Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3)

Act current to 2016-04-12 and last amended on 2015-02-26. Previous Versions

Distribution of Estate

Marginal note:Vesting of securities, etc., in trustee
  •  (1) If a securities firm becomes bankrupt, the following securities and cash vest in the trustee:

    • (a) securities owned by the securities firm;

    • (b) securities and cash held by any person for the account of the securities firm; and

    • (c) securities and cash held by the securities firm for the account of a customer, other than customer name securities.

  • Marginal note:Establishment of a customer pool fund and a general fund

    (2) Where a securities firm becomes bankrupt and property vests in a trustee under subsection (1) or under other provisions of this Act, the trustee shall establish

    • (a) a fund, in this Part called the “customer pool fund”, including therein

      • (i) securities, including those obtained after the date of the bankruptcy, but excluding customer name securities and excluding eligible financial contracts to which the firm is a party, that are held by or for the account of the firm

        • (A) for a securities account of a customer,

        • (B) for an account of a person who has entered into an eligible financial contract with the firm and has deposited the securities with the firm to assure the performance of the person’s obligations under the contract, or

        • (C) for the firm’s own account,

      • (ii) cash, including cash obtained after the date of the bankruptcy, and including

        • (A) dividends, interest and other income in respect of securities referred to in subparagraph (i),

        • (B) proceeds of disposal of securities referred to in subparagraph (i), and

        • (C) proceeds of policies of insurance covering claims of customers to securities referred to in subparagraph (i),

      •  that is held by or for the account of the firm

        • (D) for a securities account of a customer,

        • (E) for an account of a person who has entered into an eligible financial contract with the firm and has deposited the cash with the firm to assure the performance of the person’s obligations under the contract, or

        • (F) for the firm’s own securities account, and

      • (iii) any investments of the securities firm in its subsidiaries that are not referred to in subparagraph (i) or (ii); and

    • (b) a fund, in this Part called the “general fund”, including therein all of the remaining vested property.

  • 1997, c. 12, s. 118;
  • 2004, c. 25, s. 101(F);
  • 2005, c. 47, s. 119.
Marginal note:Allocation and distribution of cash and securities in customer pool fund
  •  (1) Cash and securities in the customer pool fund shall be allocated in the following priority:

    • (a) for costs of administration referred to in paragraph 136(1)(b), to the extent that sufficient funds are not available in the general fund to pay such costs;

    • (b) to customers, other than deferred customers, in proportion to their net equity; and

    • (c) to the general fund.

  • Marginal note:Where property deposited with securities firm under an EFC

    (1.1) Where

    • (a) a person has, under the terms of an eligible financial contract with the securities firm, deposited property with the firm to assure the performance of the person’s obligations under the contract, and

    • (b) that property is included in the customer pool fund pursuant to paragraph 261(2)(a),

    that person shall share in the distribution of the customer pool fund as if the person were a customer of the firm with a claim for net equity equal to the net value of the property deposited that would have been returnable to the person after deducting any amount owing by the person under the contract.

  • Marginal note:Distribution

    (2) To the extent that securities of a particular type are available in the customer pool fund, the trustee shall distribute them to customers with claims to the securities, in proportion to their claims to the securities, up to the appropriate portion of their net equity, unless the trustee determines that, in the circumstances, it would be more appropriate to sell the securities and distribute the proceeds to the customers with claims to the securities in proportion to their claims to the securities.

  • Marginal note:Compensation in kind

    (2.1) Subject to subsection (2), the trustee may satisfy all or part of a customer’s claim to securities of a particular type by delivering to the customer securities of that type to which the customer was entitled at the date of bankruptcy. For greater certainty, the trustee may, for that purpose, exercise the trustee’s power to purchase securities in accordance with section 259.

  • Marginal note:Allocation of property in the general fund

    (3) Property in the general fund shall be allocated in the following priority:

    • (a) to preferred creditors in the order set out in subsection 136(1);

    • (b) rateably

      • (i) to customers, other than deferred customers, having claims for net equity remaining after distribution of property from the customer pool fund and property provided by a customer compensation body, where applicable, in proportion to claims for net equity remaining,

      • (ii) where applicable, to a customer compensation body to the extent that it paid or compensated customers in respect of their net equity, and

      • (iii) to creditors in proportion to the values of their claims;

    • (c) rateably to creditors referred to in section 137; and

    • (d) to deferred customers, in proportion to their claims for net equity.

  • 1997, c. 12, s. 118;
  • 2005, c. 47, s. 120.
Marginal note:Delivery of customer name securities
  •  (1) Where a customer is not indebted to a securities firm, the trustee shall deliver to the customer the customer name securities that belong to the customer.

  • Marginal note:Where customer indebted to securities firm

    (2) Where a customer to whom customer name securities belong and who is indebted to the securities firm on account of customer name securities not fully paid for, or on another account, discharges their indebtedness in full, the trustee shall deliver to that customer the customer name securities that belong to the customer.

  • Marginal note:Customer indebted to securities firm

    (3) If a customer to whom customer name securities belong and who is indebted to the securities firm on account of customer name securities not fully paid for, or on another account, does not discharge their indebtedness in full, the trustee may, on notice to the customer, sell sufficient customer name securities to discharge the indebtedness, and those securities are then free of any right, title or interest of the customer. If the trustee so discharges the customer’s indebtedness, the trustee shall deliver any remaining customer name securities to the customer.

  • 1997, c. 12, s. 118;
  • 2005, c. 47, s. 121.
Marginal note:Trustee to consult customer compensation body

 Where the accounts of customers of a securities firm are protected, in whole or in part, by a customer compensation body, the trustee shall consult the customer compensation body on the administration of the bankruptcy, and the customer compensation body may designate an inspector to act on its behalf.

  • 1997, c. 12, s. 118.
Marginal note:Late claims

 A customer may prove a claim after the distribution of cash and securities in the customer pool fund and is entitled to receive cash and securities in the hands of the trustee at the time the claim is proven up to the appropriate portion of the customer’s net equity before further distribution is made to other customers, but no such claim shall affect the previous distribution of the customer pool fund or the general fund.

  • 1997, c. 12, s. 118.

Accounting of Trustee

Marginal note:Statement of trustee required

 In addition to any other statement or report required to be prepared under this Act, a trustee shall prepare

  • (a) a statement indicating

    • (i) the distribution of property in the customer pool fund among customers who have proved their claims, and

    • (ii) the disposal of customer name securities; or

  • (b) such other report relating to that distribution or disposal as the court may direct.

  • 1997, c. 12, s. 118.
 
Date modified: