Credit Laws
Bankruptcy Amendments Coming into Force
The Office of the Superintendent of Bankruptcy (OSB) is pleased to inform you that on September 18, 2009, the remaining amendments contained in chapter 36 of the Statutes of Canada, 2007, and chapter 47 of the Statutes of Canada, 2005 (c.36 and c.47) will come into force.
Please consult the OSB website at http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02261.html for more information on the coming into force, as well as links to the Companies’ Creditors Arrangement Regulations, updated Bankruptcy and Insolvency General Rules, updated forms and directives, and general information on the Companies’ Creditors Arrangement Act.
Note: If you encounter any difficulty in accessing the OSB Website, please send an e-mail to: OSBBSF@ic.gc.ca.
Regulatory Impact Analysis Statement
Issue and objectives
Amendments to the Bankruptcy and Insolvency General Rules and new Companies’ Creditors Arrangement Regulations have been made with regard to two initiatives. The first initiative is a comprehensive legislative reform package that requires corresponding regulatory amendments in order to give effect to the legislative amendments. The second initiative is the Government of Canada’s commitment to reduce the paper burden by 20% as included in Advantage Canada, the 2007 Fall Economic Statement and the 2008 Budget.
Description and rationale
These regulatory amendments and new regulations provide certainty and clarity for stakeholders with respect to recent amendments to insolvency legislation by adding definitions and standardizing information to be provided under the Bankruptcy and Insolvency Act. They also streamline the administrative burden particularly for trustees in bankruptcy.
1. Legislative reform
In 2005, a comprehensive insolvency reform package was introduced in Parliament in the form of Bill C-55 to modernize the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA), as well as to create the legislative framework for the Wage Earner Protection Program (WEPP). The Bill received Royal Assent on November 25, 2005, thereby becoming chapter 47 of the Statutes of Canada, 2005 (Chapter 47). Certain technical amendments were required to be made to Chapter 47 before it could be brought into force. Those technical amendments were contained in Bill C-12, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act, the Wage Earner Protection Program Act and chapter 47 of the Statutes of Canada, 2005 (Bill C-12). Bill C-12 received Royal Assent on December 14, 2007, thereby becoming chapter 36 of the Statutes of Canada, 2007 (Chapter 36).
The Bankruptcy and Insolvency General Rules are amended in order to give effect to the new provisions in the legislation. In addition, the Office of the Superintendent of Bankruptcy (OSB) has a new mandate under the CCAA. Therefore, new regulations were required under the CCAA in order for the Superintendent to carry out the new mandate and to implement the changes to the legislation. The nature of the amended BIA Rules and the Companies’ Creditors Arrangement Regulations are as follows:
(A) Bankruptcy and Insolvency General Rules
- Rule that prescribes certain stock exchanges and regulatory bodies for the purpose of the Act;
- Increase to the asset limit for summary administration bankruptcy estates from $10,000 to $15,000 to allow more bankrupts to qualify for this more streamlined and simplified process of administration of a bankruptcy estate;
- Rule prescribing the form and manner to send a notice to disclaim or resiliate an agreement in order to increase consistency in this process;
- Rule regarding the maximum prescribed amount ($1,800) for post-discharge payment agreements between the trustee in bankruptcy and the bankrupt in order to ensure individuals who need access to the insolvency system are able to do so;
- Rule outlining the prescribed circumstances and times under which the trustee is obliged to prepare a report under section 170 of the BIA in order to streamline the administration of a bankruptcy estate and to decrease the regulatory burden on trustees;
- Rule describing the information that a foreign representative must include in a notice of the order recognizing a foreign proceeding, which is to be published in a newspaper in Canada, in order to provide consistency, predictability and transparency; and
- Updates to section references in the legislation that have changed as a result of the legislative amendments.
(B) Companies’ Creditors Arrangement Regulations
The CCAA permits debtor companies with debts exceeding $5 million to make compromises or arrangements with their creditors in order to avoid bankruptcy. The Superintendent of Bankruptcy has a new mandate to create a registry of CCAA filings and to oversee the monitors in CCAA filings. Specifically, the Superintendent is required to keep a public record of filings under the CCAA; may apply to the court to review the appointment or the conduct of a monitor; keeps a record of all complaints regarding the conduct of the monitor; and may make, or cause to be made, any inquiry or investigation regarding the conduct of monitors that he or she considers appropriate. This new role of overseeing the monitor provides increased transparency to the proceedings under the CCAA and protects the integrity of Canada’s insolvency system. Additionally, the monitor, who did not have to be a licensed trustee in bankruptcy prior to the legislative amendments, must now be a trustee licensed by the Superintendent thereby increasing the level of oversight. The new Regulations provide:
- Regulation that prescribes certain stock exchanges and regulatory bodies for the purpose of the Act;
- Regulation outlining what prescribed representations are to be included in the report regarding the preparation of the debtor company’s cash-flow statement that must accompany the initial application under the CCAA;
- Regulation outlining the prescribed manner for giving notice to the monitor of the delegation by the Superintendent under the CCAA;
- Regulation outlining the prescribed information to be contained in the notice of the order made on the initial application in respect of a debtor company;
- Regulation outlining the prescribed manner in which the order made on the initial application and a list of creditors are to be made publicly available;
- Regulation outlining the documents to be filed with the Superintendent of Bankruptcy;
- Regulation outlining the prescribed documents that the monitor is to make publicly available including the manner and time in which the monitor is to make the documents publicly available;
- Regulation outlining the prescribed information to be contained in the public record and the prescribed period for keeping the public record;
- Regulation prescribing the manner in which the notice to disclaim or resiliate an agreement is to be sent; and
- Regulation describing the information that the foreign representative must include in a notice of the order recognizing a foreign proceeding, which is to be published in a newspaper in Canada, in order to provide consistency, predictability and transparency.
2. Paper burden reduction initiative
The Government of Canada’s commitment to reduce the paper burden by 20% was included in Advantage Canada, the 2007 Fall Economic Statement and the 2008 Budget.
The goal of the initiative is to reduce the administrative burden borne by businesses, by implementing a 20% reduction of the number of federal administrative requirements and information obligations set out in the consolidated statutes and the associated regulations, policies, guidelines and forms for which key federal departments and agencies are responsible.
In keeping with the initiative, certain Bankruptcy and Insolvency General Rules were amended in order to streamline some of the administrative steps in an insolvency file with a view to eliminating unnecessary administrative requirements and information obligations.
These amendments to the Bankruptcy and Insolvency General Rules are the following:
- Increase from $1,000 to $2,500 the existing cap on the amount that the trustee may pay for legal services without first obtaining court approval. This will streamline administrative steps;
- Repeal certain rules that are repetitive;
- Eliminate the circumstances under which the OSB receives copies of the same document from separate stakeholders; and
- Eliminate any unnecessary filing of documents with the court where no court appearance is required.
