brought. / 



A similar procedure is followed in making each succeeding dividend. 

 A creditor whose claim has been once admitted does not, however, 

 need to renew it ; he receives the subsequent dividends as matter of 

 course. Creditors who have not claimed in time for the first dividend, 

 receive an equalising dividend on the occasion of the next, if there are 

 funds to pay it. The commissioners have power to postpone making a 

 dividend till the arrival of the next statutory period for so doing ; and 

 the creditors may, on the other hand, shorten the statutory intervals 

 between each. Twelve months after the sequestration they may, by a 

 majority of three-fourths, sell their remaining interest in the estate by 

 auction. 



At any time after his examination, the bankrupt may apply to the 

 sheriff for his diKharye (certificate) ; but he must in all eases produce 

 a report by the trustee on his conduct, and this report the trustee is 

 not bound to give till five mouths after the sequestration. Further, 

 till six months after the sequestration, the bankrupt must produce the 

 consent of every creditor ; and, until the completion of two years from 

 the sequestration, he must produce the consent of a gradually diminishing 

 majority in number and value of his creditors. The petition for dis- 

 charge is advertised in the ' Gazette,' and intimated to each creditor ; 

 and the court, after hearing any opposition that may be made, grants 

 or refuses it. There is no division of discharges into classes. The 

 bankrupt receives the surplus, if any, of his property, but no sum for 

 re-establishing him in business. 



Instead of the ordinary course of dividing the estate, the bankrupt 

 may offer a composition ; it must be accompanied with security for its 

 payment. Ample notice must be given to the creditors, and the 

 trustee must send to each an estimate of the amount the estate is 

 likely to produce. A meeting is specially called to consider the pro- 

 posal, and four-fifths in value are required to authorise its acceptance. 

 If accepted, the sheriff, or Court of Session, may hear any objectors, 



