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 (S.C. 2007, c. 36)

Marginal note:Restriction on disposition of assets

• 65.13 (1) An insolvent person in respect of whom a notice of intention is filed under section 50.4 or a proposal is filed under subsection 62(1) may not sell or otherwise dispose of assets outside the ordinary course of business unless authorized to do so by a court. Despite any requirement for shareholder approval, including one under federal or provincial law, the court may authorize the sale or disposition even if shareholder approval was not obtained.

• Marginal note:Individuals

  (2) In the case of an individual who is carrying on a business, the court may authorize the sale or disposition only if the assets were acquired for or used in relation to the business.

• Marginal note:Notice to secured creditors

  (3) An insolvent person who applies to the court for an authorization shall give notice of the application to the secured creditors who are likely to be affected by the proposed sale or disposition.

• Marginal note:Factors to be considered

  (4) In deciding whether to grant the authorization, the court is to consider, among other things,

  • (a) whether the process leading to the proposed sale or disposition was reasonable in the circumstances;

  • (b) whether the trustee approved the process leading to the proposed sale or disposition;

  • (c) whether the trustee filed with the court a report stating that in their opinion the sale or disposition would be more beneficial to the creditors than a sale or disposition under a bankruptcy;

  • (d) the extent to which the creditors were consulted;

  • (e) the effects of the proposed sale or disposition on the creditors and other interested parties; and

  • (f) whether the consideration to be received for the assets is reasonable and fair, taking into account their market value.

• Marginal note:Additional factors — related persons

  (5) If the proposed sale or disposition is to a person who is related to the insolvent person, the court may, after considering the factors referred to in subsection (4), grant the authorization only if it is satisfied that

  • (a) good faith efforts were made to sell or otherwise dispose of the assets to persons who are not related to the insolvent person; and

  • (b) the consideration to be received is superior to the consideration that would be received under any other offer made in accordance with the process leading to the proposed sale or disposition.

• Marginal note:Related persons

  (6) For the purpose of subsection (5), a person who is related to the insolvent person includes

  • (a) a director or officer of the insolvent person;

  • (b) a person who has or has had, directly or indirectly, control in fact of the insolvent person; and

  • (c) a person who is related to a person described in paragraph (a) or (b).

• Marginal note:Assets may be disposed of free and clear

  (7) The court may authorize a sale or disposition free and clear of any security, charge or other restriction and, if it does, it shall also order that other assets of the insolvent person or the proceeds of the sale or disposition be subject to a security, charge or other restriction in favour of the creditor whose security, charge or other restriction is to be affected by the order.

• Marginal note:Restriction — employers

  (8) The court may grant the authorization only if the court is satisfied that the insolvent person can and will make the payments that would have been required under paragraphs 60(1.3)(a) and (1.5)(a) if the court had approved the proposal.

• Marginal note:When consumer debtor is released from debt

  (2.1) A consumer proposal accepted, or deemed accepted, by the creditors and approved, or deemed approved, by the court does not release the consumer debtor from any particular debt or liability referred to in subsection 178(1) unless the consumer proposal explicitly provides for the compromise of that debt or liability and the creditor in relation to that debt or liability voted for the acceptance of the consumer proposal.

• Marginal note:Deemed annulment — amendment withdrawn or refused

  (2) If an amendment to a consumer proposal filed before the deemed annulment of the consumer proposal under subsection (1) is withdrawn or refused by the creditors or the court, the consumer proposal is deemed to be annulled at the time that the amendment is withdrawn or refused.

• Marginal note:Duties of administrator in relation to deemed annulment

  (3) Without delay after a consumer proposal is deemed to be annulled, the administrator shall

  • (a) file with the official receiver a report in the prescribed form in relation to the deemed annulment; and

  • (b) send a notice to the creditors informing them of the deemed annulment.

• Marginal note:Effects of deemed annulment — consumer proposal made by a bankrupt

  (4) If a consumer proposal made by a bankrupt is deemed to be annulled,

  • (a) the consumer debtor is deemed to have made an assignment on the day on which the consumer proposal is deemed to be annulled;

  • (b) the trustee who is the administrator of the consumer proposal shall, within five days after the day on which the consumer proposal is deemed to be annulled, send notice of the meeting of creditors under section 102, at which meeting the creditors may by ordinary resolution, despite section 14, affirm the appointment of the trustee or appoint another trustee in lieu of that trustee; and

  • (c) the trustee shall, without delay, file with the official receiver, in the prescribed form, a report of the deemed annulment and the official receiver shall, without delay, issue a certificate of assignment, in the prescribed form, which has the same effect for the purposes of this Act as an assignment filed under section 49.

• Marginal note:Validity of things done before deemed annulment

  (5) A deemed annulment of a consumer proposal does not prejudice the validity of any sale or disposition of property or payment duly made, or anything duly done under or in pursuance of the consumer proposal and, despite the deemed annulment, a guarantee given under the consumer proposal remains in full force and effect in accordance with its terms.

• Marginal note:Notice of possibility of consumer proposal being automatically revived

  (6) In the case of a deemed annulment of a consumer proposal made by a person other than a bankrupt, if the administrator considers it appropriate to do so in the circumstances, he or she may, with notice to the official receiver, send to the creditors — within 30 days, or any other number of days that is prescribed, after the day on which the consumer proposal was deemed to be annulled — a notice in the prescribed form informing them that the consumer proposal will be automatically revived 60 days, or any other number of days that is prescribed, after the day on which it was deemed to be annulled unless one of them files with the administrator, in the prescribed manner, a notice of objection to the revival.

• Marginal note:Automatic revival

  (7) If the notice is sent by the administrator and no notice of objection is filed during the period referred to in subsection (6), the consumer proposal is automatically revived on the expiry of that period.

• Marginal note:Notice if no automatic revival

  (8) If a notice of objection is filed during the period referred to in subsection (6), the administrator is to send, without delay, to the official receiver and to each creditor a notice in the prescribed form informing them that the consumer proposal is not going to be automatically revived on the expiry of that period.

• Marginal note:Administrator may apply to court to revive consumer proposal

  (9) The administrator may at any time apply to the court, with notice to the official receiver and the creditors, for an order reviving any consumer proposal of a consumer debtor who is not a bankrupt that was deemed to be annulled, and the court, if it considers it appropriate to do so in the circumstances, may make an order reviving the consumer proposal, on any terms that the court considers appropriate.

• Marginal note:Duty of administrator if consumer proposal is revived

  (10) Without delay after a consumer proposal is revived, the administrator shall

  • (a) file with the official receiver a report in the prescribed form in relation to the revival; and

  • (b) send a notice to the creditors informing them of the revival.

• Marginal note:Eligible financial contracts

  (7) Subsection (1) does not apply in respect of an eligible financial contract.

• Marginal note:Existing eligible financial contracts

  (8) For greater certainty, if an eligible financial contract, entered into before a consumer proposal is filed, is terminated on or after the filing of the proposal, the setting off or compensation of obligations — between the consumer debtor and the other parties to the eligible financial contract, in accordance with its provisions — is permitted and, if net termination values determined in accordance with the eligible financial contract are owed by the consumer debtor to another party to the eligible financial contract, the 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 the net termination values.

• Marginal note:Definitions

  (9) In this section, “eligible financial contract” and “net termination value” have the same meanings as in subsection 65.1(8).