New Amendments to Canadian Insolvency Law Take Effect
A major package of reforms to Canada’s Bankruptcy and Insolvency Act (“BIA”) and Companies’ Creditors Arrangement Act (“CCAA”) came into force on September 18, 2009. The most significant features of the insolvency reforms pertaining to business cases include:
- Codification of a large body of case law developed in restructurings under the CCAA regarding a court’s authority to authorize debtor-in-possession financing, to authorize the sale of assets in a restructuring proceeding, and to permit the debtor to reject or assign certain kinds of contracts;
- Enhanced protection for collective bargaining agreements and intellectual property licenses;
- Provisions authorizing the appointment of a national receiver with powers that are exercisable throughout Canada, rather than merely in the province where the appointment is made, and provisions specifying the powers that the court may confer upon a receiver;
- Limitations on the rights of equity holders in restructurings;
- The adoption of procedures for dealing with cross-border insolvency proceedings based on the UNCITRAL Model Law, which has been enacted in various forms in 17 countries or territories, including the U.S. (in the new chapter 15 of the U.S. Bankruptcy Code), Great Britain, and Japan;
- Provisions protecting a receiver or trustee in bankruptcy from personal liability for claims made in connection with collective bargaining agreements or pension plans; and
- The replacement of several technical remedies in the BIA with a general power to challenge “transfers at undervalue” by the debtor and the incorporation of this power in CCAA proceedings.
The amendments are effective in bankruptcies or restructurings that formally commenced under the BIA or CCAA on or after September 18, 2009.