Sid ney Greenwood and Nancy Fitzgerald had worke d for National Business Systems, an international computer repair service, for ten years. It th erefore came as a surprise when they both received lay - off notices on a Friday afternoon late in December 2010 . Both were given severance packages that matched t heir seniority so they decided that this might be the catalyst to launch t heir own business rep airing computers and related equipment for business es in their community. Both were single, so no one else would be affected if the business failed. Sidney had graduated from a community college with a diploma in computer technology while Nancy had left high school after grade twelve, having taken several business courses prior to graduating. They decided to establish a partnership and to call their firm Compa ct Business Systems, closely mimicking a large successful firm in another city called Compaq Bu siness Systems. Since they had no plans to expand their business beyond their own community, they did not believe that the similarity in names would pose a probl em. In fact, Sidney and Nancy so admired the colours used in the Compaq B usiness Systems logo that they used similar gradient tones of red on all their signage and advertisements. Sidney and Nancy also named their prem ium same day service: Presidio Ser vice (a name similar to , but not exactly the same as, one already tradema rked by Compaq Busine ss Systems) and this became their most popular standard of service outselling their three day Invest S ervice by a margin of two to one. Sidney and Nancy gave no thought to the non - competition clause they had signed with National whe n they were hired. A ll employees of National were required to sign a non - competition covenant stipulating that they would not work for a competitor or start up a competitive busines s within three years after leaving National Business Systems. There was n o geographic restrict ion contained in the non - competition clause, as National Business Systems had customers all over the world. In con sid ering their start up costs, the pair determ ined that they would need a small shop to conduct their business from, som e testing and repair - equipment, a modest inventory of electronic components and a delivery van to pick - up and return equipment they would repair. They would also need to do some adv ertising in the local newspaper to get their name in front of the public. Pooling their resour ces they found they had a shortfall in start - up capital of some $50,000. Because neither Sidney nor Nancy owned a home or had any appreciable assets, the bank would not lend them the money without a guarantor. Nancys uncle Fred wa s fairly well establi shed and agreed to sign a continuing guarantee for the necessary funds, insisting that this was as much as he was prepared to be on the hook for, so they bett er make do. This 2 limitation however, was not written into the agreement w ith the bank, nor was the bank made aware of it. Compact Business Systems opened for business on March 1, 20 11 . In the first couple of months after start - up the business was goin g extremely well. On April 15, 20 11 , one of Compacts customers - Lucky A ccounting delivered one of its (Luckys) desktop HQ computers to Compact. Compact was asked to upgrade the computer and install a new operating system known as Vulnerable. When L uckys employee returned to Compact on April 21 st to pick up the HQ comput er, Compact informed the Lucky employee that he was out of luck because the HQ computer had been stolen in a break - in the night before. Neither Compact nor Lucky had any insurance c overage on the HQ computer. Compact had installed surveillance cameras in the store and there was a sign on the door identifying an alarm company. In order to save money, however, Compact had stopped paying for the alarm monitoring and the surveillance cameras were just dummies. Compacts desk clerk calmly explained to the L ucky employee that th e loss was not Compacts fault. The Lucky employee became very angry but she was not able to obtain any satisfaction from Compact. When Compact upgraded comput ers, this often involved not only changing the hardware but also adding ad ditional software. S hawna, a mature looking17 year old high school student, brought her computer into Compacts. Shawnas computer had not being working well lately and she had abs olutely no idea why that was the case. Compacts desk clerk advised Shawn that the only way to improve the computer would be for her to purchase Compacts Deluxe Upgrade Package for $750.00. Shawna , under the urging of the desk clerk , agreed and signed t he work order. Shawna picked up her computer a few days later. Once she had her computer at h ome it worked perfectly. When her parents returned home and found out how much she had spent to repair the computer her mother called a friend in the computer r epair field who advised her that the repairs should have cost no more than $200. About a week after Shawna had visited the store, Nancy, who happened to be working at the counter, spotted a customer behaving strangely. Upon closer observation she saw him slip some small computer components into his pocket and move towards the exit. Nancy got anot her clerk who was in the back working on some computers and, after the customer had left the store, Nancy and the clerk approached him and demanded that he empty his pockets. The customer refused and Nancy demanded that he come back i nto the store while s he called the police. Intimidated by the other clerk (whose nickname was Moose) and believing that he had no choice but to comply he accompanied them into the store. He was placed in the break room and the door was closed. He wait ed until the police a rrived and was subsequently arrested and charged with theft. Later that day a long term customer, known to his friends as Shady , brought his computer to Compa ct. Shady had heard that Compact would install software (named FreeFromIT unes) , created by a c ompany called S ketchysoft, which would allow Shady to download music and movies from itunes .com without payment. Compact installed this software and Shady paid the $400.00 fee. Whe n Shady got his comp uter home he realized that FreeFr omITunes did not work at all and , in fact , resulted in Shady being charged double for each download. Sidney and Nancy called on several of National Business Systems customers and pe rsuaded several to switch their business with offers of reduced service ch arges and faster turn - around. Sidney and Nancy were particularly proud that they were able to persuade the regional office of 3 International Tire Inc. to bring all their computer rep air work to Compact. International Tire Inc. , who was National Business S ystems largest custom er, was in the 3 rd year of a 5 year service contract with National Business. Nancy was also quick to point out to those she called on that she had long suspecte d National Business Systems of overcharging its bigger customers and using off - shore components of inferior quality in their repairs. Needless to say, many of Nationals customers were eager to switch their business in favour of the lower prices offered by Compact. On June 1, 20 11 , Compact Business Systems signed a three year a greement with Interna tional Tire Inc. Terms of the contract included the requirement that Compact would repair all of International Tires computers in a timely manner and that Inte rnational would send all of its computer repairs to Compact during the 3 y ear period. The cont ract was signed by the President of International Tire (on behalf of International Tire Inc.) and by Sidney Greenwood. Another term of the contract required Com pact to pick up, repair and return the computers within an average time o f approximately 4 bus iness days. Sid and Nancy were fortunate to get a large contract from another tire manufacture American Tire Corporation based in Nova Scotia. This contra ct was fixed price contract. Sid and Nancy negotiate a deal that would pa y $100,000 per year f or 4 years for keeping ATCs computers working in tip top shape. The contract contained Sid and Nancys cost exposure because ATCs ability to util iz e their ser vices was limited to having Sid and Nancy repair or upgrade a maximum of 1 300 computers a year. A contract covering this work was executed by both parties. A few days after the contract was signed, Nancy notice that the contract stated that the annual pa yment would be $10,000 per year. Around Thanksgiving 20 11 , things started to go wrong. Nancy, who had agreed to take care of the administrative end of the business, had fallen behind in paying the firms bills and several suppliers were becoming impatien t. At the same time, payments were not coming in from their customers and Nancy was too busy t o spend time chasing the delinquent accounts. Mainly as a result of this, cash flow was tight. By this time , Sidney and Nancys business had paid $15,000 o f the initial loan. The pair approached the manager of the bank for an add itional $40,000 in or der to pay off the remainder of the initial loan and have an additional $5,000 to get them through their tight spot. The bank manager agreed and provided the needed funds with all of Compacts business assets to be secured against t he additional funds. One night a couple of weeks later, Sidney was delivering a computer to a customer on his way home from work and had an accident. A young woman in the other ca r, Freda Schmidt, was seriously injured, suffering serious neck and back i njuries. It was deter mined that Sidney had made an improper lane change and he was subsequently charged with dangerous operation of a motor vehicle. As it turned out, Freda was a hig hly paid administrative assistant and when her boss learned she could be o ff work for at least three months, was going to sue for the loss of her services and the cost of replacing her on a temporary basis. By early November, the average time Compact to ok to repair a computer had slipped from 4 business days to 7 or 8 busines s days. After severa l complaint s from International to Compact, International advised Compact that it was cancelling the contract because Compact had 4 breach ed a condition of the con tract. International Tire Inc. stopped sending its computers to Compact f or repair. In additi on, d uring the last two months of the ir first year , the economy went from bad to worse. Orders dropped off, suppliers were screaming for payment in full on their overdue accounts, and the bank was threatening to seize the collateral po sted as security for their loan. Sidney and Nancy decided that they had had enough and decided to declare bankruptcy. Believing that uncle Fred was in the clear, it seemed like the y had nothing to lose. The bank could go pound salt. In the week be fore the pair were to visit their lawyer to discuss the bankruptcy process, Sid and Nancy wrote cheques to three of their suppliers whom they felt had treated them well and who they did not want to leave holding the bag. They also arranged to sell off som e unused inventory to a discount warehouse for 30% of its original value. They pocketed the cash they received from the sale, believing that they were entitled to it as compensation for all of their hard work. In early January 20 12 , they met with their l awyer to start bankru ptcy proceedings. They disclosed their financial situation, including the most recent loan arrangement they had with the bank. Although the lawyer only gave th e initial loan agreement with the bank a cursory look, he assured them the inventory was the on ly security the bank was entitled to. The delivery van, which was leased, could be returned to the leasing company without any additional costs and they would s imply abandon the lease for the building they were using as a workshop. Meanwhile, the leasin g company, having heard about Compacts troubles, decided to try and recover their van, fearing that bankruptcy proceedings could see it tied up for weeks once t he trustee in bankruptcy put a lock on the firms premises. They ordered their agents to break into Sidney & Nancys shop late one night to recover the van. In doing so, the agents broke the padlock on the door and, while moving through the dimly lit pre mises, one of the agents tripped over an electric heater which ignited a p uddle of solvent Nanc y had spilled and failed to clean up. The solvent ignited immediately causing a fire that quickly spread through the shop. Serious damage was done to the sho p and one of the agents sustained serious burns while putting the fire out . He was out of work for three months recovering from the injuries

Describe the steps taken by Sid and Nancy immediately prior to the bankruptcy that may be offences under the Bankruptcy and Insolvency Act. What is the legal term used to describe each of these steps (events)?