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

Marginal note:Certain rights limited

• 34 (1) No person may terminate or amend, or claim an accelerated payment or forfeiture of the term under, any agreement, including a security agreement, with a debtor company by reason only that proceedings commenced under this Act or that the company is insolvent.

• Marginal note:Lease

  (2) If the agreement referred to in subsection (1) is a lease, the lessor may not terminate or amend the lease by reason only that proceedings commenced under this Act, that the company is insolvent or that the company has not paid rent in respect of any period before the commencement of those proceedings.

• Marginal note:Public utilities

  (3) No public utility may discontinue service to a company by reason only that proceedings commenced under this Act, that the company is insolvent or that the company has not paid for services rendered or goods provided before the commencement of those proceedings.

• Marginal note:Certain acts not prevented

  (4) Nothing in this section is to be construed as

  • (a) prohibiting a person from requiring payments to be made in cash for goods, services, use of leased property or other valuable consideration provided after the commencement of proceedings under this Act;

  • (b) requiring the further advance of money or credit; or

  • (c) [Repealed, 2012, c. 31, s. 421]

• Marginal note:Provisions of section override agreement

  (5) Any provision in an agreement that has the effect of providing for, or permitting, anything that, in substance, is contrary to this section is of no force or effect.

• Marginal note:Powers of court

  (6) On application by a party to an agreement or by a public utility, the court may declare that this section does not apply — or applies only to the extent declared by the court — if the applicant satisfies the court that the operation of this section would likely cause the applicant significant financial hardship.

• Marginal note:Eligible financial contracts

  (7) Subsection (1) does not apply

  • (a) in respect of an eligible financial contract; or

  • (b) to prevent a member of the Canadian Payments Association from ceasing to act as a clearing agent or group clearer for a company in accordance with the Canadian Payments Act and the by-laws and rules of that Association.

• Marginal note:Permitted actions

  (8) The following actions are permitted in respect of an eligible financial contract that is entered into before proceedings under this Act are commenced in respect of the company and is terminated on or after that day, but only in accordance with the provisions of that contract:

  • (a) the netting or setting off or compensation of obligations between the company and the other parties to the eligible financial contract; and

  • (b) any dealing with financial collateral including

    • (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and

    • (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.

• Marginal note:Restriction

  (9) No order may be made under this Act if the order would have the effect of staying or restraining the actions permitted under subsection (8).

• Marginal note:Net termination values

  (10) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the company to another party to the eligible financial contract, that other party is deemed to be a creditor of the company with a claim against the company in respect of those net termination values.

• Marginal note:Priority

  (11) No order may be made under this Act if the order would have the effect of subordinating financial collateral.

Obligations and Prohibitions

Marginal note:Obligation to provide assistance

• 35 (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.

Marginal note:Restriction on disposition of business assets

• 36 (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

• 36.1 (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”.

Her Majesty

Marginal note:Deemed trusts

• 37 (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.

Marginal note:Status of Crown claims

• 38 (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.