Act of bankruptcy

Creditors, and buyers assessing whether a seller could be forced into bankruptcy, meet this term. The Office of the Superintendent of Bankruptcy says a bankruptcy order forces a person or business into bankruptcy and that only a creditor can apply for one.

How it works

Section 42(1) lists the cases. They include a fraudulent gift, delivery or transfer of property, a transfer or charge that would be void as a fraudulent preference, giving a creditor notice that payment of debts has been or is about to be suspended, defaulting in a proposal, and ceasing to meet liabilities generally as they become due. Subject to s. 43, one or more creditors may apply for a bankruptcy order if it is alleged that their debts reach the amount the section sets and that the debtor committed an act of bankruptcy within the six months preceding the filing (s. 43(1)). The court requires proof and may then make an order, but must dismiss if it is not satisfied with the proof of the facts or of service, or is satisfied the debtor can pay its debts or that for other sufficient cause no order ought to be made (s. 43(6) and (7)). Sections 43 to 46 do not apply to individuals whose principal occupation and means of livelihood is fishing, farming or the tillage of the soil, or to certain wage earners who do not carry on business on their own account (s. 48).

What to check

• Whether any listed event has occurred and when, since the six months run back from filing.
• Whether an application is pending or an order has been made.

See how to buy assets from an insolvent company through a BIA process and the bankruptcy and insolvency search entry.