OSB News August 2016
A word from the Superintendent
It is a pleasure to share the latest edition of the Office of the Superintendent of Bankruptcy’s (OSB’s) newsletter with you. The purpose of OSB News is 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.
Roula Eatrides, Deputy Superintendent of Operations and Corporate Services, and I had the pleasure of attending the annual Canadian Association of Insolvency and Restructuring Professionals (CAIRP) Insolvency and Restructuring Forums in April and May. We both had many interesting conversations with Licensed Insolvency Trustees (LITs) from across the country and we appreciated the opportunity to hear about the issues that mattered most to trustees.
Your input concerning this edition or regarding issues of importance to the insolvency community is always welcome. Let us know what you think or inform the OSB Communications team if you have a topic you would like to see covered in a future issue of OSB News.
Superintendent of Bankruptcy
Licensed Insolvency Trustee: Tools and information on the requirements of the new directive
With Directive No. 33, Trustee Designation and Advertising, in full effect, trustees are now required to use the new designation, "Licensed Insolvency Trustee," and to discontinue the usage of the "Trustee in Bankruptcy" title. This directive has been in effect since March 31, 2016. The OSB has published new materials to support public awareness of the new designation and assist consumers in making informed decisions when seeking help to resolve serious financial difficulties.
This information includes:
- a new webpage for consumers, What is a Licensed Insolvency Trustee?, which provides information and answers to frequently asked questions about the role of an LIT and the assistance an LIT is authorized to provide
- information to help consumers differentiate an LIT from a debt consultant
- five insolvency-related videos to help consumers better understand the process and options that are available to them:
- a new consumer brochure, Consumed by Debt?, will be available in early fall. This brochure provides individuals in financial distress with a better understanding of the available options and the insolvency process, in clear and simple language. Copies will be available for order via the OSB website
LITs are invited to share this content with debtors and with others who could benefit from it in an effort to support public awareness of the new regulatory designation.
We are pleased to report that 99% of active LITs have entered into consent agreements with the OSB authorizing the use of LIT as an official mark. In addition, the vast majority of LIT websites already include clear, factual information on what the term "LIT" means, and representations outside the regulatory definition have been few to date.
Based on our compliance monitoring activities, we have highlighted a few things that LITs need to take into account:
- the directive applies to both corporate and individual trustees
- while trustees may continue to use "TIB" during the transition to "LIT", as prescribed by the directive, they should plan on actively phasing out the use of the term "TIB" by April 1, 2017, after which only the term "LIT" may be used
- the directive applies in all cases where trustees are communicating or making representations regarding insolvency-related services, including, for example, LinkedIn profiles
- LITs should take steps to update all forms of representation and consumer advertising, including, but not limited to, websites, letterhead, business cards, and office signage
Full and detailed implementation information on requirements can be found in the Implementation information for Licensed Insolvency Trustees regarding Directive No. 33, Trustee Designation and Advertising.
It is an offence for any person not holding a trustee licence to use the designation "Licensed Insolvency Trustee" or "LIT", or to act as a licensed trustee. Those found guilty may be subject to summary conviction and liable to a fine, imprisonment or both.
To file a complaint about someone misrepresenting themselves as an LIT, please contact the OSB's Service Centre at the following phone number: 1-877-376-9902.
Reminder: key changes, Directive No. 5R5, Estate Funds and Banking
The OSB would like to remind all LITs of the key changes that came into force on May 9, 2016, as part of Directive No. 5R5, Estate Funds and Banking:
Trust Transfer Account: to facilitate electronic transactions, LITs may now use a trust transfer account to receive electronic payments from debtors and the OSB. LITs may also receive payments for estate files using a debit machine within their office.
Monthly Trust Account Reconciliations: for monthly trust account reconciliations, LITs now have the option to sign reconciliations for all trust accounts or a single attestation.
Estate Filing Fees: estate filing fees may be paid from either an estate trust account or the LIT’s corporate account.
These amendments were brought to the directive to provide efficiencies for LITs and address technological advances in banking. For any questions pertaining to this directive, please contact your local OSB office.
Update on 2016 Oral Board of Examination
This spring, thirty candidates participated in the OSB's Oral Board of Examination. The results were extremely positive, twenty-four licences were recommended by board members. The 80% success rate is the highest observed since the new competency-based process was implemented three years ago. The OSB would like to thank the LITs and insolvency lawyers who participated in this very important process.
For three years now, the OSB has instituted numeric trends for the Oral Board Examination process. Notably, there has been a decline in the number of candidates taking the Competency-Based National Insolvency Exam (CNIE), as well as a decline in the proportion of candidates who were successful. There was a drop this year from approximately 55% to 36%. The data is proving useful for licensing policy analysis, as well as for annual meetings with CAIRP regarding the qualification process.
New research paper on consumer proposals now available
The OSB recently released a research paper reporting on statistical trends in consumer proposal filings since legislative changes took place in 2009.
The main change that occurred to the BIA in 2009 as it related to consumer (Division II) proposals, consisted of the increase in the net debt (total debt minus mortgage debt on principal residence) ceiling from $75,000 to $250,000.
Key observations included a significant increase in the number of Division II proposals by individuals who were previously ineligible to file a consumer proposal. The majority were new proposal filers who had net debts in the $75,000 to $150,000 range, rather than in the $150,000 to $250,000 range.
For individuals who would have been previously ineligible to file, those who submitted after 2009 had a lower relative payment agreed to by their creditors ("cents on the dollar"), but a higher absolute payment agreed to by their creditors ("total dollar amounts").
The research paper entitled Consumer Proposals in Canada After the 2009 Legislative Amendments to the Bankruptcy and Insolvency Act can be requested via the OSB website.
Recent trends in consumer proposals
The trend to growth in the proportion of consumer proposals as a percentage of total consumer filings continued in 2015, in all regions. The national rate reached 48% in 2015. In Eastern Canada (Quebec and the Maritimes), growth in consumer proposals has been absolute, with volumes almost doubling since 2011. In contrast, in Ontario, the absolute number of consumer proposals has decreased since 2011, where the growth in proportion of proposals arises from the more significant decline in bankruptcy filings.
Updated insolvency trends for 2015
The following are some of the latest statistics on insolvencies in Canada, including the average age of bankruptcy and proposals, BIA corporate filings, large corporate restructurings, and consumer proposals. This information was presented at the CAIRP Insolvency and Restructuring Forums in April and May 2016, and provides insight into the overall trends in insolvency filings under the BIA and the Companies’ Creditors Arrangements Act (CCAA).
The number of new filings increased slightly in 2015, and remained higher than closings, which have increased significantly year after year. As a result, open inventory increased slightly to 394,000 files. Open inventory for proposals, which represented 36% of files in 2011, has steadily increased to reach 54% in 2015.
Average age of bankruptcy and proposals
Over the past five years, the average age of open bankruptcy files remained relatively stable at about 23.5 months. The average age of open proposals has increased steadily from 24 months in 2011 to 28 months in 2015.
BIA corporate filings
New corporate filings were down slightly in 2015, after two years of increases. The number of corporate file closings also fell in 2015. As a result, open inventory reached 10,739 in 2015, which is still less than the record levels set in 2011.
Large corporate restructurings
Large BIA corporate proposals (those with over $5 million in liabilities) dropped to ninety-six in 2015, from one hundred and sixteen recorded in 2014. This decrease comes after two consecutive years of growth. In contrast, CCAA filings substantially increased in 2015 to a level similar to that recorded in 2011. This sharp increase is attributable to new filings in Quebec and the West.
New Licensed Insolvency Trustee web portal coming soon
Work continues on the development of the Trustee Licence Web Portal, which will function as a simplified web-based, self-serve interface for trustee candidates and LITs. A group of LITs was consulted earlier this year to confirm the design of the new portal. The new application will integrate all licensing administrative functions into one system. LITs will be able to view, update and maintain their licence information so that they can remain in good standing and make requests for changes, including those involving new corporate licences. Based on current planning, all elements of the new portal will be rolled out to LITs by spring 2017.
In order to better serve the public, consumers will be able to find LITs in their area with the enhanced LIT Directory, which will include the option to search for an LIT on a map.
For candidates who would like to become LITs, applications for licences will be available via the portal. Those preparing for the 2017 Oral Board process will be able to apply through the portal beginning in November 2016. The deadline for applications is January 16, 2017, and the Oral Boards will take place in February and March 2017. Keep an eye on the OSB website for further announcements and instructions.
- New consumer-oriented videos and website content on insolvency topics
- What is a Licensed Insolvency Trustee?
- Do you need a debt consultant to file a consumer proposal or a bankruptcy?
- Guidance on the Collection and Reporting of Certain Types of Fees
- Directive No. 5R5, Estate Funds and Banking
- 2016 Oral Board of Examination Results
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