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
| Amendments to the Bankruptcy and Insolvency Act (BIA) | Clauses of Bill C-12 | Sections |
|---|---|---|
| Directions to Pay | 101 | s.172(2.1) |
| Court May Grant Certificates | 102 | s.175 |
| Enforcing a Security | 103 | s.244(4) |
| Distribution of Kind | 104 | s.262(3) |
| Amendments to the Companies' Creditors Arrangement Act (CCAA) | Clauses of Bill C-12 | Sections |
|---|---|---|
| Definitions | 105 | s.2 |
| Approval Restrictions | 106 | s.6 |
| Amendments to chapter 47 on the Statutes of Canada, 2005 | Clauses of Bill C-12 | Sections |
|---|---|---|
| Transitional Clause | 107 | s.132 to 134 |
| Consequential Amendments to Other Acts | 108 | s.137 to 139 |
| Coming into Force | 109 | s.141 |
| BIA and CCAA Transitional Provisions | 110 and 111 | |
| Coordinating Amendments | 112 | |
| Coming into Force | 113 |
Bill Clause No. 101
Section No. BIA s.172(2.1)
Topic: Directions to Pay
Proposed Wording
Subsection 104(3) of the Act is repealed.
Rationale
The subsection is repealed. Creditors seeking payment directly from a debtor may only do so pursuant to section 38 of the Act.
Present Law
As enacted by Chapter 47, Clause 104(3):
172.(2.1) If the court imposes as a condition of discharge that the bankrupt pay money, the court may direct that the bankrupt pay the money to any creditor, to any class of creditors, to the trustee or to the trustee and one or more creditors, in any amount and manner that the court considers appropriate.
Bill Clause No. 102
Section No. BIA s.175
Topic: Court May Grant Certificates
Proposed Wording
Section 106 of the Act is repealed.
Rationale
Section 175 was repealed by Chapter 47 because it was believed to be an outdated provision. Many insolvency professionals, however, expressed concern that for some bankrupt individuals the certificate of good conduct provided moral support in a difficult time. It is recognized that this represents a sufficient reason to maintain the section.
Present Law
As enacted by Chapter 47, Clause 106:
Section 175 of the Act is repealed.
Bill Clause No. 103
Section No. BIA s.244(4)
Topic: Enforcing a Security
Proposed Wording
Section 116 of the Act is repealed.
Rationale
Clause 116 of Chapter 47 was redundant. A section 244 notice is only required in respect of insolvent persons. The definition of insolvent person explicitly excludes bankrupts. As such, there is no need to include a "bankrupt" in subsection (4).
Present Law
As enacted by Chapter 47, Clause 116:
244.(4) This section does not apply with respect to the inventory, accounts receivable or other property of an insolvent person or of a bankrupt if there is a receiver.
Bill Clause No. 104
Section No. BIA s.262(3)
Topic: Distribution of Kind
Proposed Wording
Section 120(2) of the Act is repealed.
Rationale
The amendment in Chapter 47 was part of a version of the bill that was rejected during the drafting process. This subsection was inadvertently left in the final bill when all other sections related to it were removed.
Present Law
As enacted by Chapter 47, Clause 120(2):
262.(3)(a) to creditors in the order set out in subsection 136(1);
Bill Clause No. 105
Section No. CCAA s.2
Topic: Definitions
Proposed Wording
"equity claim" means a claim that is in respect of an equity interest, including a claim for, among others,
- (a) a dividend or similar payment,
- (b) a return of capital,
- (c) a redemption or retraction obligation,
- (d) a monetary loss resulting from the ownership, purchase or sale of an equity interest or from the rescission, or, in Quebec, the annulment, of a purchase or sale of an equity interest, or
- (e) contribution or indemnity in respect of a claim referred to in any of paragraphs (a) to (d);
"equity interest" means
- (a) in the case of a company other than an income trust, a share in the company — or a warrant or option or another right to acquire a share in the company — other than one that is derived from a convertible debt, and
- (b) in the case of an income trust, a unit in the income trust — or a warrant or option or another right to acquire a unit in the income trust — other than one that is derived from a convertible debt.
Rationale
The definition of "equity claim" is added to provide greater clarity in subsequent provisions that deal with the rights of shareholders. An equity claim is defined to include any claim that is related to an equity interest.
The definition of "equity interest" is added to provide greater clarity in subsequent provisions that deal with the rights of shareholders. An equity interest is defined to include shares in corporations and units in income trusts and the right to acquire those except where the right is derived from a debt that is convertible into a share or unit. For example, a debenture witnessing a debt obligation that may, at the option of the holder, be converted into equity, should not be considered an equity interest – unless the holder has taken the steps necessary to have the conversion occur.
Present Law
None.
Bill Clause No. 106
Section No. CCAA s.6
Topic: Approval Restrictions
Proposed Wording
6.(1) If a majority in number representing two thirds in value of the creditors, or the class of creditors, as the case may be — other than, unless the court orders otherwise, a class of creditors having equity claims, — present and voting either in person or by proxy at the meeting or meetings of creditors respectively held under sections 4 and 5, or either of those sections, agree to any compromise or arrangement either as proposed or as altered or modified at the meeting or meetings, the compromise or arrangement may be sanctioned by the court and, if so sanctioned, is binding
- (a) on all the creditors or the class of creditors, as the case may be, and on any trustee for that class of creditors, whether secured or unsecured, as the case may be, and on the company; and
- (b) in the case of a company that has made an authorized assignment or against which a bankruptcy order has been made under the Bankruptcy and Insolvency Act or is in the course of being wound up under the Winding-up and Restructuring Act, on the trustee in bankruptcy or liquidator and contributories of the company.
(2) If a court sanctions a compromise or arrangement, it may order that the debtor's constating instrument be amended in accordance with the compromise or arrangement in order to reflect any change that may lawfully be made under federal or provincial law.
(3) Unless Her Majesty agrees otherwise, the court may sanction a compromise or arrangement only if the compromise or arrangement provides for the payment in full to Her Majesty in right of Canada or a province, within six months after court sanction of the compromise or arrangement, of all amounts that were outstanding at the time of the application for an order under section 11 or 11.02 and that are of a kind that could be subject to a demand under
- (a) subsection 224(1.2) of the Income Tax Act;
- (b) any provision of the Canada Pension Plan or the Employment Insurance Act that refers to subsection 224(1.2) of the Income Tax Act and provides for the collection of contribution, as defined in the Canada Pension Plan, or an employee's premium, or employer's premium, as defined in the Employment Insurance Act, and of any related interest, penalties or other amounts; or
- (c) any provision of provincial legislation that has a purpose similar to subsection 224(1.2) of the Income Tax Act, or that refers to that subsection, to the extent that it provides for the collection of a sum, and of any related interest, penalties or other
- (i) has been withheld or deducted by a person from a payment to another person and is in respect of a tax similar in nature to the income tax imposed on individuals under the Income Tax Act, or
- (ii) is of the same nature as a contribution under the Canada Pension Plan if the province is a "province providing a comprehensive pension plan" as defined in subsection 3(1) of the Canada Pension Plan and the provincial legislation establishes a "provincial pension plan" as defined in that subsection.
(4) If an order contains a provision authorized by section 11.09, no compromise or arrangement is to be sanctioned by the court if, at the time the court hears the application for sanction, Her Majesty in right of Canada or a province satisfies the court that the company is in default on any remittance of an amount referred to in subsection (3) that became due after the time of the application for an order under section 11.02.
(5) The court may sanction a compromise or an arrangement only if
- (a) the compromise or arrangement provides for payment to the employees and former employees of the company, immediately after the court's sanction, of
- (i) amounts at least equal to the amounts that they would have been qualified to receive under paragraph 136(1)(d) of the Bankruptcy and Insolvency Act if the company had become bankrupt on the day on which proceedings commenced under this Act, and
- (ii) wages, salaries, commissions or compensation for services rendered after proceedings commence under this Act and before the court sanctions the compromise or arrangement, together with, in the case of travelling salespersons, disbursements properly incurred by them in and about the company's business during the same period; and
- (b) the court is satisfied that the company can and will make the payments as required under paragraph (a).
(6) If the company participates in a prescribed pension plan for the benefit of its employees, the court may sanction a compromise or an arrangement in respect of the company only if
- (a) the compromise or arrangement provides for payment of the following amounts that are unpaid to the fund established for the purpose of the pension plan:
- (i) an amount equal to the sum of all amounts that were deducted from the employees' remuneration for payment to the fund,
- (ii) if the prescribed pension plan is regulated by an Act of Parliament,
- (A) an amount equal to the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985, that was required to be paid by the employer to the fund, and
- (B) an amount equal to the sum of all amounts that were required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985, and
- (iii) in the case of any other prescribed pension plan,
- (A) an amount equal to the amount that would be the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985, that the employer would be required to pay to the fund if the prescribed plan were regulated by an Act of Parliament, and
- (B) an amount equal to the sum of all amounts that would have been required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985, if the prescribed plan were regulated by an Act of Parliament; and
- (b) the court is satisfied that the company can and will make the payments as required under paragraph (a).
(7) Despite subsection (6), the court may sanction a compromise or an arrangement that does not allow for the payment of the amounts referred to in that subsection if it is satisfied that the relevant parties have entered into an agreement, approved by the relevant pension regulator, respecting the payment of those amounts.
(8) No compromise or arrangement that provides for the payment of an equity claim is to be sanctioned by the court unless it provides that all claims that are not equity claims are to be paid in full before the equity claim is to be paid.
Rationale
Subsection (1) is amended to clarify that holders of equity claims are not entitled to vote unless the court orders otherwise.
Subsection (2) is added to clarify that a court may authorize a change to the debtor company's constating documents (e.g. articles of incorporation for a corporation or trust documents for an income trust) that would otherwise require approval of the shareholders or unitholders, as the case may be. The amendment is intended to address concerns that shareholders could use a right to approve a change to the constating documents to obtain beneficial treatment in a proposal. Corporate law in most jurisdictions already provides this explicit authority.
Present Law
As enacted by Chapter 47, Clause 126:
6.(1)Where a majority in number representing two thirds in value of the creditors, or class of creditors, as the case may be, present and voting either in person or by proxy at the meeting or meetings thereof respectively held pursuant to sections 4 and 5, or either of those sections, agree to any compromise or arrangement either as proposed or as altered or modified at the meeting or meetings, the compromise or arrangement may be sanctioned by the court, and if so sanctioned is binding
- (a) on all the creditors or the class of creditors, as the case may be, and on any trustee for any such class of creditors, whether secured or unsecured, as the case may be, and on the company; and
- (b) in the case of a company that has made an authorized assignment or against which a bankruptcy order has been made under the Bankruptcy and Insolvency Act or is in the course of being wound up under the Winding-up and Restructuring Act, on the trustee in bankruptcy or liquidator and contributories of the company.
(2) Unless Her Majesty agrees otherwise, the court may sanction a compromise or an arrangement only if the compromise or arrangement provides for the payment in full to Her Majesty in right of Canada or a province, within six months after court sanction of the compromise or arrangement, of all amounts that were outstanding at the time of the application for an order under section 11 or 11.02 and that are of a kind that could be subject to a demand under
- (a) subsection 224(1.2) of the Income Tax Act;
- (b) any provision of the Canada Pension Plan or of the Employment Insurance Act that refers to subsection 224(1.2) of the Income Tax Act and provides for the collection of a contribution, as defined in the Canada Pension Plan, or an employee's premium, or employer's premium, as defined in the Employment Insurance Act, and of any related interest, penalties or other amounts; or
- (c) any provision of provincial legislation that has a purpose similar to subsection 224(1.2) of the Income Tax Act, or that refers to that subsection, to the extent that it provides for the collection of a sum, and of any related interest, penalties or other amounts, and the sum
- (i) has been withheld or deducted by a person from a payment to another person and is in respect of a tax similar in nature to the income tax imposed on individuals under the Income Tax Act, or
- (ii) is of the same nature as a contribution under the Canada Pension Plan if the province is a "province providing a comprehensive pension plan" as defined in subsection 3(1) of the Canada Pension Plan and the provincial legislation establishes a "provincial pension plan" as defined in that subsection.
(3) If an order contains a provision authorized by section 11.09, no compromise or arrangement shall be sanctioned by the court if, at the time the court hears the application for sanction, Her Majesty in right of Canada or a province satisfies the court that the company is in default on any remittance of an amount referred to in subsection (2) that became due after the time of the application for an order under section 11.02.
(4) The court may sanction a compromise or an arrangement only if
- (a) the compromise or arrangement provides for payment to the employees and former employees of the company, immediately after the court's sanction, of
- (i) amounts at least equal to the amounts that they would have been qualified to receive under paragraph 136(1)(d) of the Bankruptcy and Insolvency Act if the company had become bankrupt on the date of the filing of initial application in respect of the company, and
- (ii) wages, salaries, commissions or compensation for services rendered after that date and before the court's sanction of the compromise or arrangement, together with, in the case of travelling salespersons, disbursements properly incurred by them in and about the company's business during the same period; and
- (b) the court is satisfied that the company can and will make the payments as required under paragraph (a).
(5) If the company participates in a prescribed pension plan for the benefit of its employees, the court may sanction a compromise or an arrangement in respect of the company only if
- (a) the compromise or arrangement provides for payment, immediately after the court sanction, of the following amounts that are unpaid to the fund established for the purpose of the pension plan:
- (i) an amount equal to the sum of all amounts that were deducted from the employees' remuneration for payment to the fund,
- (ii) if the prescribed pension plan is regulated by an Act of Parliament,
- (A) an amount equal to the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985, that was required to be paid by the employer to the fund, and
- (B) an amount equal to the sum of all amounts that were required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985; and
- (iii) in the case of any other prescribed pension plan,
- (A) an amount equal to the amount that would be the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985, that the employer would be required to pay to the fund if the prescribed plan were regulated by an Act of Parliament, and
- (B) an amount equal to the sum of all amounts that would have been required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985, if the prescribed plan were regulated by an Act of Parliament; and
- (b) the court is satisfied that the company can and will make the payments as required under paragraph (a).
(6) Despite subsection (5), the court may sanction a compromise or an arrangement that does not allow for the payment of the amounts referred to in that subsection if it is satisfied that the relevant parties have entered into an agreement, approved by the relevant pension regulator, respecting the payment of those amounts.
Bill Clause No. 107
Section No. Chapter 47 s.132 to 134
Topic: Transitional Clause
Proposed Wording
132. The Wage Earner Protection Program Act, as enacted by section 1 of this Act, applies in respect of wages owing by an employer only if
- (a) the employer becomes bankrupt on or after the day on which that section comes into force; or
- (b) all or part of the employer's property comes into the possession or under the control of a receiver on or after the day on which that section comes into force.
133. (1) An amendment to the Bankruptcy and Insolvency Act that is enacted by any of sections 2 to 5 and 7 to 106, subsection 107(1) and sections 108 to 123 of this Act applies only to a person who, on or after the day on which the amendment comes into force, is described in one of the following paragraphs:
- (a) the person becomes bankrupt;
- (b) the person files a notice of intention;
- (c) the person files a proposal without having filed a notice of intention;
- (d) a proposal is made in respect of the person without the person having filed a notice of intention;
- (e) an interim receiver is appointed in respect of the person's property and all or part of the person's property comes into the possession or under the control of the interim receiver; or
- (f) all or part of the person's property comes into the possession or under the control of a receiver.
(2) The amendment to the Bankruptcy and Insolvency Act that is enacted by subsection 107(2) of this Act applies only to a person who is an undischarged bankrupt on the day on which it comes into force or who becomes bankrupt on or after the day on which it comes into force.
134. An amendment to the Companies' Creditors Arrangement Act that is enacted by any of sections 124 to 131 of this Act applies only to a debtor company in respect of whom proceedings commence under that Act on or after the day on which the amendment comes into force.
Rationale
Section 132 is amended to clarify that the program applies in respect of employers who become bankrupt or subject to a receivership. While the program pays wages owed to individuals, it is triggered by the bankruptcy or receivership of an employer.
Chapter 47 provides the waiting period during which a former student may not have student loan debts discharged by bankruptcy is reduced from ten years to seven years. Section 133(2) has been amended to provide that this change is applicable to bankrupts who have yet to obtain their discharge when the amendments come into force, as well as those who become bankrupt after that date.
Both sections 133 and 134 have been amended for clarity.
Present Law
As enacted by Chapter 47, Clauses 132 to 134:
132. The Wage Earner Protection Program Act, as enacted by section 1, applies
- (a) in respect of wages owing to an individual by an employer who becomes bankrupt after the coming into force of that section; and
- (b) in respect of wages owing to an individual by an employer any of whose property comes under the possession or control of a receiver within the meaning of subsection 243(2) of the Bankruptcy and Insolvency Act after the coming into force of that section.
133. The amendments to the Bankruptcy and Insolvency Act, as enacted by any of sections 2 to 123, other than section 6, apply in respect of a person
- (a) who becomes bankrupt after the coming into force of that section;
- (b) who files a notice of intention after the coming into force of that section;
- (c) who files a proposal after the coming into force of that section without having filed a notice of intention;
- (d) in respect of whom a proposal is made after the coming into force of that section without the person having filed a notice of intention;
- (e) any of whose property comes under the possession or control of an interim receiver who is appointed as such after the coming into force of that section; and
- (f) any of whose property comes under the possession or control of a receiver within the meaning of subsection 243(2) of the Bankruptcy and Insolvency Act after the coming into force of that section.
134. The amendments to the Companies' Creditors Arrangement Act, as enacted by sections 124 to 131, apply in respect of a debtor company in respect of whom proceedings are commenced under that Act after the coming into force of those sections.
Bill Clause No. 108
Section No. Chapter 47 s.137 to 139
Topic: Consequential Amendments to Other Acts
Proposed Wording
137. Paragraph 23(2)(b) of the Canada Pension Plan is replaced by the following:
(b) subsection 224(1.2) of the Income Tax Act shall apply to employer's contributions, employee's contributions, and related interest, penalties or other amounts, subject to subsections 69(1) and 69.1(1) of the Bankruptcy and Insolvency Act and section 11.09 of the Companies' Creditors Arrangement Act.
138. Paragraph 99(b) of the Employment Insurance Act is replaced by the following:
(b) subsection 224(1.2) of the Income Tax Act shall apply to employer's premiums, employee's premiums, and related interest, penalties or other amounts, subject to subsections 69(1) and 69.1(1) of the Bankruptcy and Insolvency Act and section 11.09 of the Companies' Creditors Arrangement Act.
139. The portion of subsection 224(1.2) of the Income Tax Act before paragraph (a) is replaced by the following:
(1.2) Notwithstanding any other provision of this Act, the Bankruptcy and Insolvency Act, any other enactment of Canada, any enactment of a province or any law, but subject to subsections 69(1) and 69.1(1) of the Bankruptcy and Insolvency Act and section 11.09 of the Companies' Creditors Arrangement Act, if the Minister has knowledge or suspects that a particular person is, or will become within one year, liable to make a payment
Rationale
The Chapter 47 consequential amendments to the Canada Pension Plan Act, the Employment Insurance Act, and the Income Tax Act were to refer to the Division I proposal stays of proceedings, but not the Division II consumer proposal stay of proceedings, and therefore Chapter 47 is amended to remove the inadvertent reference to s.69.2(1).
Present Law
As enacted by Chapter 47, Clauses 137 to 139:
137. Paragraph 23(2)(b) of the Canada Pension Plan is replaced by the following:
23.(2)(b) subsection 224(1.2) of the Income Tax Act shall apply to employer's contributions, employee's contributions, and related interest, penalties or other amounts, subject to subsections 69(1), 69.1(1) and 69.2(1) of the Bankruptcy and Insolvency Act and section 11.09 of the Companies' Creditors Arrangement Act.
138. Paragraph 99.(b) of the Employment Insurance Act is replaced by the following:
99. (b) subsection 224(1.2) of the Income Tax Act shall apply to employer's premiums, employee's premiums, and related interest, penalties or other amounts, subject to subsections 69(1), 69.1(1) and 69.2(1) of the Bankruptcy and Insolvency Act and section 11.09 of the Companies' Creditors Arrangement Act.
139. The portion of subsection 224(1.2) of the Income Tax Act before paragraph (a) is replaced by the following:
224.(1.2) Notwithstanding any other provision of this Act, the Bankruptcy and Insolvency Act, any other enactment of Canada, any enactment of a province or any law, but subject to subsections 69(1), 69.1(1) and 69.2(1) of the Bankruptcy and Insolvency Act and section 11.09 of the Companies' Creditors Arrangement Act, if the Minister has knowledge or suspects that a particular person is, or will become within one year, liable to make a payment.
Bill Clause No. 109
Section No. Chapter 47 s.141
Topic: Coming into Force
Proposed Wording
141. Sections 1 to 131 and 136 to 139 come into force on a day or days to be fixed by order of the Governor in Council.
Rationale
In order to provide sufficient flexibility to the Governor in Council to bring the amendments into force when appropriate, Chapter 47 is amended to ensure that all amendments may come into force on a day or days to be fixed by order of the Governor in Council
Present Law
As enacted by Chapter 47, Clause 141:
141.(1) Sections 1, 67 and 88 come into force on a day to be fixed by order of the Governor in Council.
(2) Sections 2 to 66, 68 to 87, 89 to 123 and 136 to 139 come into force on a day or days to be fixed by order of the Governor in Council.
(3) Sections 124 to 131 come into force on a day to be fixed by order of the Governor in Council.
Bill Clause No. 110 and 111
Section No. None
Topic: BIA and CCAA Transitional Provisions
Proposed Wording
110. An amendment to the Bankruptcy and Insolvency Act that is enacted by any of subsections 1(1) and (5) to (7), sections 3 and 6, subsection 9(3), sections 12 and 13, subsections 14(2) and (3), 15(2) and (3), 16(2) and (3) and 17(2), sections 19 to 22, 25, 31, 34, 35, 37, 42, 44, 46 to 48 and 50, subsection 51(1), sections 55 to 57 and subsection 58(2) of this Act applies only to a person who, on or after the day on which the amendment comes into force, is described in one of the following paragraphs:
(a) the person becomes bankrupt;
(b) the person files a notice of intention;
(c) the person files a proposal without having filed a notice of intention;
(d) a proposal is made in respect of the person without the person having filed a notice of intention;
(e) an interim receiver is appointed in respect of the person's property and all or part of the person's property comes into the possession or under the control of the interim receiver; or
(f) all or part of the person's property comes into the possession or under the control of a receiver.
111. The amendment to the Companies' Creditors Arrangement Act that is enacted by section 67 of this Act applies only to a debtor company in respect of whom proceedings commence under that Act on or after the day on which the amendment comes into force.
Rationale
While Clause 107 amends the transitional provisions of Chapter 47, Clauses 110 and 111 provide the transitional provisions for the remaining amendments not made to Chapter 47. As with the substantive Chapter 47 amendments, the remaining amendments apply only with respect to new proceedings, as a bankruptcy, proposal, receivership, or CCAA file may last years and it would cause undue hardship to the parties involved to apply new rules to files after they have already been initiated.
Present Law
None.
Bill Clause No. 112
Section No. None
Topic: Coordinating Amendments
Proposed Wording
112.(1) Subsections (2) to (25) apply if Bill C-52, introduced in the 1st session of the 39th Parliament and entitled the Budget Implementation Act, 2007 (the "other Act"), receives Royal Assent.
(2) If subsection 94(1) of the other Act comes into force before section 25 of this Act, then section 25 of this Act is repealed.
(3) If subsection 94(1) of the other Act comes into force on the same day as section 25 of this Act, then section 25 of this Act is deemed to have come into force before subsection 94(1) of the other Act.
(4) On the later of the day on which subsection 94(1) of the other Act comes into force and the day on which section 26 of this Act comes into force — or, if those days are the same day, then on that day — paragraph 65.11(10)(a) of the Bankruptcy and Insolvency Act, as enacted by section 44 of Chapter 47 of the Statutes of Canada, 2005, as that section 44 is amended by that section 26, is replaced by the following:
- (a) an eligible financial contract;
(5) If section 26 of this Act comes into force before section 95 of the other Act, then section 95 of the other Act is deemed never to have had its effects and is repealed.
(6) If section 95 of the other Act comes into force on the same day as section 26 of this Act, then section 95 of the other Act is deemed to have come into force before section 26 of this Act.
(7) If section 96 of the other Act comes into force before section 31 of this Act, then section 31 of this Act is repealed.
(8) If section 31 of this Act comes into force before section 96 of the other Act, then
- (a) section 96 of the other Act is deemed never to have had its effects and is repealed; and
- (b) subsections 66.34(8) and (9) of the Bankruptcy and Insolvency Act are replaced by the following:
(8) Despite section 69.2, the following actions are permitted in respect of an eligible financial contract that is entered into before the filing of a consumer proposal and is terminated on or after that filing, but only in accordance with the provisions of that contract:
- (a) the netting or setting off or compensation of obligations between the consumer debtor and the other parties to the eligible financial contract; and
- (b) any dealing with financial collateral including
- (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and
- (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.
(9) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the consumer debtor to another party to the eligible financial contract, that other party is deemed, for the purposes of subsection 69.2(1), to be a creditor of the consumer debtor with a claim provable in bankruptcy in respect of those net termination values.
(9) If section 96 of the other Act and section 31 of this Act come into force on the same day, then section 31 of this Act is deemed to have come into force before section 96 of the other Act and subsection (8) applies.
(10) If section 100 of the other Act comes into force before section 40 of this Act, then
- (a) section 40 of this Act is deemed never to have had its effects and is repealed; and
- (b) sections 84.1 and 84.2 of the Bankruptcy and Insolvency Act, as enacted by section 68 of Chapter 47 of the Statutes of Canada, 2005, as that section 68 is amended by that section 100, are replaced by the following:
84.1(1) On application by a trustee and on notice to every party to an agreement, a court may make an order assigning the rights and obligations of a bankrupt under the agreement to any person who is specified by the court and agrees to the assignment.
(2) In the case of an individual,
- (a) they may not make an application under subsection (1) unless they are carrying on a business; and
- (b) only rights and obligations in relation to the business may be assigned.
(3) Subsection (1) does not apply in respect of rights and obligations that are not assignable by reason of their nature or that arise under
- (a) an agreement entered into on or after the date of the bankruptcy;
- (b) an eligible financial contract; or
- (c) a collective agreement.
(4) In deciding whether to make the order, the court is to consider, among other things,
- (a) whether the person to whom the rights and obligations are to be assigned is able to perform the obligations; and
- (b) whether it is appropriate to assign the rights and obligations to that person.
(5) The court may not make the order unless it is satisfied that all monetary defaults in relation to the agreement — other than those arising by reason only of the person's bankruptcy, insolvency or failure to perform a non-monetary obligation — will be remedied on or before the day fixed by the court.
(6) The applicant is to send a copy of the order to every party to the agreement.
84.2(1) No person may terminate or amend — or claim an accelerated payment or a forfeiture of the term under — any agreement, including a security agreement, with a bankrupt individual by reason only of the individual's bankruptcy or insolvency.
(2) If the agreement referred to in subsection (1) is a lease, the lessor may not terminate or amend, or claim an accelerated payment or a forfeiture of the term under, the lease by reason only of the bankruptcy or insolvency or of the fact that the bankrupt has not paid rent in respect of any period before the time of the bankruptcy.
(3) No public utility may discontinue service to a bankrupt individual by reason only of the individual's bankruptcy or insolvency or of the fact that the bankrupt individual has not paid for services rendered or material provided before the time of the bankruptcy.
(4) Nothing in this section is to be construed as
- (a) prohibiting a person from requiring payments to be made in cash for goods, services, use of leased property or other valuable consideration provided after the time of the bankruptcy; or
- (b) requiring the further advance of money or credit.
(5) Any provision in an agreement that has the effect of providing for, or permitting, anything that, in substance, is contrary to this section is of no force or effect.
(6) On application by a party to an agreement or by a public utility, the court may declare that this section does not apply — or applies only to the extent declared by the court — if the applicant satisfies the court that the operation of this section would likely cause the applicant significant financial hardship.
(7) Subsection (1) does not apply
- (a) in respect of an eligible financial contract; or
- (b) to prevent a member of the Canadian Payments Association from ceasing to act as a clearing agent or group clearer for an insolvent person in accordance with the Canadian Payments Act and the bylaws and rules of that Association.
(8) Despite section 69.3, the following actions are permitted in respect of an eligible financial contract that is entered into before the time of the bankruptcy, and is terminated on or after that time, but only in accordance with the provisions of that contract:
- (a) the netting or setting off or compensation of obligations between the individual bankrupt and the other parties to the eligible financial contract; and
- (b) any dealing with financial collateral including
- (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and
- (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.
(9) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the individual bankrupt to another party to the eligible financial contract, that other party is deemed, for the purposes of paragraphs 69(1)(a) and 69.1(1)(a), to be a creditor of the individual bankrupt with a claim provable in bankruptcy in respect of those net termination values.
(11) If section 40 of this Act comes into force before section 100 of the other Act, then
- (a) section 100 of the other Act is deemed never to have had its effects and is repealed;
- (b) subsection 84.1(3) of the Bankruptcy and Insolvency Act, as enacted by section 68 of Chapter 47 of the Statutes of Canada, 2005, as that section 68 is amended by that section 40, is replaced by the following:
(3) Subsection (1) does not apply in respect of rights and obligations that are not assignable by reason of their nature or that arise under
- (a) an agreement entered into on or after the date of the bankruptcy;
- (b) an eligible financial contract; or
- (c) a collective agreement.
- (c) subsection 84.2(7) of the Bankruptcy and Insolvency Act, as enacted by section 68 of Chapter 47 of the Statutes of Canada, 2005, as that section 68 is amended by that section 40, is replaced by the following:
(7) Subsection (1) does not apply
- (a) in respect of an eligible financial contract; or
- (b) to prevent a member of the Canadian Payments Association from ceasing to act as a clearing agent or group clearer for an insolvent person in accordance with the Canadian Payments Act and the bylaws and rules of that Association.
(8) Despite section 69.3, the following actions are permitted in respect of an eligible financial contract that is entered into before the time of the bankruptcy, and is terminated on or after that time, but only in accordance with the provisions of that contract:
- (a) the netting or setting off or compensation of obligations between the individual bankrupt and the other parties to the eligible financial contract; and
- (b) any dealing with financial collateral including
- (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and
- (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.
(9) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the individual bankrupt to another party to the eligible financial contract, that other party is deemed, for the purposes of paragraphs 69(1)(a) and 69.1(1)(a), to be a creditor of the individual bankrupt with a claim provable in bankruptcy in respect of those net termination values.
(12) If section 100 of the other Act and section 40 of this Act come into force on the same day, then section 100 of the other Act is deemed to have come into force before section 40 of this Act and subsection (10) applies.
(13) If subsection (10) or (11) applies, then section 99 of the other Act is deemed never to have had its effects and is repealed.
(14) On the later of the day on which section 102 of the other Act comes into force and the day on which section 42 of this Act comes into force — or, if those days are the same day, then on that day — subsection 95(2.1) of the Bankruptcy and Insolvency Act is replaced by the following:
(2.1) Subsection (2) does not apply, and the parties are deemed to be dealing with each other at arm's length, in respect of the following:
- (a) a margin deposit made by a clearing member with a clearing house; or
- (b) a transfer, charge or payment made in connection with financial collateral and in accordance with the provisions of an eligible financial contract.
(15) If section 107 of the other Act comes into force before section 63 of this Act, then section 63 of this Act is deemed never to have had its effects and is repealed.
(16) If section 107 of the other Act and section 63 of this Act come into force on the same day, then section 63 of this Act is deemed to have come into force before section 107 of the other Act.
(17) If section 109 of the other Act comes into force before section 65 of this Act, then subsection 11.3(2) of the Companies' Creditors Arrangement Act, as enacted by section 128 of Chapter 47 of the Statutes of Canada, 2005, as that section 128 is amended by that section 65, is replaced by the following:
(2) Subsection (1) does not apply in respect of rights and obligations that are not assignable by reason of their nature or that arise under
- (a) an agreement entered into on or after the day on which proceedings commence under this Act;
- (b) an eligible financial contract; or
- (c) a collective agreement.
(18) If section 65 of this Act comes into force before section 109 of the other Act, then
- (a) section 109 of the other Act is deemed never to have had its effects and is repealed; and
- (b) subsection 11.3(2) of the Companies' Creditors Arrangement Act, as enacted by section 128 of Chapter 47 of the Statutes of Canada, 2005, as that section 128 is
(2) Subsection (1) does not apply in respect of rights and obligations that are not assignable by reason of their nature or that arise under
- (a) an agreement entered into on or after the day on which proceedings commence under this Act;
- (b) an eligible financial contract; or
- (c) a collective agreement.
(19) If section 109 of the other Act and section 65 of this Act come into force on the same day, then section 109 of the other Act is deemed to have come into force before section 65 of this Act and subsection (17) applies.
(20) If section 110 of the other Act comes into force before section 76 of this Act, then paragraph 32(9)(a) of the Companies' Creditors Arrangement Act, as enacted by section 131 of Chapter 47 of the Statutes of Canada, 2005, as that section 131 is amended by that section 76, is replaced by the following:
- (a) an eligible financial contract;
(21) If section 76 of this Act comes into force before section 110 of the other Act, then
- (a) section 110 of the other Act is deemed never to have had its effects and is repealed; and
- (b) paragraph 32(9)(a) of the Companies' Creditors Arrangement Act, as enacted by section 131 of Chapter 47 of the Statutes of Canada, 2005, as that section 131 is amended by that section 76, is replaced by the following:
- (a) an eligible financial contract;
(22) If section 110 of the other Act and section 76 of this Act come into force on the same day, then section 110 of the other Act is deemed to have come into force before section 76 of this Act and subsection (20) applies.
(23) If section 111 of the other Act comes into force before section 77 of this Act, then subsection 34(7) of the Companies' Creditors Arrangement Act, as enacted by section 131 of Chapter 47 of the Statutes of Canada, 2005, as that section 131 is amended by that section 77, is replaced by the following:
(7) Subsection (1) does not apply
- (a) in respect of an eligible financial contract; or
- (b) to prevent a member of the Canadian Payments Association from ceasing to act as a clearing agent or group clearer for a company in accordance with the Canadian Payments Act and the bylaws and rules of that Association.
(8) The following actions are permitted in respect of an eligible financial contract that is entered into before proceedings under this Act are commenced in respect of the company and is terminated on or after that day, but only in accordance with the provisions of that contract:
- (a) the netting or setting off or compensation of obligations between the company and the other parties to the eligible financial contract; and
- (b) any dealing with financial collateral including
- (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and
- (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.
(9) No order may be made under this Act if the order would have the effect of staying or restraining the actions permitted under subsection (8).
(10) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the company to another party to the eligible financial contract, that other party is deemed to be a creditor of the company with a claim against the company in respect of those net termination values.
(11) No order may be made under this Act if the order would have the effect of subordinating financial collateral.
(24) If section 77 of this Act comes into force before section 111 of the other Act, then
- (a) section 111 of the other Act is deemed never to have had its effects and is repealed; and
- (b) subsection 34(7) of the Companies' Creditors Arrangement Act, as enacted by section 131 of Chapter 47 of the Statutes of Canada, 2005, as that section 131 is amended by that section 77, is replaced by the following:
(7) Subsection (1) does not apply
- (a) in respect of an eligible financial contract; or
- (b) to prevent a member of the Canadian Payments Association from ceasing to act as a clearing agent or group clearer for a company in accordance with the Canadian Payments Act and the bylaws and rules of that Association.
(8) The following actions are permitted in respect of an eligible financial contract that is entered into before proceedings under this Act are commenced in respect of the company and is terminated on or after that day, but only in accordance with the provisions of that contract:
- (a) the netting or setting off or compensation of obligations between the company and the other parties to the eligible financial contract; and
- (b) any dealing with financial collateral including
- (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and
- (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.
(9) No order may be made under this Act if the order would have the effect of staying or restraining the actions permitted under subsection (8).
(10) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the company to another party to the eligible financial contract, that other party is deemed to be a creditor of the company with a claim against the company in respect of those net termination values.
(11) No order may be made under this Act if the order would have the effect of subordinating financial collateral.
(25) If section 111 of the other Act and section 77 of this Act come into force on the same day, then section 111 of the other Act is deemed to have come into force before section 77 of this Act and subsection (23) applies.
Rationale
C-52, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007, which obtained Royal Assent on June 22, 2007 (Chapter 29), made certain changes to the treatment of eligible financial contracts. Clause 112 ensures that the changes made by Chapter 29 are not inadvertently overridden by this Act. Clause 112 coordinates Chapter 29 with the following clauses of this Act:
| Operable subsection of Clause 112 | Affected Clause of Bill C-12 | Affected section of BIA/CCAA |
|---|---|---|
| 112(2) | Clause 25 | BIA 65.1 |
| 112(4) | Clause 26 | BIA 65.11 |
| 112(7) | Clause 31 | BIA 66.34 |
| 112(10) | Clause 40 | BIA 84.1 |
| 112(10) | Clause 40 | BIA 84.2 |
| 112(14) | Clause 42 | BIA 95 |
| 112(15) | Clause 63 | CCAA 11.05 |
| 112(17) | Clause 65 | CCAA 11.3 |
| 112(20) | Clause 76 | CCAA 32 |
| 112(23) | Clause 77 | CCAA 34 |
For a more detailed explanation of the impact of Clause 112, please refer to the entries regarding the specific clauses referred to above.
Please also note that Chapter 29 was amended by removing two sections after this Act was introduced, and therefore all references to clauses of Chapter 29 in Clause 112 are currently two numbers higher than required. This has no substantive impact.
Present Law
N/A
Bill Clause No. 113
Section No. None
Topic: Coming into Force
Proposed Wording
113. Subsections 1(1) and (5) to (7), sections 3 and 6, subsection 9(3), sections 12 and 13, subsections 14(2) and (3), 15(2) and (3), 16(2) and (3) and 17(2), sections 19 to 22, 25, 31, 34, 35, 37, 42, 44, 46 to 48 and 50, subsection 51(1), sections 55 to 57, subsection 58(2) and section 67 come into force on a day or days to be fixed by order of the Governor in Council.
Rationale
While Clause 109 amends the coming into force provision for the Chapter 47 amendments, Clause 113 provides a parallel coming into force provision for the amendments that are made directly to the BIA and the CCAA. As with Clause 109, Clause 113 permits these amendments to come into force on a day or days to be fixed by the Governor in Council.
Present Law
None