10 THE CU B A REV lEW 



Abuses Bring Modification of Law 



The Spanish Code of Commerce, which prevailed in Cuba while it remained a 

 Spanish colony, was lacking in clearness when providing this protection, and in practice 

 it was made use of by dishonest debtors who purposely misconstrued the true aim 

 of the law and converted it into a sort of cover to protect their own lack of good 

 faith in dealing with their creditors. In order to put an end to this abuse certain 

 modifications were made, the last one being the law of suspension of payments of 

 June 24, 1911. 



The principal point of abuse above referred to was the interpretation of the law 

 in such a manner that any debtor of his own volition could declare himself "en sus- 

 pension de pagos" merely by filing a declaration to this effect with the court, and the 

 latter was bound to protect him in this situation without having first made a formal and 

 careful investigation to see whether or not he was entitled to such protection. 



Notwithstanding the efforts made by Cuban legislation it is apparent that means 

 have been found to continue the old abuses of the law, for not only do debtors even 

 now by means of such subterfuge prevent legal action by creditors, but frequently a 

 bankrupt will under shelter of the law conceal his true condition and dispose of his 

 few remaining assets in spite of the steps which are taken privately by his creditors, 

 who in such cases suffer the loss of their claims plus the expense incurred in trying to 

 protect their rights. 



Law Has Three Situations in View 



The law in according to a debtor the right to protection under "suspension de pagos" 

 has three situations in view: 



1. The case of the merchant who actually has more assets than liabilities but who foresees 

 the impossibility of paying all of his debts in cash at maturity. (We may say the debtor who 

 wishes to delay payment.) 



2. The case of the merchant who, because of some misfortune beyond his control, cannot pay 

 his debts in full. (We may say the debtor who is partially insolvent.) 



3 The case of the merchant who cannot pay his debts at maturity, when the creditor is taking 

 judicial proceedings or asking payment through a notary. The debtor must avail himself of the 

 suspension of payments within two days after the maturity of the debt. (We may say the debtor 

 who is acting under prosecution.) 



In all three cases the debtor must file in court, annexed to his explanatory application, 

 the following : 



(a) The oifer of a bond to secure the payment of 50 per cent of his debts within a period 

 of three years. 



(b) A detailed inventory, or a promise to furnish same within five days. 



(c) A balance statement showing all his assets and liabilities. 



(d) A sworn statement of all creditors, giving their names, addresses, and respective claims. 



(e) Evidence of having recorded his business in the Registry of Commerce. 



(/) The form of his proposal to pay his creditors all of his debts within three years — or with 

 certain concessions. 



(g) Proof of the appointment of a local merchant, who, together with another appointed by 

 the creditors, will check up the assets and liabilities. 



(h) Cash deposit of more than 10 per cent of the probable expense of making copies of docu- 

 ments, rogatory letters, publication in the papers to notify creditors, etc. 



From the time of the formal presentation of such application no individual legal 

 action or enforcement proceedings can be taken against the debtor. Within three 

 days from the filing of the application the court will ask for the bond in legal form, 

 and after it has been executed will proclaim a provisional suspension of payments. 



Other Provisions of the Law 



Even though the provisions of the law are not very clear regarding the faculties 

 of the court, and the debtor may pretend that he is entitled to the proclamation by 



