operations as previously indicated. Nevertheless, it is not necessary that it arise from a commercial cause.

The determination of the date when suspension of payments takes place is of paramount importance in view of the fact that transactions made by the bankrupt after that date and before the declaration of bankruptcy are void or voidable. This is determined by the debtor when he asks for a composition, by fixing it in the petition. It is fixed by the court when the bankruptcy is declared (by reason of fraud in or rejection of the composition and when the debtor is absent from the first meeting of creditors or fails to offer a composition), the date being that when the debtor filed his petition for composition if the suspension did not take place beforehand, and will not be more than 1 year before the date of filing said petition. In case the suspension precedes the petition the court fixes its date in accordance with the pertinent evidence that is presented. The date of suspension of payments must be indicated by the debtor when he requests his own bankruptcy. Should a creditor or creditors seek the declaration they must offer evidence of the facts and circumstances indicating that the debtor has ceased to make payments and the court then fixes the date of such failure; thereafter the receiver presents a report with his opinion concerning this date which the debtor and creditors may attack; the court then rules on the issue from which ruling only an appeal for reestablishment (apelación en relación) lies. Such opinion and attack is also allowed in the case of bankruptcy sought by the debtor. The report of the receiver to the first meeting of creditors in a composition must fix the date of suspension of payments if such failure took place. The determination of the date of suspension of payments constitutes good and sufficient evidence of that fact as against the parties to the bankruptcy proceedings. (Arts. 1, 2, 10, 11, 53, 55, 56, 60, 64, 65, 109.)

COMPOSITION OF CREDITORS

Prior to or within 3 days after his or its suspension of payments, the debtor must present a petition for composition of creditors, in order to forestall a declaration in bankruptcy. The petition will be admitted even after this term has run out if the bankruptcy, although requested, has not yet been declared. The application, which ranks as a conditional petition of bankruptcy in the event the composition is rejected or the debtor withdraws therefrom, must be filed with the judge of commerce of the commercial domicile of the petitioner. Such domicile is the place where the debtor has his business office, or his principal place of business if he has several establishments. The heirs of a person entitled to make the applicamay continue the proceedings already initiated or may institute them within 30 days of his death.

tion

Commercial partnerships legally organized may apply for a meeting of creditors through the partner or partners authorized to use the firm name or through its representatives. Corporations and limited liability partnerships may do so through the chairman of the board of directors, being duly authorized, or through the manager of the partnership; in these cases the ratification of the application by the shareholders' meeting, or by the majority of partners representing the majority of capital in limited liability partnerships, must be submitted before the day of the hearing, failing which, the

application will be deemed to have been withdrawn. Partnerships and companies in liquidation may also exercise the right to make this application provided they were legally organized. (Arts. 8, 9, 11.)

CONTENTS OF APPLICATION

The written application for composition must state the cause of the unbalanced condition of the business or the commercial difficulties and must be accompanied by:

(1) A general balance sheet of the business containing a summary of the petitioner's assets showing the items composing them and their amount and value.

(2) A list of creditors with their addresses, indication of the amounts, reason for debts, their dates of maturity, and the special guarantees, if any. (3) Certificate of registration or of the recordation of the organization contract in the Public Registry of Commerce. The inscription made after beginning operations and within 1 year of the application for composition gives rise to the presumption that it was made to take advantage of the bankruptcy law.

(4) The proof of performance of all the obligations imposed by a previous composition, if any.

(5) The date of suspension of payments, if any. The books and papers of the business must be placed at the disposal of the court with indication of the number and purpose of each and the system according to which they were kept. The court will reject the petition forthwith if (1) it does not comply with prerequisites just indicated, (2) no books of account were kept, and (3) the debtor has absconded. However, a period of 8 days may be granted to complete the required information when the petition is based on reasonable grounds. An appeal will lie from the ruling rejecting the application for a meeting of creditors; in all other instances rulings in this proceeding or in bankruptcy proceedings proper are not appealable unless otherwise expressly provided. (Arts. 10, 12.)

PROCEEDINGS FOR CALLING THE MEETING OF CREDITORS

Within 24 hours after the application is presented the court declares the composition proceedings opened and issues an order containing: (1) The appointment of the receiver.

(2) The determination of a period of time of not less than 15 nor more than 50 days within which creditors must present proof of claims.

(3) The day and hour of the meeting of creditors which must be held with those who attend within 15 days after expiration of the term fixed for presentation of proof of claims.

(4) An order to examine the applicants' books. To this end the clerk of the court or the proper justice of the peace will ascertain if the books prescribed by law as indispensable were kept and will rubricate the pages containing the last entry and cancel any previous pages which are blank or contain blank spaces. This order is made known by publication during 8 days in 2 newspapers one of which must be the one within the place of the court wherein judicial notices (anuncios legales) are published. If the debtor has several establishments this publication must be made at the places of the establishments. In such publications the creditors must be summoned to be present at the meeting at the day and hour designated. In the case of partnerships or companies which have issued bearer obligations the holders thereof will be likewise summoned and they must deposit the obligations in a bank before the day of the meeting. These notices must be published by the debtor within 48 hours after the order is issued under penalty of having his petition deemed withdrawn; this term may be extended up to 5

days if the publication must be made outside of the place where the court sits.

The receiver must immediately give notice by registered mail to all creditors or their agents or representatives, of the application, the court or clerk's office where the proceedings have been filed, and the days and hours when they must appear at the receiver's office. However, the proceedings of the meeting will not be null and void by reason that the advice was not sent or received, without prejudice to the penalties applicable to the receiver for failure to perform this duty.

The meeting cannot be postponed except in case of exceptional circumstances in the judgment of the court, no appeal lying from the ruling in this respect. The debtor must offer the composition in writing and present it to the court within 8 days before the meeting; this term cannot be reduced except under exceptional circumstances as the court may determine. The offer must be communicated to the receiver and will remain in the clerk's office at the disposal of the creditors. (Arts. 13-17, 19.)

EFFECT OF ADMISSION OF THESE PROCEEDINGS

During the prosecution of these proceedings the debtor is allowed to continue in charge of his property and to conduct the ordinary operations of his business or industry, under the supervision of the receiver. But he may not make assignments or transactions which alter the position of his creditors. All transactions done by debtor without consideration during the course of the proceedings are null and void as regards creditors. Likewise, all acts are void by which he settles, compromises, transfers, or mortgages realty and constitutes pledges, without permission of the Court of Commerce. Such authority will be granted only in case of evident need or urgency.

If the debtor acts contrary to the above limitations or performs any fraudulent act he will be removed from the management of his business and another person will be appointed in his stead to direct the pertinent operations until the proceedings are decided in one of the manners provided by the law. The removal ruling is not appealable. After the proceedings are commenced and until the judicial confirmation (homologación) of the composition becomes final, no creditor may, by reason of a cause or title antedating the application, commence or continue any act of execution of the property of the debtor except those to collect a mortgage or pledge credit. (Arts. 20, 21.)

PRESENTATION AND PROOF OF CLAIM

Creditors must deliver to the receiver the documentary evidence of their claims within the period of time fixed for that purpose, together with literal copies of same. The latter are checked against the originals and returned to the creditor who presented them with a notation that the originals remain in the hands of the receiver. Promissory notes, bills of exchange, and other documents with two or more obligors must be presented in order to verify the signature of the insolvent, and copy thereof must be left with the receiver and the reasons for the return of the original recorded. The creditor must present the original document every time he is required to do so and whenever he

claims any rights in the mass of the insolvent estate. If no documents signed by the debtor are available, the creditor must present notes, invoices, or accounts with his signature showing the origin and amount of the debt.

The receiver must check all claim documents against the books and papers of the debtor and, after obtaining any other necessary information and advice from debtor and the creditors, will render his report on each claim. Eight days before the meeting of creditors to consider the composition, the receiver must present to the court a report on the circumstances which forced the debtor to institute the proceedings, the conditions of the insolvent's accounting, assets, and liabilities, and the character of the acts of the debtor which brought about or aggravated his condition. This report must also indicate a date of suspension of payments if such failure took place, the date of recordation in the Registry of Commerce, and a statement of all the credits against the debtor with indication of their privileges and preference in the order of payment. The parties interested may examine this report at the office of the clerk of court in order to note the examination and ranking of credits (order of payments of credits) recommended and the statements concerning the suspension of payments.

Any creditor may enter an appearance in writing before the judge up to 3 days prior to the meeting of creditors, and assail all or some of the claims admitted, offering concrete proof in support of his assertion or denouncing any culpable or fraudulent act of the debtor, who in turn may attack the examination and ranking of credits recommended by the receiver. These observations will be referred to the receiver and debtor as the case may be. They may be made also at the meeting of creditors and the judge may take them under consideration if he sees fit. (Arts. 18, 22, 23, 24.)

PROCEEDINGS INCIDENTAL TO THE MEETING OF CREDITORS

The meeting of creditors held on the appointed date is presided over by the judge of commerce in the presence of the insolvent and receiver. Creditors may be represented therein by agents to whom a letter-power conferring the authority to take part in the deliberations may be granted; this letter-power must be authenticated by notary public or a judicial authority but need not be legalized (those granted by creditors abroad should have the notary public's signature properly authenticated in the manner indicated hereinabove on page 102, in order to avoid any question as to their form). The general administrative powers are sufficient for this purpose although the specific powers to grant extension of time for payment and to give discharges are not contained therein. It is very important to note that the power to represent creditors at these meetings is limited by the present law to the extent that one person cannot act for more than five creditors as regards claims exceeding 500 pesos nor can the power be granted to a creditor of the insolvent. The latter may be represented at the meeting by a person acquainted with his business affairs. The meeting will commence by the reading of the receiver's report as regards examination of claims. The credits not assailed before or during the meeting are approved by the judge. The others will be approved or rejected, after hearing the parties interested and the receiver, at that time or within 3 days thereafter but before the meeting

is declared constituted. The ruling admitting the credits not assailed constitutes res adjudicata except in case of fraud. The ruling admitting credits subject to attack must be opposed within 5 days. The ruling rejecting assailed credits does not pass on their lawfulness nor prevent a subsequent claim by the interested parties. Those whose claims are rejected or whose preference in the order of payment is not acknowledged may cause the lawfulness of the claim and the existence of the privilege to be declared in a collateral proceeding (incidente); should they obtain a favorable ruling therein, it cannot affect anything done at the meeting. Claims not presented in time can be considered at the meeting if there is no well-founded opposition by the debtor, the receiver or any of the creditors; those presented after the meeting may be examined with the intervention of the liquidator in the manner prescribed for the purpose of participating in the dividends of the bankruptcy, or of the liquidation without declaration of bankruptcy.

Another important provision of this law is the presumption it raises that the wife who pays her husband's debts does so with funds of the earnings of their matrimonial partnership; she cannot claim against the estate on this account unless she proves by documentary evidence that the monies she spent belonged to her.

If at the first meeting it is not possible to examine all the claims presented, the judge may adjourn to the day he may appoint which fact is set forth in the record, a fresh summons for the subsequent meeting not being necessary. The creditors who did not attend the first meeting cannot attack the claims which have been recognized and admitted therein. (Arts. 24-31.)

MEETING OF CREDITORS

The meeting of creditors will be declared constituted by the creditors whose claims have been proved and by those whose claims have been declared admissible. The reading of the report of the receiver will then be continued followed by a reading of the offer of composition. Modifications thereto may be heard and discussed. If accepted by the insolvent the judge may adjourn the meeting on his own motion or at the request of a majority of the creditors until 3 days thereafter and may close the debate and put the offer to a vote when he considers that its basis has been sufficiently discussed. If the debtor does not appear personally or by duly empowered agent or fails to offer a composition, his application is considered as abandoned and the proceedings are continued in the manner prescribed for bankruptcy proceedings.

Only the unsecured (quirografarios) creditors may vote on the composition. Privileged creditors waive their privilege by so voting and never may recover it. However, they may waive their privilege over a part of their claims, not less than 25 percent, and vote as unsecured creditors, as regards that part. Such waiver must be expressed and special power is needed to make it. If the privilege consists of a mortgage or pledge given by a third party the creditor may attend the meeting and vote in respect of the whole of his credit. The third party guarantor has the right to claim against the estate any payments made by him, he may attend the meeting and vote as representative of the principal creditor. The privilege of applicant's