Sec. 124. FORM OF CERTIFICATE OF DESTRUCTION OF NOTES ABOVE MENTIONED.

By-law of Association Certificate of Destruction of Notes of the (here mention name respecting of bank) accompanying monthly Circulation Statement for bank notes. month of .. A. D. 190..

We, the undersigned, hereby certify that we have examined bank notes of this Bank amounting to $..... consisting of the following, viz: (here set out the denominations) and have burned and destroyed the same, and that the said notes so burned and destroyed by us are not included in any other Certificate of Destruction of Notes signed by us or any of us, or to the best of our knowledge and belief, by any other person to accompany the present or any monthly circulation statement made or to be made to the President of the Canadian Bankers' Association.

this

day of

Directors of said bank.

19..

General Manager.

(b) For all purposes of this by-law, the chief place of business of the Bank of British North America shall be the chief office of the said bank of the City of Montreal, in the Province of Quebec.

And in the case of the said Bank of British North America the said monthly circulation return shall be signed by the general manager's clerk, or acting general manager's clerk, and by the general manager or the acting general manager of the said bank; and the said certificate of destruction of notes shall be signed by the general manager or acting general manager, the inspector or assistant inspector, and the local manager of the Montreal branch or the acting local manager of the Montreal branch of the said bank, instead of by the persons respectively hereinbefore directed to sign the said returns respectively.

(c) Every bank which neglects to make up and send in as aforesaid any monthly return required by this by-law within the time by this by-law limited, shall incur a penalty of fifty dollars for each and every day after the expiration of such time during which the bank neglects so to make up and send in such

returns.

(d) The executive council of the Association shall have Sec. 124. power, by resolution, at any time to direct that an inspection By-law of shall be made of the circulation accounts of any bank by an Association officer or officers to be named in such resolution, and such in- respecting spection shall be made accordingly.

(e) Some person or persons appointed from time to time by the executive council of the Association shall during the year 1901 (and during every year thereafter) make inspection of the circulation accounts of every bank doing business in Canada, whether members of the Association or not, and shall report thereon to the council; and upon every such inspection all and every the officers of the bank whose circulation account shall be so inspected, shall give and afford to the officer or officers making such inspection, all such information and assistance as he or they may require to enable him or them fully to inspect said circulation account, and to report to the council upon the same, and upon the means adopted for the destruction of the

notes.

(f) The amount of all penalties imposed upon a bank for any violation of this by-law shall be recoverable and enforceable with costs, at the suit of the Canadian Bankers' Association, and such penalties shall belong to the Canadian Bankers' Association for the uses of the Association.

(g) The President of the Canadian Bankers' Association shall each month have printed and forwarded to the chief executive officer of every bank in Canada subject to the Bank Act, whether a member of the Association or not, a statement of the circulation returns of all the banks in Canada for the last preceding month, as received by him.

(h) In this by-law it is declared for greater certainty that the Canadian Bankers' Association herein mentioned and referred to is the Association incorporated by special Act of Parliament of Canada, 63 and 64 Vict., c. 93.

bank notes.

Application of Windingup Act.

CHAPTER XXIV.

INSOLVENCY OF A BANK.

Secs. 125 to 129 and 131 are not applicable to the Bank of British North America (sec. 6).

In the event of the insolvency of a bank, proceedings may be taken for its winding-up under the Dominion Winding-up Act (R.S.C., c. 144) enacted by Parliament by virtue of its jurisdiction over bankruptcy and insolvency. (Schoolbred v. Clarke, 1890, 17 S.C.R. 265.)

It would be competent for the Parliament of Canada to pass a special Winding-up Act applicable to banks alone (Quirt v. The Queen, 1891, 19 S.C.R. 510). Instead of doing so, it has made applicable to banks, with some variations, the general Act for the winding-up of incorporated companies.

Upon suspension of payment by a bank, and pending the resumption of business or the appointment of a liquidator, a curator (sec. 117) is to be appointed by the Canadian Bankers' Association, to supervise the affairs of the bank in order to protect the interests of shareholders and creditors, and ensure the proper disposition of the assets.

By sec. 128 the directors of an insolvent bank are required, after a certain time, and if no proceedings are taken under the Winding-up Act, to make calls on the shareholders under the double liability clause, without waiting for the collection of debts or sale of assets.

The Winding-up Act (sec. 6) applies "to incorporated banks, savings banks, incorporated insurance companies, loan companies having borrowing powers, building societies having a capital stock, and incorporated trading companies doing business in Canada wheresoever incorporated and, (a) which are insolvent; or, (b) which are in liquidation or in process of being wound up, and, on petition by any of their shareholders or creditors, assignees or liquidators ask to be brought under the provisions of this Act."

As to when a bank is deemed insolvent, see sec. 127 of the Bank Act, and notes.

It is outside the scope of this book to discuss all the provisions of the Winding-up Act which are of general application to insolvent companies. Certain sections of the Act apply only to banks (see secs. 8 and 149) and will be noted under the sections of the Bank Act included in this chapter. Certain other sections which relate to subjects dealt with in the Bank Act will also be noted.

In addition to the sections included in this chapter, the fol- Sections of lowing earlier sections of the Act contemplate the insolvency of Bank Act a bank:

Sec. 61 forbids the issue by a bank of its notes during any period of suspension of payment, or, except under certain conditions, after the resumption of business.

Secs. 64 et seq. provide for payment out of the Bank Circulation Redemption Fund, under certain conditions, of outstanding notes of a bank which has suspended payment. The excess of any payments made for such purpose out of the fund over the amount in the fund to the credit of the bank in respect of whose notes the payments are made is recoverable out of the assets of such bank.

Sec. 115 provides for the payment to the Minister of Finance of the amount of any moneys payable to shareholders or depositors, which are unclaimed at the completion of the winding-up of a bank or at the expiration of three years from the suspension of payment or the commencement of winding-up proceedings. Sec. 116 contains a somewhat similar provision in regard to the amount of outstanding notes.

relating to nsolvency.

INSOLVENCY.

shareholders

125. In the event of the property and assets of the bank Double being insufficient to pay its debts and liabilities, each shareholder liability of of the bank shall be liable for the deficiency, to an amount equal to the par value of the shares held by him, in addition to any amount not paid up on such shares. 53 V., c. 31, s. 89.

This section dates from 1871 and is commonly known as the double liability clause. Its effect is to render a shareholder liable (in addition to the extent to which his shares are not paid

Sec. 125. up) for an amount equal to the par value of the shares held by him, or so much of such amount as may be needed to pay the debts and liabilities of the bank.

Set-off.,

As to what persons are shareholders, see secs. 37, 43 et seq., 53 and 130, and notes to these sections.

The Winding-up Act (sec. 51) provides that "every shareholder or member of the company or his representative, shall be liable to contribute the amount unpaid on his shares at the capital, or on his liability to the company, or its members or creditors, as the case may be, under the Act, charter or instrument of incorporation of the company, or otherwise," and "the amount which he is liable to contribute shall be deemed an asset of the company, and a debt due to the company, payable as directed or appointed under this Act." Cf. also secs. 52 and 53 of the same Act. The Winding-up Act also provides that the law of set-off, as administered by the courts, whether of law or equity, shall apply to claims upon the estate of the company, and to all proceedings for the recovery of debts due or accruing due to the company at the commencement of the winding-up (sec. 71), except as to debts of the company transferred within 30 days next before the commencement of the winding-up of a company under the circumstances mentioned in sec. 100 of the Act.

A contributory under the double liability clause cannot, however, set off against such liability a debt due to him by the bank, there not being that mutuality between the cross-demands which is essential to set-off (Maritime Bank v. Troop, 1888, 16 S.C.R. 456). Quære, whether the liability of a shareholder for the amount of his shares not paid up is in the same position as regards set-off.

As to acquiring debts for the purpose of set-off, see In re Central Bank and the Winding-up Act, 1888, 15 O.R. 625; Maritime Bank v. Robinson, 1887, 26 N.B.R. 297.

See sec. 128 of the Bank Act and notes, as to the enforcement of the double liability. It was held in Brooke v. Bank of Upper Canada, 1869, 16 Gr. 249, in an action against the bank and certain creditors, that a bill would also lie in equity, at the suit of a creditor, to enforce the double liability, but that such bill must be on behalf of all the creditors.

An infant cannot be made liable upon shares standing in his name, he not having received the dividends and repudiating lia