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

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:Restriction — intellectual property

  (9) If, on the day on which a notice of intention is filed under section 50.4 or a copy of the proposal is filed under subsection 62(1), the insolvent person 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 (7), that sale or disposition does not affect the 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.

Marginal note:Insolvent person may disclaim or resiliate commercial lease

• 65.2 (1) At any time between the filing of a notice of intention and the filing of a proposal, or on the filing of a proposal, in respect of an insolvent person who is a commercial lessee under a lease of real property or an immovable, the insolvent person may disclaim or resiliate the lease on giving thirty days notice to the lessor in the prescribed manner, subject to subsection (2).

• Marginal note:Lessor may challenge

  (2) Within fifteen days after being given notice of the disclaimer or resiliation of a lease under subsection (1), the lessor may apply to the court for a declaration that subsection (1) does not apply in respect of that lease, and the court, on notice to any parties that it may direct, shall, subject to subsection (3), make that declaration.

• Marginal note:Circumstances for not making declaration

  (3) No declaration under subsection (2) shall be made if the court is satisfied that the insolvent person would not be able to make a viable proposal without the disclaimer or resiliation of the lease and all other leases that the lessee has disclaimed or resiliated under subsection (1).

• Marginal note:Effects of disclaimer or resiliation

  (4) If a lease is disclaimed or resiliated under subsection (1),

  • (a) the lessor has no claim for accelerated rent;

  • (b) the proposal must indicate whether the lessor may file a proof of claim for the actual losses resulting from the disclaimer or resiliation, or for an amount equal to the lesser of

    • (i) the aggregate of

      • (A) the rent provided for in the lease for the first year of the lease following the date on which the disclaimer or resiliation becomes effective, and

      • (B) fifteen per cent of the rent for the remainder of the term of the lease after that year, and

    • (ii) three years’ rent; and

  • (c) the lessor may file a proof of claim as indicated in the proposal.

• Marginal note:Classification of claim

  (5) The lessor’s claim shall be included in either

  • (a) a separate class of similar claims of lessors; or

  • (b) a class of unsecured claims that includes claims of creditors who are not lessors.

• Marginal note:Lessor’s vote on proposal

  (6) The lessor is entitled to vote on the proposal in whichever class referred to in subsection (5) the lessor’s claim is included, and for the amount of the claim as proven.

• Marginal note:Determination of classes

  (7) The court may, on application made at any time after the proposal is filed, determine the classes of claims of lessors and the class into which the claim of any of those particular lessors falls.

• Marginal note:Section 146 not affected

  (8) Nothing in subsections (1) to (7) affects the operation of section 146 in the event of bankruptcy.

Marginal note:Lease disclaimer or resiliation if lessee is a bankrupt

65.21 If, in respect of a proposal concerning a bankrupt person who is a commercial lessee under a lease of real property or an immovable, the lessee’s lease has been surrendered, disclaimed or resiliated in the bankruptcy proceedings, subsections 65.2(3) to (7) apply in the same manner and to the same extent as if the person was not a bankrupt but was an insolvent person in respect of which a disclaimer or resiliation referred to in those subsections applies.

Marginal note:Bankruptcy after court approval

65.22 If an insolvent person who has disclaimed or resiliated a lease under subsection 65.2(1) becomes bankrupt after the court approval of the proposal and before the proposal is fully performed, any claim of the lessor in respect of losses resulting from the disclaimer or resiliation, including any claim for accelerated rent, shall be reduced by the amount of compensation paid under the proposal for losses resulting from the disclaimer or resiliation.

Marginal note:Certificate where proposal performed

65.3 Where a proposal is fully performed, the trustee shall give a certificate to that effect, in the prescribed form, to the debtor and to the official receiver.

Marginal note:Act to apply

• 66 (1) All the provisions of this Act, except Division II of this Part, in so far as they are applicable, apply, with such modifications as the circumstances require, to proposals made under this Division.

• Marginal note:Assignments

  (1.1) For the purposes of subsection (1), in deciding whether to make an order under subsection 84.1(1), the court is to consider, in addition to the factors referred to in subsection 84.1(3), whether the trustee approved the proposed assignment.

• Marginal note:Final statement of receipts and disbursements

  (1.2) For the purposes of subsection (1), the trustee is to prepare the final statement of receipts and disbursements referred to in section 151 without delay after

  • (a) the debtor files or is deemed to have filed an assignment;

  • (b) the trustee informs the creditors and the official receiver of a default made in the performance of any provision in a proposal; or

  • (c) the trustee gives the certificate referred to in section 65.3 in respect of the proposal.

• Marginal note:Examination by official receiver

  (1.3) For the purposes of subsection (1), the examination under oath by the official receiver under subsection 161(1) is to be held — on the attendance of the person in respect of whom a notice of intention is filed under section 50.4 or a proposal is filed under subsection 62(1) — before the proposal is approved by the court or the person becomes bankrupt.

• Marginal note:Division to be applied conjointly with other Acts

  (1.4) The provisions of this Division may be applied together with the provisions of an Act of Parliament, or of the legislature of a province, that authorizes or provides for the sanction of compromises or arrangements between a corporation and its shareholders or any class of its shareholders.

• Marginal note:Effect of Companies’ Creditors Arrangement Act

  (2) Notwithstanding the Companies’ Creditors Arrangement Act,

  • (a) proceedings commenced under that Act shall not be dealt with or continued under this Act; and

  • (b) proceedings shall not be commenced under Part III of this Act in respect of a company if a compromise or arrangement has been proposed in respect of the company under the Companies’ Creditors Arrangement Act and the compromise or arrangement has not been agreed to by the creditors or sanctioned by the court under that Act.

DIVISION IIConsumer Proposals

Marginal note:Definitions

66.11 In this Division,

administrator

administrator means

• (a) a trustee, or

• (b) a person appointed or designated by the Superintendent to administer consumer proposals; (administrateur)

consumer debtor

consumer debtor means an individual who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the individual’s principal residence, are not more than $250,000 or any other prescribed amount; (débiteur consommateur)

consumer proposal

consumer proposal means a proposal made under this Division. (proposition de consommateur)

Marginal note:Consumer proposal

• 66.12 (1) A consumer proposal may be made by a consumer debtor, subject to subsections (2) and 66.32(1).

• Marginal note:Dealing with certain consumer proposals together

  (1.1) Two or more consumer proposals may, in such circumstances as are specified in directives of the Superintendent, be dealt with as one consumer proposal where they could reasonably be dealt with together because of the financial relationship of the consumer debtors involved.

• Marginal note:Restriction

  (2) A consumer debtor who has filed a notice of intention or a proposal under Division I may not make a consumer proposal until the trustee appointed in respect of the notice of intention or proposal under Division I has been discharged.

• Marginal note:To whom consumer proposal is made

  (3) A consumer proposal shall be made to the creditors generally.

• Marginal note:Creditors’ response

  (4) Any creditor may respond to a consumer proposal by filing with the administrator a proof of claim in the manner provided for in

  • (a) sections 124 to 126, in the case of unsecured creditors; or

  • (b) sections 124 to 134, in the case of secured creditors.

• Marginal note:Term of consumer proposal

  (5) A consumer proposal must provide that its performance is to be completed within five years.

• Marginal note:Priority of claims, fees

  (6) A consumer proposal must provide

  • (a) for the payment in priority to other claims of all claims directed to be so paid in the distribution of the property of the consumer debtor;

  • (b) for the payment of all prescribed fees and expenses

    • (i) of the administrator on and incidental to proceedings arising out of the consumer proposal, and

    • (ii) of any person in respect of counselling provided pursuant to paragraph 66.13(2)(b); and

  • (c) for the manner of distributing dividends.

Marginal note:Commencement of proceedings

• 66.13 (1) A consumer debtor who wishes to make a consumer proposal shall commence proceedings by

  • (a) obtaining the assistance of an administrator in preparing the consumer proposal; and

  • (b) providing the administrator with the prescribed information on the consumer debtor’s current financial situation.

• Marginal note:Duties of administrator

  (2) An administrator who agrees to assist a consumer debtor shall

  • (a) investigate, or cause to be investigated, the consumer debtor’s property and financial affairs so as to be able to assess with reasonable accuracy the consumer debtor’s financial situation and the cause of his insolvency;

  • (b) provide, or provide for, counselling in accordance with directives issued by the Superintendent pursuant to paragraph 5(4)(b);

  • (c) prepare a consumer proposal in the prescribed form; and

  • (d) subject to subsection (3), file with the official receiver a copy of the consumer proposal, signed by the consumer debtor, and the prescribed statement of affairs.

• Marginal note:Where consumer proposal not to be filed

  (3) The administrator shall not file a consumer proposal under paragraph (2)(d) if he has reason to believe that

  • (a) the debtor is not eligible to make a consumer proposal; or

  • (b) there has been non-compliance with anything required by this section or section 66.12.

• Marginal note:Where consumer proposal wrongly filed

  (4) Where the administrator determines, after filing a consumer proposal under paragraph (2)(d), that it should not have been filed because the debtor was not eligible to make a consumer proposal, the administrator shall forthwith so inform the creditors and the official receiver, but the consumer proposal is not invalid by reason only that the debtor was not eligible to make the consumer proposal.