TITLE III. SCHEMES OF ARRANGEMENT
Art. 1119. - Application for scheme of arrangement.
Any trader who has or is about to suspend payments and has not been declared bankrupt may apply to the court for the opening of a scheme of arrangement, in accordance with the provisions of this Title.
Art. 1120. - Admissibility of application.
1. The application shall not be considered unless it is prepared in the form of a declaration which shall be deposited in the court registry.
2. The debtor shall file the documents specified in Art. 973 together with a report giving the reasons for his suspension or impending suspension of payments, and the reasons for his proposing a scheme of arrangement.
3. The debtor shall also show:
a. that he has been registered with the commercial registry from the opening of his business or for not less than two years;
b. that during this period he has kept proper accounts;
c. that he has not been adjudicated bankrupt nor made a scheme of arrangement within the preceding five years;
d. that he has not been converted of offences under Art. 680-688 of the Penal Code.
Art. 1121. - Proposals contained in application.
1. The application shall contain the following requirements:
a. an undertaking to pay not less cl1an 50% of the capital value of unsecured debts within one year from the date of confirmation of the scheme, or 75% within a period of eighteen month or 100% within a period of three years;
b. a promise to furnish material or personal guarantees to secure the undertakings made under paragraph (a) and giving details of the guarantees.
2. The debtor may propose to assign to his creditors all assets held by him at the date of the application for a scheme of arrangement where the assets are sufficient, to meet payments as provided in sub-art. (1)
Art. 1122. - Refusal to consider application.
After hearing the public prosecutor, the court may refuse the application where any of the conditions laid down in Art. 1120 is not present.
Art. 1123. - Additional reasons for refusing to consider application.
1. The court may refuse the application, notwithstanding that it is made in proper form, where it is of opinion that the debtor is not in a position to comply with the undertaking required under Art. 1121.
2. The court shall refuse, the application where the debtor has absconded closing his place of business, or has misappropriated or fraudulently reduced the value of part of his estate.
3. Where the application is refused under Art. 1122 or under this Article, the court shall make an order for adjudication of the bankruptcy where the debtor has suspended his payments.
Art. 1124. - Application to set aside.
1. No application shall be made to set aside judgments given under Art. 1122 and Art. 1123 (1) and (2).
2. An application to set aside an order under Art. 1123 (3) may be entertained in accordance with the relevant provisions of Art. 984-988.
Art. 1125. - Judgment opening proceedings under scheme of arrangement.
1. Where the court considers that there are merits in the application, it shall order the scheme of arrangement be opened and no application to set aside such an order shall be made.
2. In the decision on ,the application, the court shall;
a. appoint a delegate judge and a commissioner in accordance 'With Art. 994 (1), (4) and (5);
b. order the calling of the creditors' meeting within not more than thirty days from judgment and determine the period within which the judgment shall be published and notified to the creditors;
c. determine a period of time not exceeding eight days within which debtor shall complete the list of his creditors where the debtor has given reasons in his application for not having submitted such list;
d. fix a period of time not exceeding eight days within which the debtor shall deposit in the court registry an amount sufficient to cover the costs.
3. Where the debtor fails to comply with the provisions of paragraphs (c) and (d), the provision of Art. 1123 (3) shall apply.
Art. 1126. - Orders of delegate judge.
Any interested party may apply to set aside orders of the delegate judge in accordance with Art. 992.
Art. 1127. - Commissioner.
The provisions of Art. 997-1001 shall apply to the commissioner carrying out a scheme of arrangement.
Art. 1128. - Publication of judgment.
1. The judgment shall be published by the registrar by means of notices posted at the entrance of the court and by an extract published in a newspaper empowered to publish legal notices.
2. The registrar shall ensure that the judgment be entered in the commercial register in accordance with the provisions of Art. 983 (4.).
3. The delegate judge and the registrar shall enter and sign a note of the judgment at the end of the entries in the debtor's books, and the books shall be handed back to the debtor.
Art. 1129. - Notice to creditors.
1. The delegate judge shall fix the place and time for the creditors' meeting.
2. Within the period of time fixed by the court under Art. 1125 (2) (b), the registrar shall send to each creditor, by registered letter or cable as appropriate, a notice containing:
a. the names of the debtor, the delegate judge and the commissioner;
b. the date of the judgment calling the creditors and the place, date and time of the meeting; and
c. a summary of the proposals of the debtor.
Art. 1130. - Documentary evidence.
Documentary evidence showing that the publications required have been made and that notice has been given to the creditors shall be inserted in the application file of the proceedings.
Art. 1131. - Effect of application for scheme of arrangement.
1. After the application has been made and until final confirmation of the scheme, no creditor holding a claim arising prior to judgment may distrain, acquire a preferred right over the debtor's property or register a mortgage.
2. Prescriptions, preemptions and forfeitures shall be suspended.
3. Unsecured debts enjoying no preferred rights shall be deemed to be due but interest shall be suspended as regards the creditors.
4. Amounts due in respect of taxes are not subject to the provisions of this Article.
Art. 1132. - Administration of debtor's property.
During, the course of proceedings under a scheme of arrangement, the debtor shall retain the administration of his property and the management of his business under the supervision of the commissioner and the guidance of the delegate judge. The commissioner and judge may at any time inspect the books and accounts.
Art. 1133. - Acts of debtor not to affect creditors.
1. Gifts and other gratuitous acts or acts by way of the debtor during the proceedings shall not be creditors.
2. Acts by which the debtor has contracted loans, even by bill of exchange, or compromised or arbitrated, or agreed to assignments not falling within the exercise of the business, or to mortgages or the setting up of pledges, without the written approval of the delegate judge, who shall not give approval unless the necessity is clear, shall not be set up against the creditors.
Art. 1134. - Adjudication bankruptcy during proceedings under scheme of arrangement.
Where the debtor fails to comply with the provisions of Art. 1132 and 1133, or he is shown to have concealed part of his assets, fraudulently omitted certain creditors, increased his liabilities or committed fraudulent acts, the delegate judge shall refer the matter, to the court on the recommendation of the commissioner and the court shall adjudge the debtor bankrupt, without prejudice to such criminal penalties as may be appropriate.
Art. 1135. - Duties of commissioner.
The commissioner shall prepare an inventory of the debtor's estate. He shall check the list of creditors and debtors and prepare a detailed report on the affairs and conduct of the debtor, on the proposed scheme and the guarantees offered to creditors. Such report shall be deposited in the registry not less than five days before the creditors' meeting convenes.
Art. 1136. - Creditors' meeting.
1. The delegate judge shall preside at creditors' meetings.
2. Any creditor may be represented by an attorney appointed by an entry made on the notice calling the creditor to the meeting.
3. The debtor or his attorney shall appear in person. The debtor may be represented by a special agent where it is proved to the delegate judge that he cannot be present.
4. After the commissioner's report has been read, the debtor shall submit his final proposals.
Art. 1137. - Consideration of proposals for scheme.
1. Any creditor may give reasons for not accepting the scheme and discuss the concurrence of debts.
2. The debtor may reply and discuss the debts. He shall give such information as may be required.
3. The discussion shall be summarily recorded in the minutes and the documents, if any, shall be annexed, thereto.
Art. 1138. - Extension of meeting. Where the business of the meeting cannot be finished on the day fixed, it shall be adjourned to the next working day without further notice to creditors, even though not present at the meeting.
Art. 1139. - Provisional admission of debts in dispute.
1. The delegate judge may grant provisional admission of debts in dispute in whole or in part, for the purpose of voting and calculation of the majority, but such admission shall not affect the final decision on the standing of such debts.
2. Creditors who have not been admitted may, at the time of confirmation of the scheme, appeal against their not having been admitted, where the majority would have been different, had they been admitted.
Art. 1140. - Majority required for approval of scheme.
1. The scheme of arrangement shall be approved by a majority of creditors representing not less than two-thirds of all non-preferred or unsecured debts.
2. Secured creditors may not vote, unless they give up their security. Such surrender may be partial but shall not be less than one-third of the full value of the debt.
3. Where a secured creditor has voted without having made a partial surrender under sub-art. (2), he shall be deemed to, have made a full surrender where he accepts the scheme under Art. 1141.
4. The court, when confirming the scheme, shall take into account the increase in the debtor's assets which has occurred under sub-art. (2) and (3).
5. Where a scheme is not completed or confirmed or is set aside or cancelled, the surrender of a security, even though partial, shall cease to have effect.
6. The provisions of Art. 1083 (4) and (5) shall apply to voting under this Article.
Art. 1141. - Acceptance of scheme.
1. The names of the creditors, the value of their debts and the way each of them voted shall be recovered in the minutes of the meeting, which shall be signed by the delegate judge, the commissioner and the registrar.
2. Creditors notifying their acceptance of the scheme by cable or letter within ten days after the minutes have been prepared shall be entered in the margin of the minutes by the registrar and included in the calculation of the majority.
Art. 1142. – Nun-approval of scheme.
Where the scheme of arrangement is not approved in accordance with Art. 1140 and 1141, the delegate judge shall without delay inform the court, which shall of its own motion adjudge the debtor bankrupt.
Art. 1143. - Procedure for confirming scheme.
1. The delegate judge shall in the minutes and before such minutes are signed, make an order in writing for the parties to appear before the court within the next twenty days when the scheme will be confirmed.
2. The commissioner shall deposit his reasoned order in the registry not less than three days before the application for confirmation of the scheme is heard by the court and the delegate judge shall submit a report at the hearing.
3. The debtor and the creditors may be heard on the hearing of the application.
Art. 1144. - Confirmation of scheme by the court.
1. When the court is satisfied that the provisions of this Tide have been complied with, it shall:
a. Consider the financial advisability of the scheme with respect to the creditors, having regard to the existing activities and potentialities of the firm; and
b. seek the majorities required by law. To this effect, the court shall provisionally estimate the importance and amount of the debts declared with a view to estab1ishting whether there is a majority, without prejudice to the final judgments to be given; and
c. examine whether the securities offered are sufficient to guarantee the enforcement of the scheme and, in the case provided in Art. 1121 (2), whether the property assigned by the debtor is sufficient to meet the claims to the extent prescribed by Art. 1121 (1); and
d. consider whether the debtor deserves to be granted approval of the scheme, taking into account the reasons for his failure.
2. The court shall adjudge the debtor bankrupt where it does not confirm the scheme.
3. In its judgment confirming the scheme, the court shall make an order for:
a. the deposit of the dividend due in respect of declared debts;
b. the amount to be set aside to cover debts in dispute; and
c. the procedure for payment of amounts due at successive intervals under the scheme, unless this matter is referred to the delegate judge.
Art. 1145. - Assignment of property.
Where the scheme provides for the assignment of the debtor’s property under Art. 1121 (2) and subject to different stipulations, the court shall in its judgment:
a. appoint liquidators and a committee of the three or five creditors to supervise the winding-up; and
b. fix the details therof.
Art. 1146. - Prohibitions as regards debtor.
1. Unless otherwise provided in the scheme or in a resolution adopted under this Title and confirmed by the court, the debtor shall not dispose of or charge his immovable property, agree to rights of pledge or set aside any part of his assets otherwise than as required by the nature of his business, until he has fully carried out in duties under the scheme.
2. Any act done in violation of the provisions of sub-art. (1) shall not be set up against creditors prior to the confirmation of the scheme of arrangement.
Art. 1147. – Publication of judgment.
Judgments confirming or refusing confirmation of a scheme shall be published in accordance, with the relevant provisions of Art. 983.
Art. 1148. - Application to set aside judgement confirming the scheme.
1. The creditors who dissent and any interested party may apply to the court to set aside the judgment confirming the scheme within five days after the minutes have been prepared.
2. The reasons for the application shall be given and the application notified to the debtor and the commissioner.
Art. 1149. - Appeals against judgment confirming or refusing to confirm the scheme.
The debtor and the creditors who have made an application under Art. 1148 may appeal against the judgment confirming or refusing to confirm the scheme within fifteen days from the publication of the judgment, notice of appeal being served on the debtor, the commissioner and all parties to the proceedings.
Art. 1150. - Effect of judgment confirming the scheme.
1. The judgment confirming the scheme of arrangement shall bind all creditors prior to the opening of the proceedings for the scheme, but their rights against persons jointly and severally liable with the debtor, sureties and assignees shall not be affected.
2. Such persons may be heard on the hearing of the application for confirming the scheme. .
Art. 1151. - Supervision of carrying out of scheme.
1. The carrying out of a scheme which has been supervised by the commissioner, in accordance laid down in the judgment.
2. The commissioner shall inform the delegate judge of any fact likely to prejudice the creditors.
3. The delegate judge shall pay the costs and fees due to the commissioner during his term of office, notwithstanding any provision to the contrary.
Art. 1152. Setting aside of scheme of arrangement.
1. The provisions of Art. 1091 and 1093 shall apply where a scheme of arrangement is set aside but the duties of the trustee be carried out by the commissioner
2. Where a scheme of arrangement provides for an assignment of property under Art. 1121 (2), the scheme shall not be set aside where the proceeds of the assignment are sufficient to meet 50% of the debts.
Art. 1153. - Clause of return to good fortune.
The application of a clause in a scheme of arrangement providing that the debtor shall only be discharged where his fortune remains bad shall be limited, to a period of five years and to cases where the debtor's assets exceed his liabilities by not less than 25%.