Conclusion. Finally there can be no doubt that it is improper to state as a reserve fund any sum which has not been actually set aside, out of profits, solely for the purpose of providing against unforeseen contingencies.

It might be added that the word "fund" is, in many cases, used in the same sense as the words "fund account.' Considerable discussion of this question has taken place recently, it being contended by some that a "fund" can only be an asset, the word itself indicating something which is tangible. The discussion, therefore, hinges largely on the interpretation of the meaning of the word, and it is hoped that there will very soon be uniformity of opinion on the subject. At present, however, most large corporations use the former word.

The mere existence of large reserve accounts does not in itself suffice to ward off disaster, hence many unfortu nate stockholders have bitterly stated that these paper reserves were "fictitious," and there is much truth in their contention. Reserve funds should be actually invested in securities outside the business itself, and the balance-sheet should show them properly "ear-marked."

X

INSOLVENCY, BANKRUPTCY, AND

RECEIVERSHIPS

Illustration of Preceedings-Causes of Insolvency-Remedies in the Event of Insolvency-Voluntary Proceedings-Involuntary Bankruptcy-Acts of Bankruptcy-Filing Petition by CreditorsReceiverships-How Appointed-Duties of a Receiver-Order of Payment by Receivers-Reorganizations-Cash Requirements— Fixed Charges-Voting Trusts.

B

X

INSOLVENCY, BANKRUPTCY,

AND RECEIVERSHIPS

ANKRUPTCY is the taking control of the property of an insolvent by the court. Insolvency is a personal matter. It is for insolvency rather than for bankruptcy that the State laws make provision. The various States of the Union have, at times, passed laws which sometimes resemble insolvency laws, and sometimes resemble bankruptcy laws. The test as to whether ' a person is insolvent or bankrupt is to observe whether upon assigning all his property for the benefit of his creditors he is discharged from further liability for his then existing debts. If he is discharged from further obligation under these debts, the law, whatever it may be called, is a bankruptcy law; if not, the law is practically an insolvency law.

Illustration of Proceedings.-Let us say that A, who is in financial difficulties, endeavors to clear himself. He does not go into court, but simply assigns, or turns over, all his property to X, as an assignee, directing the latter what to do with it. A's creditors are not compelled to accept this arrangement. They could file a petition in a State court against A, and ask that the State court take charge of A's property: that is, that it appoint an assignee. Then, under this latter situation, the court has control of the property of A. This action would supersede any voluntary assignment made by A to X.

Another kind of proceedings which may be taken by the creditors of A is that they file a petition in the United States District Court to put A in bankruptcy under