An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act and to make consequential amendments to other Acts (S.C. 2005, c. 47)
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Assented to 2005-11-25
AMENDMENTS TO THE BANKRUPTCY AND INSOLVENCY ACT
35. (1) The portion of subsection 50.4(1) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Notice of intention
50.4 (1) Before filing a copy of a proposal with a licensed trustee, an insolvent person may file a notice of intention, in the prescribed form, with the official receiver in the insolvent person’s locality, stating
(2) Paragraph 50.4(2)(a) of the Act is replaced by the following:
(a) a statement indicating, on a weekly basis, the projected cash-flow of the insolvent person (in this section referred to as the “cash-flow statement”), prepared by the insolvent person, reviewed for its reasonableness by the trustee under the notice of intention, and signed by the trustee and the insolvent person;
(3) Subsection 50.4(6) of the Act is replaced by the following:
Marginal note:Trustee to notify creditors
(6) Within five days after the filing of a notice of intention under subsection (1), the trustee named in the notice shall send to every known creditor, in the prescribed manner, a copy of the notice including all of the information referred to in paragraphs (1) (a) to (c).
(4) Subsection 50.4(7) of the Act is amended by striking out the word “and” at the end of paragraph (a), by adding the word “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) shall send a report about the material adverse change to the creditors without delay after ascertaining the change.
(5) Paragraph 50.4(8)(b) of the Act is replaced by the following:
(b) the trustee shall, without delay, file with the official receiver, in the prescribed form, a report of the deemed assignment;
(b.1) the official receiver shall 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; and
(6) The portion of subsection 50.4(9) of the Act before paragraph (a) is replaced by the following:
Marginal note:Extension of time for filing proposal
(9) The insolvent person may, before the expiry of the 30-day period referred to in subsection (8) or of any extension granted under this subsection, apply to the court for an extension, or further extension, as the case may be, of that period, and the court, on notice to any interested persons that the court may direct, may grant the extensions, not exceeding 45 days for any individual extension and not exceeding in the aggregate five months after the expiry of the 30-day period referred to in subsection (8), if satisfied on each application that
36. The Act is amended by adding the following after section 50.5:
Marginal note:Interim financing
50.6 (1) A court may, on the application of a debtor, other than an individual, in respect of whom a notice of intention has been filed under section 50.4 or a proposal has been filed under subsection 62(1), make an order, on any conditions that the court considers appropriate, declaring that the debtor’s property is subject to a security or charge in favour of any person specified in the order who agrees to lend to the debtor an amount that is approved by the court as being required by the debtor, having regard to the debtor’s cash-flow statement referred to in paragraph 50(6)(a) or 50.4(2)(a), as the case may be,
(a) for the period of 30 days after the filing of the notice of intention;
(b) for the period of 30 days after the filing of the proposal, if no notice of intention has been filed under section 50.4 in respect of the debtor; or
(c) for any period specified in the order, if notice of the application has been given to the secured creditors likely to be affected by the security or charge.
Marginal note:Rank
(2) The court may specify in the order that the security or charge ranks in priority over the claim of any secured creditor of the debtor.
Marginal note:Other orders
(3) The court may, in the order, specify that the security or charge ranks in priority over any security or charge arising from a previous order made under subsection (1) only with the consent of the person in whose favour the previous order was made.
Marginal note:Factors to be considered
(4) In deciding whether to make the order, the court must consider, among other things,
(a) the period the debtor is expected to be subject to proceedings under this Act;
(b) how the debtor’s business and financial affairs are to be governed during the proceedings;
(c) whether the debtor’s management has the confidence of its major creditors;
(d) whether the loan agreement will enhance the debtor’s prospects as a going concern if the proposal is approved;
(e) the nature and value of the debtor’s property;
(f) whether any creditor will be materially prejudiced as a result of the debtor’s continued operations; and
(g) if notice of the application was given to the secured creditors, whether the debtor has provided a cash-flow statement for the period ending 120 days after the making of the application for the order.
37. (1) Subparagraph 54(2)(a)(i) of the Act is replaced by the following:
(i) all unsecured creditors, other than a creditor having a claim against the debtor arising from the rescission of a purchase or sale of a share or unit of the debtor — or a claim for damages arising from the purchase or sale of a share or unit of the debtor, and
(2) Section 54 of the Act is amended by adding the following after subsection (4):
Marginal note:Limitation regarding vote on a proposal
(5) Unless the court orders otherwise, a vote on a proposal may not be held until all disallowances of claims that could have an impact on the outcome of the vote have been dealt with by the court or until all appeal periods have elapsed.
Marginal note:Claims acquired after filing of notice of intention or proposal
(6) No person is entitled to vote on a claim acquired after the filing of a notice of intention in respect of a debtor or, if no such notice was filed, after the filing of a proposal in respect of the debtor, unless the entire claim is acquired.
38. Paragraph 57(b) of the Act is replaced by the following:
(b) the trustee shall, without delay, file with the official receiver, in the prescribed form, a report of the deemed assignment;
(b.1) the official receiver shall 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; and
39. (1) Paragraph 60(1.3)(a) of the Act is replaced by the following:
(a) it provides for payment to the employees and former employees, immediately after court approval of the proposal, of amounts at least equal to the amounts that they would be qualified to receive under paragraph 136(1)(d) if the employer became bankrupt on the date of the filing of the notice of intention, or proposal if no notice of intention was filed, as well as wages, salaries, commissions or compensation for services rendered after that date and before the court approval of the proposal, together with, in the case of travelling salespersons, disbursements properly incurred by them in and about the bankrupt’s business during the same period; and
(2) Section 60 of the Act is amended by adding the following after subsection (1.4):
Marginal note:Proposals by employers — prescribed pension plans
(1.5) No proposal in respect of an employer who participates in a prescribed pension plan for the benefit of its employees shall be approved by the court unless
(a) the proposal provides for payment of the following amounts that are unpaid to the fund established for the purpose of the pension plan:
(i) an amount equal to the sum of all amounts that were deducted from the employees’ remuneration for payment to the fund,
(ii) if the prescribed pension plan is regulated by an Act of Parliament,
(A) an amount equal to the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985, that was required to be paid by the employer to the fund, and
(B) an amount equal to the sum of all amounts that were required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985; and
(iii) in the case of any other prescribed pension plan,
(A) an amount equal to the amount that would be the normal cost, within the meaning of subsection 2(1) of the Pension Benefits Standards Regulations, 1985, that the employer would be required to pay to the fund if the prescribed plan were regulated by an Act of Parliament, and
(B) an amount equal to the sum of all amounts that would have been required to be paid by the employer to the fund under a defined contribution provision, within the meaning of subsection 2(1) of the Pension Benefits Standards Act, 1985, if the prescribed plan were regulated by an Act of Parliament; and
(b) the court is satisfied that the employer can and will make the payments as required under paragraph (a).
Marginal note:Non-application of subsection (1.5)
(1.6) Despite subsection (1.5), the court may approve a proposal that does not allow for the payment of the amounts referred to in that subsection if it is satisfied that the relevant parties have entered into an agreement, approved by the relevant pension regulator, respecting the payment of those amounts.
40. Paragraph 61(2)(b) of the Act is replaced by the following:
(b) the trustee shall, without delay, file with the official receiver, in the prescribed form, a report of the deemed assignment;
(b.1) the official receiver shall 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; and
41. (1) Subsection 62(1) of the Act is replaced by the following:
Marginal note:Filing of proposal
62. (1) If a proposal is made in respect of an insolvent person, the trustee shall file with the official receiver a copy of the proposal and the prescribed statement of affairs.
(2) Subsection 62(2) of the Act is replaced by the following:
Marginal note:On whom approval binding
(2) Subject to subsection (2.1), a proposal accepted by the creditors and approved by the court is binding on creditors in respect of
(a) all unsecured claims; and
(b) the secured claims in respect of which the proposal was made and that were in classes in which the secured creditors voted for the acceptance of the proposal by a majority in number and two thirds in value of the secured creditors present, or represented by a proxyholder, at the meeting and voting on the resolution to accept the proposal.
Marginal note:When insolvent person is released from debt
(2.1) A proposal accepted by the creditors and approved by the court does not release the insolvent person from any particular debt or liability referred to in subsection 178(1) unless the proposal explicitly provides for the compromise of that debt or liability and the creditor in relation to that debt or liability has assented to the proposal.
42. The Act is amended by adding the following after section 63:
Marginal note:Removal of directors
64. (1) The court may, on the application of any person interested in the matter, make an order removing from office any director of a debtor in respect of whom a notice of intention has been filed under section 50.4 or a proposal has been filed under subsection 62(1) if the court is satisfied that the director is unreasonably impairing or is likely to unreasonably impair the possibility of a viable proposal being made in respect of the debtor or is acting or is likely to act inappropriately as a director in the circumstances.
Marginal note:Filling vacancy
(2) The court may, by order, fill any vacancy created under subsection (1).
Marginal note:Security or charge relating to director’s indemnification
64.1 (1) The court may, on the application of a person in respect of whom a notice of intention has been filed under section 50.4 or a proposal has been filed under subsection 62(1), make an order declaring that the assets of the person are subject to a security or charge, in an amount that the court considers appropriate, in favour of any director or officer of the person to indemnify the director or officer against obligations and liabilities that he or she may incur as a director or an officer of the person after the filing of the notice of intention or the proposal, as the case may be.
Marginal note:Rank
(2) The court may specify in the order that the security or charge ranks in priority over the claim of any secured creditor of the person.
Marginal note:Restriction — indemnification insurance
(3) The court shall not make the order if in its opinion the person could obtain adequate indemnification insurance for the director or officer at a reasonable cost.
Marginal note:Declaration in cases of gross negligence, etc.
(4) The court shall make an order declaring that the security or charge does not apply in respect of a specific obligation or liability incurred by a director or an officer if it is of the opinion that the obligation or liability was incurred as a result of the director’s or officer’s gross negligence or wilful misconduct or, in the Province of Quebec, the director’s gross or intentional fault.
Marginal note:Court may order security or charge to cover certain costs
64.2 (1) The court may make an order declaring that property of a person, other than an individual, in respect of whom a notice of intention has been filed under section 50.4 or a proposal has been filed under subsection 62(1) is subject to a security or charge, in an amount that the court considers appropriate, in respect of
(a) the costs of the interim receiver, the receiver-manager and the trustee, including their legal costs;
(b) the person’s costs incurred in relation to the remuneration and expenses of any financial, legal or other experts engaged by the person for the purpose of any proceedings under this Division; and
(c) the costs of any interested party incurred in relation to the remuneration and expenses of any financial, legal or other experts engaged by the party, if the court is satisfied that the incurring of those costs is necessary for the effective participation of the interested party in the proceedings under this Division in relation to the person.
Marginal note:Rank
(2) The court may specify in the order that the security or charge ranks in priority over the claim of any secured creditor of the person.
43. (1) The portion of subsection 65.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Certain rights limited
65.1 (1) If a notice of intention or a proposal has been filed in respect of an insolvent person, no person may terminate or amend any agreement, including a security agreement, with the insolvent person, or claim an accelerated payment, or a forfeiture of the term, under any agreement, including a security agreement, with the insolvent person, by reason only that
(2) Subsection 65.1(4) of the Act is amended by striking out the word “or” at the end of paragraph (a), by adding the word “or” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) as preventing a lessor of aircraft objects under an agreement with the insolvent person from taking possession of the aircraft objects
(i) if, after the commencement of proceedings under this Act, the insolvent person defaults in protecting or maintaining the aircraft objects in accordance with the agreement,
(ii) 60 days after the commencement of proceedings under this Act unless, during that period, the insolvent person
(A) remedied the default of every other obligation under the agreement, other than a default constituted by the commencement of proceedings under this Act or the breach of a provision in the agreement relating to the insolvent person’s financial condition,
(B) agreed to perform the obligations under the agreement, other than an obligation not to become insolvent or an obligation relating to the insolvent person’s financial condition, until the day on which proceedings under this Act end, and
(C) agreed to perform all the obligations arising under the agreement after the proceedings under this Act end, or
(iii) if, during the period that begins on the expiry of the 60-day period and ends on the day on which proceedings under this Act end, the insolvent person defaults in performing an obligation under the agreement, other than an obligation not to become insolvent or an obligation relating to the insolvent person’s financial condition.
44. The Act is amended by adding the following after section 65.1:
Marginal note:Disclaimer or resiliation of agreements
65.11 (1) A debtor, other than an individual, in respect of whom a notice of intention has been filed under section 50.4 or a proposal has been filed under subsection 62(1) may, subject to subsection (3), disclaim or resiliate any agreement to which the debtor is a party on the date the notice of intention or the proposal was filed by giving 30 days notice to the other parties to the agreement in the prescribed manner.
Marginal note:Exceptions
(2) Subsection (1) does not apply in respect of
(a) an eligible financial contract within the meaning of subsection 65.1(8);
(b) a lease referred to in subsection 65.2(1);
(c) a collective agreement;
(d) a financing agreement if the debtor is the borrower; and
(e) a lease of real property or an immovable if the debtor is the lessor.
Marginal note:Party may challenge
(3) Within 15 days after being given notice of the disclaimer or resiliation, a party to the agreement may apply to the court for a declaration that subsection (1) does not apply in respect of the agreement, and the court, on notice to any parties that it may direct, shall, subject to subsection (4), make that declaration.
Marginal note:Circumstances for not making declaration
(4) No declaration under subsection (3) shall be made if the court is satisfied that a viable proposal could not be made in respect of the debtor without the disclaimer or resiliation of the agreement and all other agreements that the debtor has disclaimed or resiliated under subsection (1) or 65.2(1).
Marginal note:Intellectual property
(5) If the debtor has, in any agreement, granted the use of any intellectual property to a party to the agreement, the disclaimer or resiliation of the agreement does not affect the party’s right to use the intellectual property so long as that party continues to perform its obligations in relation to the use of the intellectual property.
Marginal note:Deemed claim of other party
(6) If an agreement is disclaimed or resiliated, every other party to the agreement is deemed to have a claim for damages as an unsecured creditor.
Marginal note:Application for authorization to serve a notice to bargain
65.12 (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) who is a party to a collective agreement and who is unable to reach a voluntary agreement with the bargaining agent to revise any of its provisions may, on giving five days notice to the bargaining agent, apply to the court for an order authorizing the insolvent person to serve a notice to bargain under the laws of the jurisdiction governing collective bargaining between the insolvent person and the bargaining agent.
Marginal note:Conditions for issuance of order
(2) The court may issue the order only if it is satisfied that
(a) the insolvent person would not be able to make a viable proposal, taking into account the terms of the collective agreement;
(b) the insolvent person has made good faith efforts to renegotiate the provisions of the collective agreement; and
(c) the failure to issue the order is likely to result in irreparable damage to the insolvent person.
Marginal note:No delay on vote on proposal
(3) The vote of the creditors in respect of a proposal may not be delayed solely because the period provided in the laws of the jurisdiction governing collective bargaining between the insolvent person and the bargaining agent has not expired.
Marginal note:Claims arising from revision of collective agreement
(4) If the parties to the collective agreement agree to revise the collective agreement after proceedings have been commenced under this Act in respect of the insolvent person, the bargaining agent that is a party to the agreement has a claim, as an unsecured creditor, for an amount equal to the value of concessions granted by the bargaining agent with respect to the remaining term of the collective agreement.
Marginal note:Order to disclose information
(5) On the application of the bargaining agent and on notice to the person to whom the application relates, the court may, subject to any terms and conditions it specifies, make an order requiring the person to make available to the bargaining agent any information specified by the court in the person’s possession or control that relates to the insolvent person’s business or financial affairs and that is relevant to the collective bargaining between the insolvent person and the bargaining agent. The court may make the order only after the insolvent person has been authorized to serve a notice to bargain under subsection (1).
Marginal note:Unrevised collective agreements remain in force
(6) For greater certainty, any collective agreement that the insolvent person and the bargaining agent have not agreed to revise remains in force.
Marginal note:Parties
(7) For the purpose of this section, the parties to a collective agreement are the insolvent person and the bargaining agent who are bound by the collective agreement.
Marginal note:Restriction on disposal of certain assets
65.13 (1) An insolvent person, other than an individual, 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.
Marginal note:Notice to secured creditors
(2) An insolvent person who applies to the court for the authorization must give notice of the application to all secured creditors who are likely to be affected by the proposed sale or disposal of the assets to which the application relates.
Marginal note:Factors to be considered
(3) In deciding whether to grant the authorization, the court must consider, among other things,
(a) whether the process leading to the proposed sale or disposal of the assets was reasonable in the circumstances;
(b) whether the trustee approved the process leading to the proposed sale or disposal of the assets;
(c) whether the trustee has filed with the court a report stating that in his or her opinion the sale or disposal of the assets is necessary for a viable proposal that will provide a better result for creditors than if the assets were sold or disposed of under a bankruptcy;
(d) the extent to which the creditors were consulted in respect of the proposed sale or disposal;
(e) the effects of the proposed sale or disposal on creditors and other interested parties; and
(f) whether the consideration to be received for the assets is reasonable and fair, taking into account the market value of the assets.
Marginal note:Additional factors
(4) In addition to taking the factors referred to in subsection (3) into account, if the proposed sale or disposal is to a person who is related to the insolvent person, the court may grant the authorization only if it is satisfied that
(a) good faith efforts were made to sell or dispose of the assets to persons who are not related to the person proposing to sell or dispose of them; and
(b) the consideration to be received is superior to the consideration that would be received under all other offers actually received in respect of the assets.
Marginal note:Related persons
(5) For the purpose of subsection (4), a person who is related to the insolvent person includes a person who controls the insolvent person, a director or an officer of the insolvent person and a person who is related to a director or an officer of the insolvent person.
Marginal note:Direction that assets may be disposed of free of charges, etc.
(6) In granting an authorization for the sale or disposal of assets, the court may order that the assets may be sold or disposed of free and clear of any security, charge or other restriction, but if it so orders, it shall also order that the proceeds realized from the sale or disposal of the assets are subject to a security, charge or other restriction in favour of the creditors whose security, charges or other restrictions are affected by the order.
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