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Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36)

Act current to 2022-09-11 and last amended on 2019-11-01. Previous Versions

PART IIIGeneral (continued)

Obligations and Prohibitions

Marginal note:Obligation to provide assistance

  •  (1) A debtor company shall provide to the monitor the assistance that is necessary to enable the monitor to adequately carry out the monitor’s functions.

  • Marginal note:Obligation to duties set out in section 158 of the Bankruptcy and Insolvency Act

    (2) A debtor company shall perform the duties set out in section 158 of the Bankruptcy and Insolvency Act that are appropriate and applicable in the circumstances.

  • 2005, c. 47, s. 131

Marginal note:Restriction on disposition of business assets

  •  (1) A debtor company in respect of which an order has been made under this Act 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:Notice to creditors

    (2) A company that applies to the court for an authorization is to 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

    (3) 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 monitor approved the process leading to the proposed sale or disposition;

    • (c) whether the monitor 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

    (4) If the proposed sale or disposition is to a person who is related to the company, the court may, after considering the factors referred to in subsection (3), 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 company; 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

    (5) For the purpose of subsection (4), a person who is related to the company includes

    • (a) a director or officer of the company;

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

    (6) 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 company 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

    (7) The court may grant the authorization only if the court is satisfied that the company can and will make the payments that would have been required under paragraphs 6(5)(a) and (6)(a) if the court had sanctioned the compromise or arrangement.

  • Marginal note:Restriction — intellectual property

    (8) If, on the day on which an order is made under this Act in respect of the company, the company is a party to an agreement that grants to another party a right to use intellectual property that is included in a sale or disposition authorized under subsection (6), that sale or disposition does not affect that other party’s right to use the intellectual property — including the other party’s right to enforce an exclusive use — during the term of the agreement, including any period for which the other party extends the agreement as of right, as long as the other party continues to perform its obligations under the agreement in relation to the use of the intellectual property.

Preferences and Transfers at Undervalue

Marginal note:Application of sections 38 and 95 to 101 of the Bankruptcy and Insolvency Act

  •  (1) Sections 38 and 95 to 101 of the Bankruptcy and Insolvency Act apply, with any modifications that the circumstances require, in respect of a compromise or arrangement unless the compromise or arrangement provides otherwise.

  • Marginal note:Interpretation

    (2) For the purposes of subsection (1), a reference in sections 38 and 95 to 101 of the Bankruptcy and Insolvency Act

    • (a) to “date of the bankruptcy” is to be read as a reference to “day on which proceedings commence under this Act”;

    • (b) to “trustee” is to be read as a reference to “monitor”; and

    • (c) to “bankrupt”, “insolvent person” or “debtor” is to be read as a reference to “debtor company”.

  • 2005, c. 47, s. 131
  • 2007, c. 36, s. 78

Her Majesty

Marginal note:Deemed trusts

  •  (1) Subject to subsection (2), despite any provision in federal or provincial legislation that has the effect of deeming property to be held in trust for Her Majesty, property of a debtor company shall not be regarded as being held in trust for Her Majesty unless it would be so regarded in the absence of that statutory provision.

  • Marginal note:Exceptions

    (2) Subsection (1) does not apply in respect of amounts deemed to be held in trust under subsection 227(4) or (4.1) of the Income Tax Act, subsection 23(3) or (4) of the Canada Pension Plan or subsection 86(2) or (2.1) of the Employment Insurance Act (each of which is in this subsection referred to as a “federal provision”), nor does it apply in respect of amounts deemed to be held in trust under any law of a province that creates a deemed trust the sole purpose of which is to ensure remittance to Her Majesty in right of the province of amounts deducted or withheld under a law of the province if

    • (a) that law of the province imposes a tax similar in nature to the tax imposed under the Income Tax Act and the amounts deducted or withheld under that law of the province are of the same nature as the amounts referred to in subsection 227(4) or (4.1) of the Income Tax Act, or

    • (b) the province is a province providing a comprehensive pension plan as defined in subsection 3(1) of the Canada Pension Plan, that law of the province establishes a provincial pension plan as defined in that subsection and the amounts deducted or withheld under that law of the province are of the same nature as amounts referred to in subsection 23(3) or (4) of the Canada Pension Plan,

    and for the purpose of this subsection, any provision of a law of a province that creates a deemed trust is, despite any Act of Canada or of a province or any other law, deemed to have the same effect and scope against any creditor, however secured, as the corresponding federal provision.

  • 2005, c. 47, s. 131

Marginal note:Status of Crown claims

  •  (1) In relation to a proceeding under this Act, all claims, including secured claims, of Her Majesty in right of Canada or a province or any body under an enactment respecting workers’ compensation, in this section and in section 39 called a “workers’ compensation body”, rank as unsecured claims.

  • Marginal note:Exceptions

    (2) Subsection (1) does not apply

    • (a) in respect of claims that are secured by a security or charge of a kind that can be obtained by persons other than Her Majesty or a workers’ compensation body

      • (i) pursuant to any law, or

      • (ii) pursuant to provisions of federal or provincial legislation if those provisions do not have as their sole or principal purpose the establishment of a means of securing claims of Her Majesty or a workers’ compensation body; and

    • (b) to the extent provided in subsection 39(2), to claims that are secured by a security referred to in subsection 39(1), if the security is registered in accordance with subsection 39(1).

  • Marginal note:Operation of similar legislation

    (3) Subsection (1) does not affect the operation of

    • (a) subsections 224(1.2) and (1.3) of the Income Tax Act,

    • (b) any provision of the Canada Pension Plan or of the Employment Insurance Act that refers to subsection 224(1.2) of the Income Tax Act and provides for the collection of a contribution, as defined in the Canada Pension Plan, an employee’s premium, or employer’s premium, as defined in the Employment Insurance Act, or a premium under Part VII.1 of that Act, and of any related interest, penalties or other amounts, or

    • (c) any provision of provincial legislation that has a purpose similar to subsection 224(1.2) of the Income Tax Act, or that refers to that subsection, to the extent that it provides for the collection of a sum, and of any related interest, penalties or other amounts if the sum

      • (i) has been withheld or deducted by a person from a payment to another person and is in respect of a tax similar in nature to the income tax imposed on individuals under the Income Tax Act, or

      • (ii) is of the same nature as a contribution under the Canada Pension Plan if the province is a province providing a comprehensive pension plan as defined in subsection 3(1) of the Canada Pension Plan and the provincial legislation establishes a provincial pension plan as defined in that subsection,

    and, for the purpose of paragraph (c), the provision of provincial legislation is, despite any Act of Canada or of a province or any other law, deemed to have the same effect and scope against any creditor, however secured, as subsection 224(1.2) of the Income Tax Act in respect of a sum referred to in subparagraph (c)(i), or as subsection 23(2) of the Canada Pension Plan in respect of a sum referred to in subparagraph (c)(ii), and in respect of any related interest, penalties or other amounts.

  • 2005, c. 47, s. 131
  • 2009, c. 33, s. 29

Marginal note:Statutory Crown securities

  •  (1) In relation to proceedings under this Act in respect of a debtor company, a security provided for in federal or provincial legislation for the sole or principal purpose of securing a claim of Her Majesty in right of Canada or a province or a workers’ compensation body is valid in relation to claims against the company only if, before the day on which proceedings commence, the security is registered under a system of registration of securities that is available not only to Her Majesty in right of Canada or a province or a workers’ compensation body, but also to any other creditor who holds a security, and that is open to the public for information or the making of searches.

  • Marginal note:Effect of security

    (2) A security referred to in subsection (1) that is registered in accordance with that subsection

    • (a) is subordinate to securities in respect of which all steps necessary to setting them up against other creditors were taken before that registration; and

    • (b) is valid only in respect of amounts owing to Her Majesty or a workers’ compensation body at the time of that registration, plus any interest subsequently accruing on those amounts.

  • 2005, c. 47, s. 131
  • 2007, c. 36, s. 79

Marginal note:Act binding on Her Majesty

 This Act is binding on Her Majesty in right of Canada or a province.

  • 2005, c. 47, s. 131

Miscellaneous

Marginal note:Certain sections of Winding-up and Restructuring Act do not apply

 Sections 65 and 66 of the Winding-up and Restructuring Act do not apply to any compromise or arrangement to which this Act applies.

  • 2005, c. 47, s. 131

Marginal note:Act to be applied conjointly with other Acts

 The provisions of this Act may be applied together with the provisions of any Act of Parliament, or of the legislature of any province, that authorizes or makes provision for the sanction of compromises or arrangements between a company and its shareholders or any class of them.

  • 2005, c. 47, s. 131

Marginal note:Claims in foreign currency

 If a compromise or an arrangement is proposed in respect of a debtor company, a claim for a debt that is payable in a currency other than Canadian currency is to be converted to Canadian currency as of the date of the initial application in respect of the company unless otherwise provided in the proposed compromise or arrangement.

  • 2005, c. 47, s. 131

PART IVCross-border Insolvencies

Purpose

Marginal note:Purpose

 The purpose of this Part is to provide mechanisms for dealing with cases of cross-border insolvencies and to promote

  • (a) cooperation between the courts and other competent authorities in Canada with those of foreign jurisdictions in cases of cross-border insolvencies;

  • (b) greater legal certainty for trade and investment;

  • (c) the fair and efficient administration of cross-border insolvencies that protects the interests of creditors and other interested persons, and those of debtor companies;

  • (d) the protection and the maximization of the value of debtor company’s property; and

  • (e) the rescue of financially troubled businesses to protect investment and preserve employment.

  • 2005, c. 47, s. 131

Interpretation

Marginal note:Definitions

  •  (1) The following definitions apply in this Part.

    foreign court

    foreign court means a judicial or other authority competent to control or supervise a foreign proceeding. (tribunal étranger)

    foreign main proceeding

    foreign main proceeding means a foreign proceeding in a jurisdiction where the debtor company has the centre of its main interests. (principale)

    foreign non-main proceeding

    foreign non-main proceeding means a foreign proceeding, other than a foreign main proceeding. (secondaire)

    foreign proceeding

    foreign proceeding means a judicial or an administrative proceeding, including an interim proceeding, in a jurisdiction outside Canada dealing with creditors’ collective interests generally under any law relating to bankruptcy or insolvency in which a debtor company’s business and financial affairs are subject to control or supervision by a foreign court for the purpose of reorganization. (instance étrangère)

    foreign representative

    foreign representative means a person or body, including one appointed on an interim basis, who is authorized, in a foreign proceeding respect of a debtor company, to

    • (a) monitor the debtor company’s business and financial affairs for the purpose of reorganization; or

    • (b) act as a representative in respect of the foreign proceeding. (représentant étranger)

  • Marginal note:Centre of debtor company’s main interests

    (2) For the purposes of this Part, in the absence of proof to the contrary, a debtor company’s registered office is deemed to be the centre of its main interests.

  • 2005, c. 47, s. 131
 
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