OSB News June 2015

OSB News - June 2015

A word from the Superintendent

It is a pleasure to share with you the latest edition of the Office of the Superintendent of Bankruptcy’s (OSB’s) newsletter. OSB News is intended to keep you up to date on initiatives and changes taking place at the OSB that either affect you or may be of interest to the insolvency community.

In addition, we highlight changes coming to the Trustee Compliance Program, which are aimed at ensuring a consistent, national approach.

Elisabeth Lang, OSB’s Director General of Program Policy and Regulatory Affairs, and I had the pleasure of attending the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) Forums this year. It was a great opportunity to have a dialogue with trustees, and hear about issues and opportunities in business and in the insolvency system in general. In this edition we are sharing some statistics and other information presented in our update at the CAIRP Forum. We discussed three regulatory initiatives planned for the current year, including a new directive issued on Trustee Designation and Advertising, revision of the Assessment Directive, and issuing an amended Banking Directive for consultation.

Your input on this edition or on issues of importance to the insolvency community is always welcome. Let us know what you think or tell the OSB Communications team if you have a topic you would like to see covered in a future issue of OSB News.

Bill James
Superintendent of Bankruptcy

New filing trends in 2014-2015

In 2014-2015 the OSB received about 123,400 new files and closed 114,500 files.

Bankruptcy Insolvency Act (BIA) volumes and inventory have evolved over the past five years. The chart below shows this evolution.

During the economic recession and its immediate aftermath, insolvency volumes reached record highs. Volumes in 2012 and 2013 reflect a return to relative stability.

Figure 1: Bankruptcy and insolvency volume and inventory over the past five years*

Bankruptcy and insolvency volume and inventory over the past five years
Long description for Table 1

This chart is a combination bar graph and line graph called BIA Volumes. The title has an asterisk that notes that the data presented include consumer, sole proprietor and corporate files.

The bar graph presents the open inventory for proposals and bankruptcies over fiscal years, during the 2010–2011 to 2014–2015 five-year period. The line graph shows the trends for new files and closed files in relation to all open files over the same five-year period.

The legend at the top of the chart shows that the red in the bars, always on the lower part of the bars, represents the open inventory for proposals. The blue in the upper part of the bars represents the open inventory for bankruptcies. The purple line represents new files and the green line represents closed files.

The y-axis on the left side of the graph represents the scale for the units for the number of new files and closed files. Its baseline is 50,000 files and it increases by increments of 20,000, topping out at 170,000. The y-axis on the right of the graph represents the number of open files and uses a different scale. Its baseline is 25,000 files and it increases by increments of 50,000, topping out at 375,000.

The x-axis shows the fiscal years for 2010–2011, 2011–2012, 2012–2013, 2013–2014, and 2014–2015. There are two asterisks on the 2014–2015 label that note that the data for 2014–2015 represent preliminary results, subject to final review.

Based on the bar graph, the number of open files, that is, proposals and bankruptcies combined, remained fairly steady over the five-year period, with open proposals steadily increasing balanced by a decline in open bankruptcies. In 2010–2011, there were 122,306 open proposals and 254,314 open bankruptcies. The number of open proposals increased to 144,372 in 2011–2012 but open bankruptcies dropped to 235,237. The number of open proposals jumped further, to 165,011, in 2012–2013, while the number of open bankruptcies fell to 215,450. In 2013–2014, the number of open proposals increased again to 183,014, while the number of open bankruptcies dropped to 198,542. In 2014–2015, the number of open proposals increased again to 201,336, for the first time surpassing the number of open bankruptcies, which dropped to 189,088.

In the line graph, the purple line, which is uppermost, shows that there were about 138,000 new files in 2010–2011, decreasing to about 126,000 new files in 2011–2012, and then about 122,000 new files in 2012–2013. The number of new files increased slightly to about 123,000 in 2013–2014, and remained at that level for 2014–2015.

The green line, which is never higher than the purple line, shows there were about 125,000 files closed in 2010–2011, about the same amount in 2011–2012 and then the number of files closed dipped to about 120,000 in 2012-2013. The number of files closed bounced back to around 122,000 in 2013–2014 before they dropped down to about 114,000 in 2014–2015.

The source for the graphs is the Office of the Superintendent of Bankruptcy Canada.

Here are some highlights of a few of the insolvency trends that we saw in 2014-2015:

  • new filings substantively exceeded closings for the first time in 4 years, resulting in a net increase of open inventory of about 8,900 files or 2.3% relative to the year prior
  • the proportion of open inventory made up of proposals also continued to increase last year, representing 51.6% of the inventory at year end. This is not a surprise given that proposals have a longer average duration when compared to a bankruptcy

*BIA volume includes: Consumer, Sole Proprietor and Corporate files.
**Preliminary results, subject to final review.

Steady increase in consumer filings

In recent years, there has been a steady increase in the proportion of total BIA consumer filings, which are accounted for by proposals.

Figure 2: Consumer Proposals/Total Consumer Filings

Consumer Proposals/Total Consumer Filings
Long description for Table 2

This line graph is called Consumer Proposals/Total Consumer Filings. It presents the share of consumer proposals in consumer insolvency filings (that is, consumer proposals combined with consumer bankruptcies), broken down by Canada and the East, Ontario and West Regions, for the calendar years 2010 to 2014.

The legend on the right side of the chart shows that the East region is represented by a red line with squares to mark data points; the Ontario region is represented by a green line with triangles for data points; the West region is represented by a purple line with crosses for data points; and Canada has a blue line with circles and crosses for data points.

The x-axis represents the year for the data points, starting at 2010 and continuing for each year until 2014.

The y-axis shows the proportion consumer proposals represent of all consumer files. The baseline is zero percent, increasing by increments of 10% until it reaches 60%.

The highest line shows the proportion of consumer proposals for the Ontario region, which had the highest percentage of consumer filings for all years shown. The next highest line, but only for 2010 to 2013, shows the proportion of consumer proposals for all of Canada. The proportion of consumer proposals in the West region is shown in the line below the line representing Canada for all years except 2014, the only year when the proportion of consumer proposals in the West region was higher than for Canada. The line for the proportion of consumer proposals in the East region is consistently lower for all years shown.

For all four lines, the percentage in 2010 was the lowest and the percentage in 2014 was the highest. Except for the Ontario region, all the lines show a fairly steady increase over the five-year period. The percentage of consumer proposals in the Ontario region, however, dipped slightly in 2013.

The Ontario region, the green line, started at about 42% in 2010, meaning 42% of consumer filings in the Ontario region were consumer proposals. It rose to about 50% in 2011 and then to about 51% in 2012. There was a slight dip to 50% in 2013 and then an increase to about 53% in 2014.

The West region, the purple line, started at about 25% in 2010, increasing to about 31% in 2011, 36% in 2012 and 40% in 2013. The purple line crosses the blue line that represents the national percentage, rising to about 47% in 2014.

The East region, the red line, started at about 23% in 2010, increasing to about 26% in 2011, 30% in 2012, 35% in 2013 and 38% in 2014.

The percentage of consumer filings that were proposals for all of Canada, shown by the blue line, started at about 31% in 2010. It rose to about 37% in 2011, then 40% in 2012, 42% in 2013, and about 45% in 2014, the only year where the blue line representing Canada dips below the purple line representing the West region.

Below the graph is a table showing the volume of consumer proposals for the same five-year period and the same regional breakdown, presented in the order of Canada, and then the East, Ontario and West regions. Consumer proposals in Canada numbered 42,314 in 2010; 45,006 in 2011; 46,903 in 2012; 49,454 in 2013; and 53,211 in 2014. Consumer proposals in the East region numbered 11,432 in 2010; 11,986 in 2011; 13,809 in 2012; 17,531 in 2013; and 20,311 in 2014. Consumer proposals in the Ontario region numbered 23,619 in 2010; 24,931 in 2011; 24,145 in 2012; 22,361 in 2013; and 21,874 in 2014. Consumer proposals in the West region numbered 7,246 in 2010; 8,071 in 2011; 8,908 in 2012; 9,531 in 2013; and 11,026 in 2014.

The source for the graph and table is the Office of the Superintendent of Bankruptcy Canada.

In 2014, the national proportion of total consumer filings which were proposals reached 45%.

This varied from a high of 53% in Ontario, 47% in the West, to a low of 38% in the East.

OSB consulting on trustee designation and advertising

The OSB is proposing changes to the directive on trustee advertising, which is now being revised. A consultation period was launched on June 1, 2015, and will run until June 30, 2015.

Directive 29R2, Advertising by Trustees currently requires that trustees identify themselves as “Trustee in Bankruptcy” when advertising their services. It is proposed that all trustees holding a licence in good standing from the Superintendent of Bankruptcy will be referred to as a “Licensed Trustee in Insolvency and Restructuring” or by the acronym “LTIR”. The new professional designation would replace the current mandatory term effective April 2016.

Under the proposal, trustees would identify themselves using this new professional designation in all communications and representations under the BIA, as well as in all advertising directed at consumer clients.

The aim to provide greater clarity for Canadians regarding who is licensed by the OSB to provide services under the BIA and to help individuals to make informed choices about formal mechanisms to address debt problems. These proposed changes reinforce the exclusive role of trustees, taking into account the criteria put forward by the OSB as the federal regulator of insolvency.

The consultation document and the proposed directive can be accessed on the OSB website.

Questions or comments about the changes can be sent to OSB’s Communications team. We look forward to hearing your input on the proposed changes.

Changes coming to Trustee Compliance Program: What trustees need to know

The OSB is implementing changes this spring to the Trustee Compliance Program, which are aimed at providing a uniform, national approach to managing trustee compliance activities.

Activities will now be conducted on a cyclical basis to validate the balances and operation of trust accounts, review final statement of receipts and disbursements, aged estates and trustee disclosure and reporting. These changes will reduce the occasions we will need contact trustees for one-off issues, as we shift to a more systematic approach to validating compliance.

Trustees can expect to work with the same team of employees. A Senior Bankruptcy Analyst may also contact them to provide additional information on the Trustee Compliance approach. Additional information may be requested from trustees at times and they will receive a letter of notification when an activity has been completed and compliance is validated. The OSB will also continue to conduct trustee office visits.

For any questions or additional information, please contact your Senior Bankruptcy Analyst.

Proposed amendments to the directive concerning assessment of an individual debtor

The OSB will be proposing amendments to Directive No. 6R3, Assessment of an Individual Debtor, which are intended to help protect the integrity of the insolvency system by ensuring debtors receive transparent and high-quality assessments.

The amendments are being proposed in order to clarify trustee accountability as well as requirements for those who assist with elements of the assessment. Changes will take into account input from stakeholders, including CAIRP, and will aim to maintain the integrity and quality of the assessment process.

Following discussions with CAIRP, the OSB will publish an amended directive for public consultation. Questions on the amendments should be sent to the OSB Communications team.

Enhanced statistics now available on the OSB website

In order to provide greater access to insolvency statistics, the OSB is now posting the monthly, quarterly and annual reports categorized by forward sortation areas (FSA) and by North American Industry Classification System (NAICS) codes on its website.

What does this mean for website users?

  • On the day the insolvency statistics are released, users will be able to request copies of the Insolvency Statistics in Canada by FSA and Insolvency Statistics in Canada by NAICS reports in Excel format on the OSB website. There are two easy steps: choose the desired report and enter an email address. The report will show up in the requestor’s email box shortly thereafter
  • Users will also have the ability to request reports going back to 2013 whenever needed

Users can sign up for the Statistics RSS feed, or subscribe to an electronic update to be notified by email when statistics are released.

Update on mandatory counselling renewal

The OSB is working toward a renewed model for mandatory counselling. It will include a revised curriculum featuring greater standardization of the information delivered to debtors through core topics that are considered to be of value to the majority of debtors today.

In the coming months, the OSB will be holding focus groups with trustees to discuss the issues. They include validating an updated curriculum that was developed with input from an advisory committee; seeking input on a modernized delivery approach that would include the use of web-based content; and looking at piloting a model that would achieve a more standard approach on core content, and in use of technology to support learning and results measurement.

Photo of Bill James, Superintendent of Bankruptcy

Insolvency Law Cases heard at Supreme Court of Canada

The 407 ETR and Moloney insolvency law cases were heard at the Supreme Court of Canada in January 2015. The legal issue in both cases is the refusal to renew permits related to driving for non-payment of debts that have been released by reason of a debtor’s discharge. The OSB was one of numerous interveners in the case. For additional details on the 407 ETR and Moloney cases, visit the Supreme Court of Canada’s website.


Centralization of CCAA files within the OSB:
CCAA services head West

As of October 2014, the Companies' Creditors Arrangement Act (CCAA) function has been consolidated to a new team based in Vancouver, BC. This team will serve as the single point of contact within our organization for all records, enquiries and complaints for CCAA proceedings and provide multi-channel bilingual services to the public.

In the upcoming year the team will start to review the OSB repository of closed CCAA files and determine the most effective and accessible way of maintaining them to enhance and facilitate access for both trustees and the public. For any questions about CCAA filings please contact: ic.osbccaa-laccbsf.ic@canada.ca.

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