29. Fraud by insolvent is not deemed fraud, legally speaking, for an insolvent trader to continue to purchase goods without disclosing his true position, where no questions are asked. If ques tioned, he must either state the facts or refuse the information, leaving,the other party free to accept the order or reject it., But if he represents that he is solvent when he is not, in order to get goods on credit, his act is fraudulent. If the seller discovers the true facts he may refuse delivery or stop the goods in transit. He may also have the dealer arrested for giving false replies.
The effect of these statutes in their leniency is cer tainly to discourage a trader who is deeply involved from continuing in business, as he may manage to pull out safely. Ile is not bound to publish his finan cial difficulties to the world.
30. Winding up of companies.—In an earlier sec tion it was said that in Canada there is no Domin ion bankruptcy or insolvency act. This statement must now be qualified in this respect, that there is a Dominion Winding-Up Act, applicable to incorpo rated companies. The Dominion Winding-Up Act applies to all trading companies, wherever incorpo rated, doing business in Canada, which arc insolvent. Provincial Winding-Up Acts apply only to compan ies, not insolvent, which are in voluntary liquidation. The courts are entitled to protect the rights of Cana dian creditors upon the assets of a foreign company doing business in Canada. Thus, suppose a company incorporated and having its head office in France has a branch in Montreal. If winding-up proceedings are begun against the company in France, the courts may under the Dominion Act order it to be wound up so far as concerns its assets in Canada. If the courts, on the other hand, order the winding-up of the Canadian end of the business, the company's opera tions in the foreign country of its origin are not af fected unless its home creditors take similar steps.
31. Insolvency of a company: law determined.—A company is deemed insolvent under the Winding-up Act: (a) If it is unable to pay its debts as they become due.
(b) If it calls a meeting of its creditors for the purpose of compounding with them.
(c) If it exhibits a statement showing its inability to pay its debts.
(d) If it has otherwise acknowledged its insolv ency.
(e) If it assigns, removes or disposes of its prop erty with intent to defraud, defeat or delay creditors, or if it attempts so to do.
(f) If, with such intent, it has procured its money, goods, land or property to be seized under exe cution.
(g) If it has made a general conveyance or assign ment of its property for the benefit of credi tors, or if without their knowledge and against their interests it sells or conveys the whole or the main part of its assets.
(h) If it permits any execution issued against it to remain unsatisfied for fifteen days, or to within four days of the date of sale.
A company is deemed to be unable to pay its debts as they become due, and to be insolvent, when a credi tor in a sum exceeding two hundred dollars has made legal demand for payment, and the company has, for ninety days in the case of a bank, and for sixty days in all other cases, neglected to pay or secure or com pound for the claimed.
32. Duties of winding-up order is granted upon a petition to that effect. Upon the petition being granted a provisional liquidator is ap pointed who takes possession of the company's assets and affairs temporarily. A meeting of creditors, shareholders and contributories is then called and a permanent liquidator appointed. This officer makes an inventory of the company's assets and a list of con tributories (that is, of shareholders whose stock is not fully paid), and proceeds to collect all debts due the company. He may be authorized to continue the business temporarily. When he has liquidated the assets, he prepares a dividend sheet of which he mails a copy to all interested persons. If the dividend sheet is not contested within a prescribed time he pays any dividend and obtains his discharge from the court.
33. All claims may be debts payable on a contingency, and all claims against the company. present or future, may be proved. A claim for an uncertain amount will be given a fixed value by the court. The hclder of a bill of exchange may prove both for the amount thereof and for protest charges. Damages for breach of contract may be proved. Claims are proved by affidavit of the creditor or of someone acting for him.
34. Bulk several of the provinces there exist Bulk Sales Acts. The general effect of these is that it is made the duty of every, person who pur chases a stock of goods in bulk and thus out of the usual course of business of the vendor, before making settlement by cash, note or check, to demand and re ceive from the seller a statutory declaration giving the names and addresses of his creditors and the amounts he owes. The purchaser is then to retain sufficient of the purchase price to pay these debts. If this is not done and the creditors are not paid, the whole transaction is deemed fraudulent and void, as respects any creditor who is prejudiced as a result.