One point may be mentioned in which the Australian colonies have improved on the English system. Under the English acts a bankrupt is under no obligation to apply for his discharge. The result is that the United Kingdom contains a population of 70,000 undischarged bankrupts—a manifest danger to the trading community. Under the bankruptcy systems of New South Wales, Victoria and New Zealand, a bankrupt is bound to apply for his discharge within a fixed period, otherwise he is guilty of a contempt of court.
In Canada, under the British North America Act 1867, the Dominion parliament has exclusive legislative power in regard to bankruptcy and insolvency: but there is no existing Dominion act on the subject. A Dominion act was passed in 1875, but repealed in 1880. The failure of this act may perhaps be ascribed to the diversity of the pre-existing provincial systems, embracing such contrasts as the English law of Ontario, and the French code based on cessio bonorum—which ruled in Quebec. Bankruptcy is dealt with in a fragmentary way by the provincial legislatures by acts regulating such matters as priority of execution creditors, fraudulent assignments and preferences, imprisonment of debtors, administration of estates of deceased insolvents.
In Cape Colony and Natal English law is substantially followed. In the Transvaal, where Roman-Dutch law prevails, the law governing the subject is the Insolvency Law, No. 13 of 1895. It provides for voluntary surrender and compulsory sequestration. The law of the Orange River Colony is similar.
In British Guiana, Gambia, Jamaica, Hong Kong, Mauritius, Grenada, Trinidad, Tobago and the Straits Settlements the law is modelled on the English pattern.
In India insolvency is regulated by the Indian Insolvency Act 1848, extended by the Act XI. of 1889.
An English bankrupt, it may be added, is entitled to plead his discharge in England as a defence in a colonial court. The explanation is this. The English act vests all the bankrupt's property, whether in the United Kingdom or in the colonies, in his trustee in bankruptcy. Having thus denuded him of everything, it has been held to follow that the bankrupt's discharge must also receive recognition in a colonial court.
France.—Bankruptcy in France is regulated by the Commercial Code of 1807, amended and supplemented by the law of 9th June 1838. By Article 437 of the code bankruptcy is defined as the state of a trader who is unable to meet his commercial engagements. Simple insolvency of this kind is known in France as faillite. Insolvency attended with circumstances of misconduct or fraud is known as banqueroute simple or banqueroute frauduleuse. Only a trader can become bankrupt. The debt, too, for obtaining adjudication must be a commercial debt, the laws regulating bankruptcy being designed exclusively for the protection of commerce. To be made a bankrupt a trader need not be insolvent: it is sufficient that he has suspended payment. Commercial companies of all kinds are liable to be declared bankrupt in the same manner as individual traders. A trader-debtor can be adjudicated bankrupt upon his own petition, or upon the petition of a creditor, or by the court itself proprio motu. A petitioning debtor must within fifteen days file at the
office of the Tribunal of Commerce of the district, a declaration of suspension, with a true account of his conduct and of the state of his affairs, showing his assets, debts, profits and losses and personal expenses. On adjudication the Tribunal of Commerce appoints a person, called a syndic provisoire, to manage the bankrupt's estate, and a juge commissaire is also named to supervise the syndic. A bankruptcy terminates by an ordinary composition (concordat), a sale of the debtor's assets (union), or a composition by relinquishment of assets. It is a striking feature of the French system, and highly creditable to French commercial integrity, that a discharge in bankruptcy, even when accompanied by a declaration d'excusabilité, leaves the unpaid balance a debt of honour. At the time of the French Revolution the National Convention passed a resolution that any man who contracted a debt should never be free from liability to pay it. The spirit of this resolution still survives, for until a trader has paid every penny that he owes he is not rehabilitated and remains under the stigma of various disabilities: he has no political rights, he cannot hold any public office, or act as a stockbroker, or sit on a jury. Banqueroute simple is where the bankrupt has been guilty of grave faults in the conduct of his business, such as extravagance in living, hazardous speculation or preferring creditors. Banqueroute frauduleuse involves the worse delinquency of fraud. Both banqueroute simple and banqueroute frauduleuse are punishable,—the latter with penal servitude ranging from five to twenty years.
Germany.—Bankruptcy in Germany is governed by a code passed in 1877. Prior to this each state had its system and the law was "wholly chaotic." The same distinction is drawn in Germany as in France between mere commercial failure and bankruptcy, simple or fraudulent. Simple bankruptcy is established by such offences as gambling, dealing in "futures," disorderly book-keeping or extravagance in living: fraudulent bankruptcy, by offences of a deeper dye—the concealment of property, the falsifying of books, the manufacture of fictitious debts and the giving of illegal preferences. Both kinds of bankruptcy are punishable, fraudulent bankruptcy by penal servitude, or in case of mitigating circumstances, by imprisonment for not less than three months. Accessories in fraudulent bankruptcies are liable to penal servitude—for instance, a creditor who conspires with the debtor to secure an advantage to the prejudice of the other debtors. The creditors are called together within one month from the date of adjudication, and at their meeting they may appoint a committee of their number to advise with the trustee. It is the duty of the court to see that the trustee performs his functions. Estates are liquidated with great rapidity. In order that the creditors may receive dividends at the earliest moment, it is customary to sell the assets by auction. The creditors by a majority in number and three-fourths in value may accept a composition, but such an arrangement must have the approval of the court. The fees are very moderate: in an ordinary bankruptcy the attorney's fees do not, it is said, exceed £5.
Italy.—Bankruptcy in Italy is regulated by the Commercial Code of 1883 (Part III.). Only merchants can pass through the bankruptcy court. Merchants are defined by the code as those who, as an habitual profession, engage in commercial business. This definition includes merchant companies. Bankruptcy proceedings may be taken either by the debtor or by a creditor for a commercial debt, or may be ordered by the court. The amount of the debt is immaterial: a small sum will suffice, provided its non-payment is proof of insolvency. Bankruptcy can only be declared where there is insolvency. The judgment adjudicating a debtor bankrupt deprives the bankrupt of the right to administer his affairs, and nominates a trustee to realize the property under the superintendence of a judge and a commission of creditors. All the property of the bankrupt, movable and immovable, is sold by auction and distributed in dividends. This is one way of closing the bankruptcy, but it may also be closed by an arrangement. No minimum percentage is required for such arrangement, but it must have the assent of creditors representing three-fourths of the bankrupt's indebtedness. Composition before bankruptcy is not recognized by Italian law. Bankrupts are liable to criminal proceedings involving punishments more or less heavy for offences against the law, e.g. for not keeping books in the way prescribed by law.