Caisse Populaire Desjardins de l’Est de Drummond v. Canada, 2009 SCC 29

On September 18, 2009, long-awaited amendments to the Bankruptcy and Insolvency Act (“BIA”) and the Companies’ Creditors Arrangement Act (“CCAA”) take effect that will have a significant impact on commercial insolvencies in Canada. While many of these changes reflect existing practice and case law, some introduce more novel concepts not developed by courts, broadening what can be accomplished under the insolvency regime. This article comments on salient features of the new amendments.

Long-awaited amendments to Canada’s insolvency legislation came into force on September 18, 2009. The amendments materially reform both of Canada’s major insolvency statutes: the Bankruptcy and Insolvency Act (the “BIA”) and the Companies’ Creditors Arrangement Act (the “CCAA”). To a considerable degree the amendments codify 15 years of case law developments, but with modifications that could prove to be material in the next few years.

Credit agreements typically provide that any amendment permitting the release of “all or substantially all” of the collateral requires the unanimous consent of the lenders. Many market participants expect that this provision provides protection against the agent and other lenders from consenting to the sale of the collateral and releasing the corresponding liens without the consent of all lenders.

The recent steady drumbeat of Chapter 11 bankruptcy filings is producing an equally persistent corollary: creditors receiving new securities issued by the reorganizing debtor or a related party in full or partial satisfaction of the creditors’ claims. Some of these creditors-cum-investors never planned to receive securities. The paradigmatic example is a creditor that enters into a normal business transaction resulting in an obligation that the debtor company hasn’t yet satisfied when it files for reorganization.

American Bankruptcy Institute: Caribbean Symposium 2009

Introduction

The recent decision of the Supreme Court of Canada in Saulnier (Receiver of) v. Saulnier has changed the basis for determining whether a licence is property under a provincial Personal Property Security Act (“PPSA”) and the federal Bankruptcy and Insolvency Act (“BIA”).

Nothing is certain in today's financial crisis - except that the legal system will be sorting out the rights and obligations of financial market participants for years to come. This is especially true for participants in the over-the-counter derivatives markets.

This memorandum provides an overview of the practical issues facing a sub-participant under a Loan Market Association ("LMA") English-law governed sub-participation agreement as the creditworthiness of grantor deteriorates.

On July 7, 2008 specific provisions of the Insolvency Reform Act, 2005 and the Insolvency Reform Act, 2007 were proclaimed into force by Order in Council. As a result, the Wage Earner Protection Program Act (the “WEPPA”) and certain related amendments to the Bankruptcy and Insolvency Act (“BIA”) have come into immediate effect.

Certain of those amendments are intended to protect current and former employees of insolvent companies and will affect lenders to insolvent businesses.