Transitional Provisions—Explanatory Note

Revisions to the "Transitional Provisions — Explanatory Note" document

It has been brought to our attention that some of the items in Table 1 and Figure 1 of the OSB's document, "Transitional Provisions — Explanatory Note," are inaccurate. Accordingly, the OSB has consulted with its counsel at Industry Canada Legal Services and has revised the document.

Please note that the "Introduction" and "Summary" of the document continue to be accurate.

In this updated version of the document, the OSB has corrected the errors found in Table 1, expanded on the examples and made the text more comprehensive and descriptive (e.g. by including section references to the Bankruptcy and Insolvency Act) in order to clearly reflect the legislative amendments. In addition, Figure 1 has been removed from the document.

Enquiries

If you require further information, please do not hesitate to contact us.

James Callon
Superintendent of Bankruptcy


Introduction

The Office of the Superintendent of Bankruptcy (OSB) has developed this summary to ensure that the transitional provisions are clearly understood. Please note that this is an explanatory overview only. Please refer directly to s.107 and s.110 of Chapter 36 of the Statutes of Canada, 2007 (c.36) for a more comprehensive understanding of the transitional provisions. These sections also apply to provisions that came into force as of .

The transitional provisions provide that the amendments to the Bankruptcy and Insolvency Act (BIA) apply only to a person who, on or after the coming into force date of the amendments, is described in one of (a) – (f) below:

  1. the person becomes bankrupt;
  2. the person files a notice of intention;
  3. the person files a proposal without having filed a notice of intention;
  4. a proposal is made in respect of the person without the person having filed a notice of intention;
  5. an interim receiver is appointed in respect of the person's property and all or part of the person's property comes into the possession or under the control of the interim receiver; or
  6. all or part of the person's property comes into the possession or under the control of a receiver.

As such, to determine whether the amendments apply to a particular insolvency file, the question that needs to be asked is whether one of the "triggering events" described in (a) – (f) above occurred on or after the coming into force date.

Summary

  1. For insolvency proceedings that exist as of the coming into force date, the transitional provisions are clear. Unless one of triggering events (a) – (f) above occurs on or after the coming into force date, the amendments do not apply.
  2. For any new insolvency filing on or after the coming into force date of the amendments, the rule is clear — the amendments apply. Why? Because one of triggering events (a) – (f) above occurred after the coming into force date. For example, a person becomes bankrupt after the coming into force date of the amendments. The triggering event is (a) above.
  3. For insolvency proceedings that change status over time, the question that needs to be asked is: Did one of triggering events (a) – (f) above occur on or after the coming into force date? If the answer is "yes", the amendments apply. If the answer is "no", the amendments do not apply.

Table 1 provides some examples that help illustrate situations in which triggering events (a) – (f) above result in the amendments applying to the person (post-coming into force) and situations in which there is no triggering event and, as such, the amendments would not apply to the person (pre-coming into force).

Transitional provisions for amendments to the Companies' Creditors Arrangement Act (s.111 of Chapter 36) apply to a debtor company in respect of whom proceedings commence under that Act on or after the coming into force.

If further explanation is required, please contact the OSB via email.


Table 1
Scenario number Prior to the coming into force date On or after the coming into force date Version of the BIA that applies
1 Notice of Intention to file a proposal is filed Bankruptcy (e.g. deemed assignment by virtue of failure to file a proposal under s.50.4(8)(a)Footnote 1)

– Triggering event (a)Footnote 2 present

Post-coming into force
2 Division I Proposal is approved by court – No triggering event present Pre-coming into force
3 Division I Proposal is filed Bankruptcy (e.g. deemed assignment by virtue of creditor refusal under s.57(a) or court refusal under s.61(2)(a))

– Triggering event (a) present

Post-coming into force
4 Division II Proposal is approved - No triggering event present Pre-coming into force
5 Division II Proposal is approved Bankruptcy

– Triggering event (a) present

Post-coming into force
6 Bankruptcy Division I Proposal is filed and then is refused by creditors, refused by court or annulled

– Triggering event (c) and/or (d) present on filing of Division I Proposal (and subsequent events are irrelevant)

Post-coming into force
7 Bankruptcy Division II Proposal is filed and then is withdrawn, refused by creditors, refused by court or annulled

– Triggering event (c) and/or (d) present on filing of Division II Proposal (and subsequent events are irrelevant)

Post-coming into force
8 Bankruptcy, then Division I Proposal is filed Division I Proposal is refused by creditors or refused by court, which does not trigger a deemed assignment

– No triggering event present (triggering event (a) does not occur as a bankrupt is not an "insolvent person" and, therefore, neither s.57(a) nor s.61(2)(a) are engaged; original bankruptcy remains as failure to obtain court approval means it was never annulled under s.61(1))

Pre-coming into force
9 Bankruptcy, followed by court approval of Division I Proposal

(Approval of proposal results in annulment of bankruptcy, s.61(1))

Division I Proposal is annulled and deemed to have thereupon made an assignment (s.63(4))

– Triggering event (a) present

Post-coming into force
10 Bankruptcy, then Division II Proposal is filed Division II Proposal is withdrawn (s.66.25), refused by creditors (s.66.19(1)) or refused by court (s.66.24(2))

– No triggering event present (original bankruptcy remains)

Pre-coming into force
11 Bankruptcy, followed by approval of Division II Proposal

(Approval of proposal results in annulment of bankruptcy, s.66.4(2)(d))

Division II Proposal is annulled by the court and deemed to have thereupon made an assignment (s.66.3(5)(a))

– Triggering event (a) present

Post-coming into force
12 Bankruptcy, followed by approval of Division II Proposal

(Approval of proposal results in annulment of bankruptcy, s.66.4(2)(d))

Division II Proposal is deemed annulled (under old s.66.31)

– No triggering event present

– Unless a triggering event occurs, new s.66.31(4)(a) is inapplicable

Pre-coming into force
13 Companies' Creditors Arrangement Act filing Division I Proposal is filed

– Triggering event (c) or (d) present

Post-coming into force
14 Companies' Creditors Arrangement Act filing, then Division I Proposal – No triggering event present Pre-coming into force
15 Receivership – No triggering event present Pre-coming into force
16 Receivership Receivership continues, and Bankruptcy, Notice of Intention to file a proposal, Division I Proposal or Division II Proposal is filed

– Triggering event (a), (b), (c) or (d) present

Post-coming into force provisions apply to both the receivership and the post-coming into force proceeding (see August 19, 2009, endorsement of Mr. Justice Morawetz in SAAN Stores Ltd. (Court File No. CV-08-00007559-00CL))
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