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Compositions Bankruptcy Act

proposal, scheme, debtor and creditors

COMPOSITIONS (BANKRUPTCY ACT). When a receiving order has been made against a debtor, he must, within a certain time, submit a statement of his affairs to the official receiver. (See RECEIVING ORDER.) If the debtor wishes to submit to his cre ditors a proposal for a composition—that is, a payment of so much in the pound—or for a scheme of arrangement, the Bankruptcy Act, 1890, provides as follows : " Section 3. (1) Where a debtor intends to make a proposal for a composition in satisfaction of his debts, or a pro posal for a scheme of arrangement of his affairs, he shall, within four days of submitting his statement of affairs, or within such time there after as the official receiver may fix, lodge with the official receiver a proposal in writing, signed by him, embodying the terms of the com position or scheme which he is desirous of submitting for the con sideration of his creditors, and setting out particulars of any sureties or securities proposed.

" (2) In such case tile official receiver shall hold a meeting of creditors, before the public examination of the debtor is concluded, and send to each creditor, before the meeting, a copy of the debtor's proposal with a report thereon ; and if at that meet ing a majority in number and three fourths in value of all the creditors who have proved resolve to accept the proposal, the same shall be deemed to be duly accepted by the creditors, and when approved by the court shall be binding on all the creditors."

The Court has power to approve or to refuse to approve the proposal (s.s. 10).

If the debtor's proposal is accepted by the creditors, the receiving order is discharged by the Court. If a trustee is appointed to carry out the scheme, the official receiver hands the debtor's property to him, but if no trustee is appointed the official receiver acts as trustee.

If the proposal is not accepted within four teen days after the conclusion of the debtor's examination, the Court shall adjudge the debtor bankrupt. (See ADJUDICATION OF BANKRUPTCY.) A composition or scheme of arrangement may be accepted by the creditors, if they think fit, at any time after the debtor is adjudicated bankrupt, and the Court may annul the bankruptcy. (Section 23, s.s. 1, 2.) If default is made in payment of an instal ment, the Court may adjudge the debtor bankrupt and annul the composition or scheme, but without prejudice to the validity of any sale, disposition, or payment duly made in pursuance of the composition or scheme. (Section 23, s.s. 3.) Debts are proved in the same way as in the case of bankruptcy. (See BANKRUPTCY, PROOF OF DEBTS.)