Government of Canada / Gouvernement du Canada
Symbol of the Government of Canada

Search

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

Act current to 2021-11-17 and last amended on 2019-11-01. Previous Versions

PART IVProperty of the Bankrupt (continued)

General Provisions (continued)

Marginal note:Certain rights limited

  •  (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 bankrupt individual by reason only of the individual’s bankruptcy or insolvency.

  • Marginal note:Lease

    (2) If the agreement referred to in subsection (1) is a lease, the lessor may not terminate or amend, or claim an accelerated payment or forfeiture of the term under, the lease by reason only of the bankruptcy or insolvency or of the fact that the bankrupt has not paid rent in respect of any period before the time of the bankruptcy.

  • Marginal note:Public utilities

    (3) No public utility may discontinue service to a bankrupt individual by reason only of the individual’s bankruptcy or insolvency or of the fact that the bankrupt individual has not paid for services rendered or material provided before the time of the bankruptcy.

  • 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 time of the bankruptcy; or

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

  • 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 an insolvent person in accordance with the Canadian Payments Act and the by-laws and rules of that Association.

  • Marginal note:Permitted actions

    (8) Despite section 69.3, the following actions are permitted in respect of an eligible financial contract that is entered into before the time of the bankruptcy, and is terminated on or after that time, but only in accordance with the provisions of that contract:

    • (a) the netting or setting off or compensation of obligations between the individual bankrupt 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:Net termination values

    (9) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the individual bankrupt to another party to the eligible financial contract, that other party is deemed, for the purposes of paragraphs 69(1)(a) and 69.1(1)(a), to be a creditor of the individual bankrupt with a claim provable in bankruptcy in respect of those net termination values.

  • 2005, c. 47, s. 68
  • 2007, c. 29, s. 98
  • 2009, c. 31, s. 64

Partnership Property

Marginal note:Application to limited partnerships

  •  (1) This Act applies to limited partnerships in like manner as if limited partnerships were ordinary partnerships, and, on all the general partners of a limited partnership becoming bankrupt, the property of the limited partnership vests in the trustee.

  • Marginal note:Actions by trustee and bankrupt’s partner

    (2) If a member of a partnership becomes bankrupt, the court may authorize the trustee to commence and prosecute any action in the names of the trustee and of the bankrupt’s partner, and any release by the partner of the debt or demand to which the action relates is void or, in the Province of Quebec, null.

  • Marginal note:Notice to partner

    (3) Notice of the application for authority to commence an action under subsection (2) shall be given to the bankrupt’s partner, who may show cause against it, and on his application the court may, if it thinks fit, direct that he shall receive his proper share of the proceeds of the action, and, if he does not claim any benefit therefrom, he shall be indemnified against costs in respect thereof as the court directs.

  • R.S., 1985, c. B-3, s. 85
  • 2004, c. 25, s. 52

Crown Interests

Marginal note:Status of Crown claims

  •  (1) In relation to a bankruptcy or proposal, all provable claims, including secured claims, of Her Majesty in right of Canada or a province or of any body under an Act respecting workers’ compensation, in this section and in section 87 called a “workers’ compensation body”, rank as unsecured claims.

  • Marginal note:Exceptions

    (2) Subsection (1) does not apply

    • (a) to 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, where those provisions do not have as their sole or principal purpose the establishment of a means of securing claims of Her Majesty or of a workers’ compensation body; and

    • (b) to the extent provided in subsection 87(2), to claims that are secured by a security referred to in subsection 87(1), if the security is registered in accordance with that subsection.

  • Marginal note:Exceptions

    (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 similar purpose 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, where 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.

  • R.S., 1985, c. B-3, s. 86
  • 1992, c. 27, s. 39
  • 1997, c. 12, s. 73
  • 2000, c. 30, s. 148
  • 2005, c. 47, s. 69
  • 2009, c. 33, s. 25

Marginal note:Statutory Crown securities

  •  (1) 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 of a province or of a workers’ compensation body is valid in relation to a bankruptcy or proposal only if the security is registered under a prescribed system of registration before the date of the initial bankruptcy event.

  • Marginal note:Idem

    (2) In relation to a bankruptcy or proposal, 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 make them effective 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.

  • R.S., 1985, c. B-3, s. 87
  • 1992, c. 27, s. 39
  • 1997, c. 12, s. 74
  • 2004, c. 25, s. 53
  • 2005, c. 47, s. 70

Priority of Financial Collateral

Marginal note:Priority

 In relation to a bankruptcy or proposal, no order may be made under this Act if the order would have the effect of subordinating financial collateral.

  • R.S., 1985, c. B-3, s. 88
  • 1992, c. 27, s. 39
  • 1994, c. 26, s. 6
  • 2007, c. 29, s. 99, c. 36, s. 112
  • 2009, c. 31, s. 65

 [Repealed, 1992, c. 27, s. 39]

Preferences and Transfers at Undervalue

 [Repealed, 2005, c. 47, s. 71]

 [Repealed, 2000, c. 12, s. 12]

 [Repealed, 2005, c. 47, s. 72]

Marginal note:Preferences

  •  (1) A transfer of property made, a provision of services made, a charge on property made, a payment made, an obligation incurred or a judicial proceeding taken or suffered by an insolvent person

    • (a) in favour of a creditor who is dealing at arm’s length with the insolvent person, or a person in trust for that creditor, with a view to giving that creditor a preference over another creditor is void as against — or, in Quebec, may not be set up against — the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the date of the bankruptcy; and

    • (b) in favour of a creditor who is not dealing at arm’s length with the insolvent person, or a person in trust for that creditor, that has the effect of giving that creditor a preference over another creditor is void as against — or, in Quebec, may not be set up against — the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is 12 months before the date of the initial bankruptcy event and ending on the date of the bankruptcy.

  • Marginal note:Preference presumed

    (2) If the transfer, charge, payment, obligation or judicial proceeding referred to in paragraph (1)(a) has the effect of giving the creditor a preference, it is, in the absence of evidence to the contrary, presumed to have been made, incurred, taken or suffered with a view to giving the creditor the preference — even if it was made, incurred, taken or suffered, as the case may be, under pressure — and evidence of pressure is not admissible to support the transaction.

  • Marginal note:Exception

    (2.1) Subsection (2) does not apply, and the parties are deemed to be dealing with each other at arm’s length, in respect of the following:

    • (a) a margin deposit made by a clearing member with a clearing house; or

    • (b) a transfer, charge or payment made in connection with financial collateral and in accordance with the provisions of an eligible financial contract.

  • Marginal note:Definitions

    (3) In this section,

    clearing house

    clearing house means a body that acts as an intermediary for its clearing members in effecting securities transactions; (chambre de compensation)

    clearing member

    clearing member means a person engaged in the business of effecting securities transactions who uses a clearing house as intermediary; (membre)

    creditor

    creditor includes a surety or guarantor for the debt due to the creditor; (créancier)

    margin deposit

    margin deposit means a payment, deposit or transfer to a clearing house under the rules of the clearing house to assure the performance of the obligations of a clearing member in connection with security transactions, including, without limiting the generality of the foregoing, transactions respecting futures, options or other derivatives or to fulfil any of those obligations. (dépôt de couverture)

  • R.S., 1985, c. B-3, s. 95
  • 1997, c. 12, s. 78
  • 2004, c. 25, s. 56
  • 2007, c. 29, s. 100, c. 36, ss. 42, 112

Marginal note:Transfer at undervalue

  •  (1) On application by the trustee, a court may declare that a transfer at undervalue is void as against, or, in Quebec, may not be set up against, the trustee — or order that a party to the transfer or any other person who is privy to the transfer, or all of those persons, pay to the estate the difference between the value of the consideration received by the debtor and the value of the consideration given by the debtor — if

    • (a) the party was dealing at arm’s length with the debtor and

      • (i) the transfer occurred during the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy,

      • (ii) the debtor was insolvent at the time of the transfer or was rendered insolvent by it, and

      • (iii) the debtor intended to defraud, defeat or delay a creditor; or

    • (b) the party was not dealing at arm’s length with the debtor and

      • (i) the transfer occurred during the period that begins on the day that is one year before the date of the initial bankruptcy event and ends on the date of the bankruptcy, or

      • (ii) the transfer occurred during the period that begins on the day that is five years before the date of the initial bankruptcy event and ends on the day before the day on which the period referred to in subparagraph (i) begins and

        • (A) the debtor was insolvent at the time of the transfer or was rendered insolvent by it, or

        • (B) the debtor intended to defraud, defeat or delay a creditor.

  • Marginal note:Establishing values

    (2) In making the application referred to in this section, the trustee shall state what, in the trustee’s opinion, was the fair market value of the property or services and what, in the trustee’s opinion, was the value of the actual consideration given or received by the debtor, and the values on which the court makes any finding under this section are, in the absence of evidence to the contrary, the values stated by the trustee.

  • Meaning of person who is privy

    (3) In this section, a person who is privy means a person who is not dealing at arm’s length with a party to a transfer and, by reason of the transfer, directly or indirectly, receives a benefit or causes a benefit to be received by another person.

  • R.S., 1985, c. B-3, s. 96
  • 1997, c. 12, s. 79
  • 2004, c. 25, s. 57
  • 2005, c. 47, s. 73
  • 2007, c. 36, s. 43
 
Date modified: