Section 147 of the Bankruptcy and Insolvency Act (“BIA”) provides that the Superintendent’s Levy is applied to defray the supervisory expenses of the Superintendent, will be charged on dividend payments made by the trustee.

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”).

Currently, neither the Bankruptcy and Insolvency Act nor the Companies’ Creditors Arrangement Act defines “director.” However, pending legislative amendments to the Bankruptcy and Insolvency Act (BIA) and Companies’ Creditors Arrangement Act (CCAA) will include an expansive definition of “director” that includes any person “occupying the position of director,” regardless of his or her formal title.

American Bankruptcy Institute: Caribbean Symposium 2009

Introduction

As the pace of restructuring activity in Canada continues to accelerate (see the partial listing below), international creditors should be aware that there are credit risks in doing business with a company that is restructuring in either of Canada's two restructuring systems. (These are, briefly, the Bankruptcy and Insolvency Act which is generally used for small to medium sized restructurings and the Companies Creditors' Arrangement Act which is generally used for large cases and resembles proceedings under Chapter 11 of the United States Bankruptcy Code).

For most lenders, taking security from their borrowers is pretty straightforward: take a general security agreement covering inventory, receivables and all other collateral, add some guarantees, and then look to see if there are any other loose ends that need tying up. But for businesses in regulated industries where some sort of government-issued licence is a threshold requirement, it's not that easy.

The priorities of some pension claims on bankruptcy and receivership changed as a result of amendments effective July 8, 2008 to the Bankruptcy and Insolvency Act R.S.C. (Canada) (the “BIA”).  

Priority Before the Amendments

The Supreme Court of Canada released its decision in Saulnier v. Royal Bank of Canada on October 24, 2008. The decision provides welcome clarification concerning the nature of government licenses and confirms that at least certain kinds of licenses constitute property for the purposes of the Bankruptcy and Insolvency Act (the “BIA”) and for the purposes of Canadian personal property security legislation. The decision is also important because it takes a purposive and commercial approach to the interpretation of bankruptcy and personal property security legislation.

In Ultra Information Systems Canada Inc. v. Pushor Mitchell LLP (2008 Carswell BC 1537 (B.C.S.C.)), one of the corporate Defendants had become bankrupt. There was an issue as to whether some of the bankrupt Defendant’s production documents were privileged. The Court considered whether the Trustee in Bankruptcy could waive the previously claimed solicitor and client privilege and therefore produce the documents.

Prudent lenders should monitor their corporate debtors’ pension plan liabilities and pension plan deficits because they may have a significant impact on the priority of the lender’s security and on the amount the lender will recover if the lender enforces its security.

Priority with respect to Lender’s Security