The bankruptcy and insolvency reforms passed by Parliament in 2005 and 2007 will at last come into force today, September 18th, 2009. While a small initial round of reforms dealing with employee wages were implemented in July 2008, today marks a more radical shift in Canadian insolvency law as the remaining amendments come into effect. The reforms will be applicable to any bankruptcy or insolvency proceedings started on or after today’s date. Key elements of the reforms will include:

Interim Financing, Administrative and D&O Charges

A. THE PROBLEM

Many charities and associations have cash flow challenges, particularly in the current economic situation. They usually budget to break even financially. If some funding does not materialize as expected, they may be forced to close down. Their directors may be at financial risk as a result.

On July 7, 2008, the Wage Earner Protection Program Act (the "WEPPA") was proclaimed into force, along with complementary amendments to the Bankruptcy and Insolvency Act (the "BIA") and other related statutes. The new program protects a limited amount of the unpaid wages of employees when an employer becomes bankrupt or is placed into receivership, and the amendments to the BIA provide for the priority of some un-remitted pension contributions.

The Wage Earner Protection Program (the "WEPP")

On July 23, 2008, the Canadian Government proclaimed into force amendments to the Bankruptcy and Insolvency Act (Canada) (the "BIA") that provide super-priority security to claims, subject to specified limits, for unpaid wages ("Unpaid Wage Claims") and unpaid pension plan contributions ("Unpaid Pension Contribution Claims") in a bankruptcy or receivership proceeding, effective as of July 7, 2008.