INSOLVENCY OF PARTNERSHIPS & CORPORATIONS
WHEN PARTNERSHIP MAY BE DECLARED INSOLVENT
A partnership may be adjudged insolvent during the continuation of the partnership business or after its dissolution but before the final settlement thereof
WHO MAY PETITION FOR DECLARATION OF INSOLVENCY IN PARTNERSHIP
1. In case of voluntary insolvency—the petition may be filed by all the partners, or any one of them
2. In case of involuntary insolvency—the petition is filed by one or more of the partners or three or more of the creditors of the partnership.
a. If the petition be filed by less than all the partners of the partnership, those partners who don’t join the petition shall be ordered to show cause why should not be adjudged to be insolvent in the same manner as other creditors are required to show cause upon a creditor’s petition
PROPERTIES INCLUDED IN THE INSOLVENCY PROCEEDINGS
1. All the properties of the partnership
2. All the separate property of each of the partners, except
a. Separate properties of limited partners
b. Properties which are exempt by law
EFFECT OF FILING OF PETITION
1. When insolvency proceedings have been instituted against or by a partnership, the proceedings are deemed to commence against the partners at the same time even if a partner is not ordered included in the proceedings until sometime later
2. Upon order of the court, all the property of the partnership and also all the separate property of each partner, if they are liable, shall be taken
3. All creditors of the partnership and the separate creditors of each partner shall be allowed to prove their respective claims
4. The assignee shall be chosen by the creditors of the partnership
5. Pending insolvency proceedings by or against any partnership, no statute of limitations shall run upon a claim of or against the estate of the debtor
EFFECT OF INSOLVENCY OF PARTNERSHIP OR ANY PARTNER
1. A partnership may be declared insolvent notwithstanding the solvency of the partners constituting the same
2. A partnership isn’t necessarily insolvent because one of its members is insolvent
3. A partnership is automatically dissolved upon the insolvency of one of the partners or of the partnership
DISTRIBUTION OF PROCEEDS
1. The net proceeds of the partnership property shall be appropriated to the payment of partnership debts
2. The net proceeds of the individual estate of each partner shall be applied to the payment of his individual debts
3. Should any surplus remain, so much thereof as corresponds to him as his share in the subsidiary liability for partnership debts shall be added to the partnership assets and be applied to the payment of such debts
4. Should any surplus remain of the partnership property, such assets shall be added to the assets of the individual partners in the proportion of their respective interests in the partnership
WHO MAY PETITION FOR DECLARATION OF INSOLVENCY OF A CORPORATION
1. In case of voluntary insolvency—the petition may be filed by any officer duly authorized by the vote of the board of directors or trustees at a meeting especially called for that purpose, or by the assent in writing of a majority of directors, or trustees, as the case may be
2. In case of involuntary insolvency—
a. First view—upon a creditor’s petition made and presented in the manner provided for in respect to
debtors
b. Second view—the petition must be filed by at least 3 creditors of the corporation under the circumstances mentioned by law
EFFECT WHEN CORPORATION DECLARED INSOLVENT
1. Property and assets shall be distributed to the creditors
2. No discharge shall be granted
PARTNERSHIPS & CORPORATIONS - Insolvency Law
SECTION 51. Partnerships. — A partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged insolvent, either on the petition of the partners or any one of them, or on the petition of three or more creditors of the partnership, qualified as provided in section
twenty of this Act, in either of which cases the court shall issue an order in the manner provided by this Act, upon which all the property of the partnership, and also all the
separate property of each of the partners, if they are liable, shall be taken, excepting such parts thereof as may be exempt by law; and all creditors of the partnership, and the
separate creditors of each partner, shall be allowed to prove their respective claims; and the assignee shall be chosen by the creditors of the partnership, and shall also
keep separate accounts of the property of the partnership, and of the separate estate of each member thereof. The expenses of the proceedings shall be paid from the
partnership property and the individual property of the partners in such proportions as the court shall determine. The net proceeds of the partnership property shall be
appropriated to the payment of the partnership debts and the net proceeds of the individual estate of each partner to the payment of his individual debts. Should any surplus
remain of the property of any partner after paying his individual debts, such surplus shall be added to the partnership assets and be applied to the payment of the
partnership debts. Should any surplus of the partnership property remain after paying the partnership debts, such surplus shall be added to the assets of the individual
partners in the proportion of their respective interests in the partnership. Certificate of discharge shall be granted or refused to each partner as the same would or ought to be if
the proceedings had been by or against him alone under this Act; and in all other respects the proceedings as to the partners shall be conducted in like manner as if they had
been commenced and prosecuted by or against one person alone. If such partners reside in different provinces, the court in which the petition is first filed shall retain exclusive
jurisdiction over the case. If the petition to be filed by less than all the partners of a partnership those partners who do not join in the petition shall be ordered to show cause why they, as individuals, and said partnership, should not be adjudged to be insolvent, in the same manner as other debtors are required to show cause upon a creditor's petition, as in this Act provided; and no order of djudication shall be made in said proceedings until after the hearing of said order to show cause.
SECTION 52. Corporations and sociedades anonimas; Banking. — The provisions of this Act shall apply to corporations and sociedades anonimas, and upon the
petition of any officer of any corporation or sociedad anonima, duly authorized by the vote of the board of irectors or trustees, at a meeting specially called for that purpose, or by the assent in writing of a majority of the directors or trustees as the case may be, or upon a creditor's petition made and presented in the manner provided in respect to debtors, of the like proceedings shall be had and taken as are provided in the case of debtors:
Provided, That in case the articles of association or by-laws of any corporation the or sociedad anonima provide a method for such proceedings, such method shall be
followed. All the provisions of this Act which apply to the debtor, or set forth his duties, examination, and liabilities, or prescribe penalties, or relate to fraudulent conveyances, payments, and assignments, apply to each and every officer of any corporation or sociedad anonima in relation to the same matters concerning the corporation. Whenever any corporation is declared insolvent, its property and assets shall be distributed to the creditors; due at but no discharge shall be granted to any corporation. The provisions of this Act shall not apply to corporations engaged principally in the banking business, 26 or to any other corporation as to which there is any special provision of law for its liquidation in case of insolvency.
