Canada's Insolvency Statutes

Companies’ Creditors Arrangement Act (CCAA). The CCAA is the principal statute for the reorganization of a large insolvent corporation that has more than C$5-million of claims against it. The CCAA is a federal statute with application in every province and territory of Canada and is generally analogous in effect to Chapter 11 of the U.S. Bankruptcy Code (U.S. Code), although there are a number of important technical differences. As discussed below, the 2009 amendments to the CCAA and case law have confirmed that the sale of a debtor’s business and assets in a CCAA proceeding is permitted even in the absence of a formal plan of reorganization.
The Bankruptcy and Insolvency Act (BIA). The BIA is also a federal statute that includes provisions to facilitate both the liquidation and reorganization of insolvent debtors. The liquidation provisions, which provide for the appointment of a trustee in bankruptcy over the assets of the insolvent debtor, are generally analogous to Chapter 7 of the U.S. Code, although there are a number of important technical differences. The reorganization provisions under the BIA, known as the “proposal” process, are more commonly used for smaller, less complicated reorganizations than those that take place under the CCAA because the BIA proposal provisions have more stringent timelines, provide for less flexibility and establish a minimum debt threshold of only C$1,000. The BIA also provides for the appointment of an interim receiver and, as a result of the 2009 amendments, a receiver with national power and authority.
The Personal Property Security Act (PPSA). The PPSA governs the priorities, rights and obligations of secured creditors, including a secured creditor’s right, following a default by the debtor, to enforce its security and dispose of assets subject to its security (including on a going-concern basis). Each province of Canada, except Quebec (which has its own unique Civil Code, modelled on the French Napoleonic Code) has enacted a version of the PPSA. The PPSA is analogous to, and modelled on, the Uniform Commercial Code enacted in each U.S. state.
Provincial Rules of Court. In all provinces except Quebec, it is also possible to sell an insolvent business, by way of liquidation or going-concern sale, through a court-appointed receiver, which is usually the insolvency branch of an accounting firm. Each province, other than Quebec, has “Rules of Court” similar to Ontario’s Courts of Justice Act, which allow the court to appoint a receiver and/or receiver and manager when it is “just or convenient” to do so. The receiver, by way of court order, can be granted the right to take possession of, and sell, the assets subject to the receivership.