VI INSOLVENCY

The law of insolvency has a significant bearing on commercial enter­prise, since, when contemplating taking risks, all but the boldest will reflect for a moment on the consequences of financial disaster.

Insolvency

109 uncertain. It seems unlikely that a deeply obscure provision of the Twelve Tables (3.6) - ‘let them cut up their shares' (partes secanto) actually referred, as used to be believed (perhaps by those who had recently read The Merchant of Venice), to the creditors carving up the debtor's body rather than his assets. But what personal execution did mean was that the debtor, although not enslaved, was in the power of the creditor and could be imprisoned. It may be that this continued until he had worked off his debt, although this is not certain.

In classical times, the normal procedure seems to have been execution against the debtor's property. Even this was extremely drastic. A credi­tor who was not satisfied could seek an order from the praetor for seizure of the debtor's whole property. Fortified with this order, the creditor could then take possession and administer the property on behalf of all the creditors of the debtor; the granting of the order was publicized, presumably to allow other creditors to join the proceedings. This stage was typically followed by a public auction of the debtor's whole prop­erty, in which the property was knocked down to the bidder who offered the creditors the highest dividend on their claims.

From the creditors' point of view, it seems clear that this sort of system could hardly have been guaranteed to produce the best return: it might well have been possible to sell specific items of property for more, indi­vidually. But the notion that seems to lie beneath this system is that, with the exception of privileged creditors such as the fisc or certain munici­palities (Plin., ep. 10.108-9), all creditors must be treated in the same way. For that reason the praetor introduced a series of remedies which made it possible to undo a transaction under which one creditor had know­ingly benefited at the expense of the others within the year preceding insolvency (Kaser 1971: 251-2).

From the debtor's point of view, the remarkable - and very harsh - feature of this system was that the sale was not only of items of the debtor's property sufficient to meet the debt (as would, for example, typ­ically be the case nowadays), and it made no difference that one or two items in his estate might satisfy it: the whole had to be sold up. Behind this system is a notion of bankruptcy quite different from our own: the modern conception in Britain is that the debtor's estate should be taken out of his control and administered by a trustee, in order to realize the assets and satisfy the creditors as far as possible. In contrast, in the Roman approach lurks the idea that the debtor must be punished. Two further points support this view. First, the fact that the proceedings made

the debtor infamis, not quite the same as ‘infamous', but a state which (crucially) involved social stigma, as well as some civil disabilities, such as being unable to be a judge, to appoint an agent to conduct litigation, or as a rule to conduct litigation on behalf of anyone other than oneself (Kaser 1996: 194, 208, 212, 383-403).

Second, Augustus (or possibly Caesar) introduced a procedure, bonorum cessio, which mitigated the harshness of this regime to some extent.

A procedure under which only items of property sufficient to meet the debt were sold up became routinely available under the cognitio system of procedure, which gained ground throughout the principate but appears to have superseded the formulary procedure only in the third century. Prior to that, however, though at an uncertain date, a senatus consultum had apparently permitted claraepersonae, members of the senatorial class, to enjoy such a privilege. They therefore could avoid the worst rigours of insolvency; and under this procedure they did not become infames either. But that was not the normal rule for the classical system of pro­cedure (Kaser 1996: 404-5).

With failure bringing this unattractive prospect into view, it seems likely that a Roman would have taken great care to structure business dealings so as to avoid the risk of personal insolvency and the sale of his entire personal property. Whether these rules inhibited commerce as a whole is a question which it is really impossible to answer.