Circular No. 2R2

Summary Administration Estates with Realizable Assets Exceeding $15,000

Date: November 6, 2009

Please take note that Circular No. 2R has been revised. The "Application" section in paragraph 5 of Circular No. 2R ought to have been deleted when the Circular was updated and issued on August 14, 2009. Paragraph 5 was a carry over from the previous round of reform in 1997. This was inadvertently overlooked.

Coming into Force

The coming into force provision at section 11 of Circular No. 2R2 applies and effectively replaces the wording of paragraph 5 in Circular No. 2R which ought to have been deleted.

Enquiries

If you require further information, please do not hesitate to contact the OSB office nearest you.

James Callon
Superintendent of Bankruptcy

Issued: November 6, 2009

(Supersedes Circular No. 2R issued on August 14, 2009, on the same topic)

Background

1. Pursuant to subsection 49(6) of the Bankruptcy and Insolvency Act, if the bankrupt is not a corporation and in the opinion of the official receiver the realizable assets of the bankrupt, after the claims of secured creditors are deducted, will not exceed $15,000, sections 155, 156, 156.1 and 157 of the Bankruptcy and Insolvency Act apply until the official receiver directs that they cease to apply.

49. (8) The official receiver may direct that subsection (6) shall cease to apply in respect of the bankrupt where the official receiver determines that

(a) the realizable assets of the bankrupt, after the claims of secured creditors are deducted, exceed five thousand dollars or the amount prescribed, as the case may be, or

(…)

the official receiver considers that such direction is appropriate.

Rule 130: For the purposes of subsections 49(6) and (8) of the Act, the prescribed amount is $15,000.

2. The trustee's fees and disbursement in a summary administration are calculated according to Rule 128 (1) of the Bankruptcy and Insolvency General Rules.

Rule 128(1): The fees of the trustee for services performed in a summary administration are calculated on the total receipts remaining after deducting necessary disbursements relating directly to the realization of the property of the bankrupt, and the payments to secured creditors, according to the following percentages:

(a) 100 percent on the first $975 or less of receipts;

(b) 35 percent on the portion of the receipts exceeding $975 but not exceeding $2,000; and

(c) 50 percent on the portion of the receipts exceeding $2,000.

3. Direction from the official receiver that subsection 49(6) ceases to apply is commonly known as "converting" or "changing the status of" an estate from summary administration to ordinary administration.

Purpose

4. This policy establishes the procedure that the official receiver will apply in those cases where the realizable assets in a summary administration exceed $15,000.

Conversion from Summary to Ordinary Where Realizable Assets Exceed $15,000

5. Subject to paragraph 6, the official receiver will convert summary administration estates to ordinary administration estates if the realizable assets exceed $15,000.
6. If a trustee opts to limit his or her fees to the amount calculated on total receipts no greater than $15,000, the summary administration provisions may continue to apply. For greater certainty, the fees of the trustee will be calculated on the total receipts remaining after deducting necessary disbursements relating directly to the realization of the property of the bankrupt and payments to secured creditors, to a maximum of $15,000.

Example 1:

The total receipts are $20,000. After deducting necessary disbursements relating directly to the realization of the property of the bankrupt of $3,000, total net receipts are $17,000. There are no payments to secured creditors. The trustee opts to limit his or her fees to the amount calculated on total receipts of $15,000. The official receiver does not convert the estate to an ordinary administration.

Example 2:

The total receipts are $17,000. After deducting necessary disbursements relating directly to the realization of the property of the bankrupt of $3,000, total net receipts are $14,000. There are no payments to secured creditors. The trustee calculates his or her fees on the total net receipts of $14,000. The official receiver does not convert the estate to an ordinary administration.

7. The nature and sum total of the realizable assets are irrelevant when applying paragraphs 5 and 6.
8. The trustee is expected to advise the official receiver as soon as possible after the realizable assets in a summary administration exceed $15,000.
9. In the event that there has been no inspector appointment prior to the conversion, it is suggested that the trustee thereupon proceed pursuant to either section 102 or 118 of the Act, as the circumstances allow.
10. It is recommended that the trustee include an explanatory footnote on the Final Statement of Receipts and Disbursements if the trustee has opted to limit his or her fees as described in paragraph 6.

Coming into Force

11. This Circular comes into force on the day on which subsection 1(1) of Chapter 36 of the Statutes of Canada, 2007, comes into force. This Circular, applies only to a person who, on or after the day on which subsection 1(1) of Chapter 36 of the Statutes of Canada, 2007, comes into force, is described in one of (a) – (f) listed below:

As such, in order to determine whether Circular No. 2R2 applies to a particular insolvency file, the question that needs to be asked is whether one of the "triggering events" described in (a) – (f) occurred on or after the coming into force date.

Enquiries

12. For any questions pertaining to this Circular, please contact your local OSB office.

James Callon
Superintendent of Bankruptcy