Directive No. 13R3
Trustee Licensing
Issued: December 8, 2011
Pending the issuance of a revised Directive addressing the full range of issues identified in the “Review of the Trustee Licensing Regulatory Framework: The Results of the Consultation,” Directive No. 13R2, Trustee Licensing has been amended, on a transitional basis, to provide for review and approval by the Superintendent of Bankruptcy of proposed corporate names. Review of any proposed corporate name will include consideration of the following:
- the rationale for the application;
- the intent of the provisions of the Directive with regard to corporate names;
- the rationale for the timing of the request; and,
- the consequences of a delay in obtaining the corporate name
Coming into Force
Directive No. 13R3 comes into force on December 8, 2011.
Enquiries
If you require further information, please do not hesitate to contact the OSB office nearest you.
(Supersedes Directive No. 13R2 issued on August 14, 2009, on the same topic)
Interpretation
1. For the purposes of this Directive, all terms defined or described in the Bankruptcy and Insolvency Act and Bankruptcy and Insolvency General Rules apply.
2. Subject to paragraph 1, the following definitions apply:
"Act" means the Bankruptcy and Insolvency Act;
"applicant" means a person who applies for a trustee licence under the Act;
"licence" means a licence issued by the Superintendent of Bankruptcy pursuant to the Act;
"OSB" means the Office of the Superintendent of Bankruptcy;
"professional engagement" means any bankruptcy or insolvency matter in respect of which a trustee is appointed or designated to act in that capacity pursuant to the Act;
"resident office" means the principal place of business from which the trustee normally practises;
"state of insolvency" means being bankrupt, having filed a notice of intention or a proposal under the Act or being subject to any similar proceedings under federal, provincial or foreign legislation.
Authority and Purpose
3. This Directive is issued pursuant to paragraph 5(4)(d) of the Act and specifies the criteria and qualifications required to obtain and maintain a trustee licence.
4. Paragraph 5(4)(d) of the Act authorizes the Superintendent to issue directives governing the criteria to be applied, in determining whether a trustee licence is to be issued to a person, and governing the qualifications and activities of trustees.
Part I
Criteria to Obtain a Trustee Licence
A. Trustee Licence — Individual
Application
5. Application by an individual for a trustee licence shall be made using Form 2, Application for Trustee Licence (Individual).
Prerequisite Qualifications
6. An individual who wishes to apply for a licence must meet the following prerequisites:
(a) not be an insolvent person and not have been in a state of insolvency within five (5) years preceding the date of the application;
(b) possess a Canadian university degree or its equivalent, or hold a relevant professional designation recognized in Canada or have a minimum of five (5) years relevant work experience;
(c) have successfully completed
(i) the National Insolvency Qualification Program; and
(ii) the National Insolvency Examination,
as described in the licensing process set out in Appendix A;
(d) have successfully completed the Insolvency Counsellor's Qualification Course, as established by the Superintendent of Bankruptcy; and
(e) be in good standing with, and not subject to any current disciplinary action by, any professional organization of which the applicant is a member.
Specific Qualifications
7. An applicant who meets the prerequisite qualifications must satisfy the reputation and suitability requirements described below.
(i) Reputation
8. The applicant shall
(a) be of good character and reputation; and
(b) satisfy the Superintendent that the issuance of a licence will not impair public confidence in the insolvency process.
9. Without limiting paragraph 8, an applicant who has been convicted of an indictable offence must satisfy the Superintendent that a pardon has been granted and that the conviction was not related to an offence of a commercial or an economic nature.
10. Without limiting paragraph 8, an applicant who has been found guilty of professional misconduct must satisfy the Superintendent that such misconduct was not of a commercial or an economic nature. Where the misconduct is not of a commercial or an economic nature, the applicant must show that the misconduct is not likely to impair public confidence in the applicant or in the bankruptcy and insolvency system in general.
(ii) Suitability
11. The suitability of a candidate to become a trustee is evaluated by a Board of Examination that will consider the skills of the applicant.
12. The applicant shall demonstrate before the Board:
(a) the ability to administer professional engagements;
(b) the ability to apply related legislation and jurisprudence;
(c) appropriate experience and a good understanding of business and consumer matters;
(d) good judgment in the administration of professional engagements; and
(e) a high standard of business ethics and professionalism.
Limit
13. An applicant is limited to three (3) appearances before the Board of Examination, over a period of ten (10) years from the date of enrolment in the National Insolvency Qualification Program, as described in the licensing process set out in Appendix A.
Conditions
14. A licence is issued
(a) subject to the condition that the trustee continue to meet the requirements and qualifications of this Directive at all times; and
(b) subject to any other conditions that the Superintendent considers appropriate.
Limitations
15. A licence may be limited to
(a) corporate bankruptcies and corporate proposals;
(b) consumer bankruptcies and consumer proposals;
or be subject to any other limitations that the Superintendent considers appropriate taking into account the Board of Examination's evaluation and the professional environment in which the applicant will operate.
16. For the purposes of this Directive only, where a trustee licence is limited to consumer bankruptcies pursuant to paragraph 15(b) of this Directive, a "consumer bankruptcy" means a bankruptcy in which an individual has, directly or indirectly, no business liabilities.
17. Where a bankruptcy does not constitute a "consumer bankruptcy" as defined in paragraph 16 of this Directive and is not a corporate bankruptcy, such an estate may only be administered by a trustee holding a licence without limitations.
B. Trustee Licence — Corporate
Application
18. Application for a corporate trustee licence shall be made using Form 3, Application for Trustee Licence (Corporation).
Pre-approval of Name
19. A person who wishes to apply for a corporate trustee licence must
(a) obtain pre-approval from the Superintendent for the proposed corporate trustee name; and
(b) obtain the approval of the appropriate federal or provincial regulatory body regarding the proposed corporate name.
Corporate Requirements
20.
(1) Subject to paragraph 20(2) of this Directive, the name of a corporate trustee shall only be composed of the names of one or more trustees or accountants that are practising or have actively practised either as trustees or accountants.
(2) The name of a corporate trustee may consist of the name of a monitor appointed in Companies' Creditors Arrangement Act (CCAA) proceedings commenced after September 30, 1997, and before the day on which subsection 1(1) of Chapter 36 of the Statutes of Canada, 2007, comes into force.
(3) The corporate trustee must be a corporation incorporated under an Act of Parliament or of the legislature of a province.
21. The corporate trustee shall restrict its business to the duties and responsibilities of a trustee licensed pursuant to the Act and to other related functions such as those of a liquidator, a receiver, an interim receiver, a receiver/manager, an agent for a secured creditor or a consultant in insolvency matters.
22. A majority of the directors and a majority of the officers of a corporate trustee shall be licensed trustees.
23. A corporate trustee shall be a private or closed company as defined in the applicable legislation.
24. A trustee may, with pre-approval from the Superintendent, be a shareholder or a financial backer of more than one corporate trustee provided that
(a) the corporate trustees do not operate in the same district;
(b) the trustee satisfies the Superintendent that there is no conflict of interest; and
(c) the trustee respects any other conditions and limitations that the Superintendent considers appropriate.
25. Notwithstanding paragraph 24, a trustee may, with pre-approval from the Superintendent, be a shareholder or a financial backer of more than one corporate trustee in the same district, for a limited period of time, in order to retire from practise as a trustee.
Issuance of Licence
26. A licence is issued
(a) subject to the condition that the corporate trustee continues to meet the requirements and qualifications of this Directive at all times; and
(b)subject to any other conditions and limitations that the Superintendent considers appropriate.
Part II
Conditions to Practise
General Requirements
27. In order to perform professional engagements, the trustee must
(a) be solvent at all times;
(b) have financial resources sufficient to warrant confidence in the ability to properly administer professional engagements;
(c) have adequate facilities to perform his or her professional engagements; and
(d) have adequate professional liability insurance and adequate employee dishonesty (also known as fidelity) insurance, a bond or other suitable financial arrangements.
Corporate Representation
28. Except in extraordinary circumstances, a corporate trustee must, at all times and in each district for which it holds a licence, operate through an individual trustee.
29. Extraordinary circumstances include the situation where the corporate trustee is left with no individual trustee in a given district due, notably, to death, sickness or resignation of an individual trustee. Under these circumstances, the corporate trustee must obtain authorization from the Superintendent to maintain its operation in the given district.
Designated Trustee
30. A corporate trustee shall, for each professional engagement, designate an individual trustee who shall be responsible for the administration of that engagement.
31. The designation of an individual trustee shall not relieve the corporate trustee of its ethical responsibility under any professional engagement it has accepted.
32. An individual trustee designated pursuant to paragraph 30 of this Directive shall not accept professional engagements under the individual trustee's personal name.
Incompatible Occupation
33. An individual trustee shall not act as a trustee if that trustee practises an incompatible occupation.
34. "Incompatible occupation" includes, notably, a collection agent, a bailiff, a trade association representative, an employee of the Office of the Superintendent of Bankruptcy (OSB) or a lawyer, or a notary in the Province of Quebec, as well as any other occupation, business or profession that may be in conflict with the duties and responsibilities of a trustee.
35. Notwithstanding paragraph 34, an employee of the OSB acting pursuant to sections 14.03 or 29 of the Act may act as a trustee.
36. The trustee who is a member of a professional body regulating an incompatible occupation must satisfy the Superintendent that he or she does not practise that occupation or profession.
Geographical Jurisdiction
37. A licence is issued for the bankruptcy district or part thereof in which the trustee maintains a resident office.
38. The Superintendent may, upon written request, transfer the licence of an individual trustee to another district, or part thereof, provided the trustee satisfies the Superintendent that he or she has sufficient knowledge of the relevant legislation that applies in that district.
39. The Superintendent may, upon written request, extend the licence of an individual trustee to another district, or part thereof, provided the trustee satisfies the Superintendent that
(a) he or she has sufficient knowledge of the relevant legislation that applies in that district; and
(b) this extension will not adversely affect the performance of professional engagements.
40. Where an individual trustee has made a request to the Superintendent to transfer or extend his or her licence to one or more districts, the Superintendent may require that the trustee appear before a Board of Examination.
41. Notwithstanding paragraph 40, the individual trustee who requests that his or her licence be transferred from a common law province to a civil law province, or vice versa, will be required to appear before a Board of Examination.
Part III
Maintenance of a Trustee Licence
Notification of Changes
42. Subject to paragraph 45, the following changes require the approval of the Superintendent and shall be contained in a written request for such approval prior to the effective date of the proposed change:
(a) a change of district or of the resident office of the trustee;
(b) a change of firm for which the individual trustee practises;
(c) a change in the corporate structure or trustee name;
(d) reactivation or reinstatement of a trustee licence;
(e) a merger of two or more corporate trustees.
43. Any other change in the information supplied by the trustee under this Directive shall be communicated to the Superintendent, in writing, at the latest within five (5) days of such a change.
Corporate Name
44. A corporate trustee shall operate and do business only under the name under which it is licensed.
45. Any change to the corporate name shall be pre-approved by the Superintendent before the approval of the appropriate federal or provincial regulatory body is requested.
Part IV
Trustee Status
46. An individual trustee may be active or inactive.
Applicable Factors
47. The following factors are taken into consideration in determining whether a trustee is active or inactive:
(a) activity in the day-to-day administration of professional engagements;
(b) a supervisory role or control in an insolvency practice;
(c) the length of time of inactivity;
(d) the inventory of open estates in the trustee's personal name or in the trustee's name on behalf of a corporate trustee.
Active Trustee
48. An active trustee is a trustee who may accept professional engagements either in the trustee's personal name or for a corporate trustee; the trustee is responsible for the administration of these professional engagements.
49. The trustee must obtain pre-approval from the Superintendent before that trustee can begin accepting professional engagements.
Inactive Trustee
50. An inactive trustee is a trustee who does not carry out the functions of a trustee and who does not perform any duties in relation to supervision, receivership or liquidation work, look-see, consultation or research in insolvency matters, for example, a trustee who has gone back to school for a period of time or left the profession.
51. Upon being formally notified by the Superintendent that he or she is inactive, the trustee shall not accept any professional engagements, nor shall that trustee carry out any functions that are exclusively reserved for a trustee appointed under a professional engagement.
52. An inactive trustee must pay the prescribed annual fees.
53. In order to reactivate a licence, an inactive trustee must satisfy the Superintendent that the technical knowledge and skills required to act as a trustee have been maintained.
54. Where the trustee has been inactive for more than five (5) years and wishes to reactivate his or her licence, he or she will be required to appear before a Board of Examiners.
Honorary Trustee
55. The Superintendent may issue an honorary trustee licence to an individual trustee, acknowledging past service, where the trustee meets the following criteria:
(a) the trustee has been active for a minimum of thirty (30) years;
(b) the trustee has attained the age of fifty-five (55) years;
(c) the trustee has retired from active insolvency practise;
(d) the trustee is not responsible for any professional engagements;
and, at the discretion of the Superintendent,
(e) the trustee is generally recognized by peers as having made a significant contribution to the insolvency community.
56. An honorary trustee shall not accept any professional engagements and will not be subject to any fees.
Part V
Reinstating a Trustee Licence
57. In order to reinstate a licence that has ceased to be valid, in accordance with subsection 13.2(3) of the Act, the trustee must satisfy the Superintendent that reinstatement of the licence will not impair public confidence in the bankruptcy and insolvency system.
Part VI
General Provisions
Temporary Absence
58. In the event of a temporary absence (i.e. illness, maternity leave, vacation) during which the trustee is unable to perform normal trustee duties, arrangements may be made with the Designated Senior Bankruptcy Analyst to allow another trustee to carry out the required duties.
Transitional Measures
59. Paragraph 6(b) and sub-paragraph 6(c)(i) do not apply to applicants who have successfully completed the National Insolvency Examination held in 1998 or in a previous year.
60. Paragraph 6(b) and sub-paragraph 6(c)(i) do not apply to applicants who failed the National Insolvency Examination held in 1997 or in a previous year, but successfully completed it in 1998, 1999 or 2000.
61. Paragraph 6(d) does not apply to licences issued in 1998 or in a previous year.
62. A corporate trustee may continue to use a name approved by the Superintendent prior to the date of coming into force of this Directive.
63. The requirements of paragraph 20(1) of this Directive may be waived or varied in circumstances where the Superintendent is satisfied it is appropriate.
Compliance and Enforcement
64. Failure to comply with any provision of this Directive constitutes an offence under the Act and, in accordance with subsection 13.2(5) of the Act, may, among other things, result in cancellation or suspension of a licence as well as application of a disciplinary process and conservatory measures, including a direction to the official receiver not to appoint the trustee to any new estates.
Coming into Force
65. This Directive comes into force on December 8, 2011.
Enquiries
66. For any questions pertaining to this Directive, please contact your local OSB office.
Bill James
Superintendent of Bankruptcy
Appendix A
Licensing Process
This appendix provides detailed information on the licensing process and is an integral part of Directive No. 13R3, Trustee Licensing.
A. Process Regarding Issuance of an Individual Trustee Licence
1. In order to obtain an individual trustee licence, a person must meet the prerequisite qualifications set out in paragraph 6 of the Directive.
Professional Designation
2. Examples of relevant professional designations are those relating to accounting, law, business administration, management and finance.
Insolvency Counsellor's Qualification Course
3. Successful completion of the Insolvency Counsellor's Qualification Course is required in order for an individual to qualify to conduct counselling under the Bankruptcy and Insolvency Act. It is also a prerequisite qualification that must be met by an individual who wishes to apply for a trustee licence, as set out in paragraph 6(d) of the Directive.
4. This course provides individuals with the basic skills and knowledge required for delivering counselling to insolvent consumers. The course is intended to ensure that individual debtors will receive professional counselling from qualified people who can assist them in adopting more responsible practices in their financial matters.
National Insolvency Qualification Program
5. By Memorandum of Understanding (MOU), the Superintendent of Bankruptcy and the Canadian Insolvency Practitioners Association (CIPA) have established the National Insolvency Qualification Program (NIQP) as a common qualification system for providers of insolvency and business-recovery services in Canada.
6. The NIQP is a three (3) year joint education process that consists of a body of knowledge, a prescribed course of study, a tutorial, written examinations, the National Insolvency Examination (NIE) and an oral examination before a Board of Examination.
7. Individuals will be allowed ten (10) years from the date of enrolment to complete the NIQP, with no more than three (3) attempts at any examination, including the NIE and the oral board examination.
8. Subject to the transitional provisions and exemptions set out in the MOU, enrolment in and successful completion of the NIQP is compulsory for any individual wishing to become a trustee.
National Insolvency Examination
9. The NIE, held jointly by the Office of the Superintendent of Bankruptcy (OSB) and the CIPA, is the written final examination that individuals must pass.
10. The purpose of the NIE is to assess the technical knowledge of a person wishing to apply for an individual licence.
11. The NIE is held once per year at locations and times determined by the OSB and the CIPA.
12. The NIE consists of two (2) parts, each three (3) hours long. The exam contains questions on bankruptcy and proposals, as well as on receiverships.
13. The examinations are marked by a committee made up of representatives of the OSB and the CIPA.
14. An individual may appeal the examination result, in writing, within thirty (30) days after the date on which the results are sent.
Application
15. Applicants who have passed the NIE will receive an invitation to appear before a Board of Examination for the oral examination. The invitation will include a copy of Form 2 (Application for Trustee Licence (Individual)), which the applicant will file with the Superintendent.
Investigation
16. Once Form 2, Application for Trustee Licence (Individual) is filed, the Superintendent verifies that the applicant meets the qualifications set out in the Directive.
17. The Superintendent may require an applicant to provide such additional information and sign such authorization for information as the Superintendent deems appropriate.
18. For example, the Superintendent may require that authorization be given to communicate with a professional organization in order to verify the applicant's good standing.
19. The Superintendent may request an investigation by the Royal Canadian Mounted Police to determine if the applicant has a criminal record. The Superintendent may also take any other investigative measures that are deemed necessary, including but not limited to:
(a) a bankruptcy search and a credit verification;
(b) a financial evaluation; and
(c) verification of the applicant's employment history and references.
Board of Examination
20. The Board of Examination shall consist of a trustee, a lawyer, a person designated by the Regional Director to act as Assistant Superintendent and a representative of the Superintendent. The members of the Board may vary from district to district. The trustee examiner is selected by the CIPA and the lawyer examiner is selected by the Superintendent, with consideration given to the following factors:
(a) that these examiners have a minimum of five (5) years' relevant practical experience in the insolvency field;
(b) the opinion of the Regional Director regarding the competence of these examiners; and
(c) that there is no relationship between the examiner and the applicants that would call into question the impartiality or the fairness of the oral examination process.
21. Various Boards will meet applicants in several locations across Canada over a period of approximately sixty (60) to ninety (90) days every year.
22. The members of each Board shall make a recommendation to the Superintendent for each applicant they have met based on their personal opinions as to the applicant's suitability to become a trustee as demonstrated in the interview.
Decision of the Superintendent
23. The decision of the Superintendent shall be mailed simultaneously to all applicants.
24. Applicants are entitled, upon request made within thirty (30) days, to receive feedback on their performance, as indicated in the comments of the Board members.
Review of the Superintendent's Decision
25. An applicant may ask for a review of the Superintendent's decision provided that a written request stating the grounds therefor is made to the Superintendent within thirty (30) days of receiving the decision.
26. An applicant may ask to be heard in person by the Superintendent.
Licence
A. Licence Subject to Conditions
27. The following conditions apply to a new licence:
(a) the newly licensed trustee agrees, for a period of twenty-four (24) months, to practise with, and in the same physical location as, an active established trustee who is acceptable to the Superintendent;
(b) that where, at any time during those twenty-four (24) months, the newly licensed trustee does not satisfy the requirement set forth in paragraph 27(a) above, the newly licensed trustee is authorized to act only in the following cases:
(i) consumer proposals;
(ii) summary administration estates;
(iii) estates, known as ordinary administration estates, for which unsecured liabilities, as per the Statement of Affairs, do not exceed $500,000 and for which the realizable assets, as per the Statement of Affairs, after deducting the value of all security interests, do not exceed $15,000; and
(iv) all other cases (notice of intention, Division I Proposal, interim receiver, estates not covered by case (iii) above, etc.), subject to the approval of the Designated Assistant Superintendent and on such terms as the Designated Assistant Superintendent shall determine, considering the performance of the newly licensed trustee.
28. In granting the newly licensed trustee approval to act in the cases described in sub-paragraph 27(b)(iv) of this Appendix, the Designated Assistant Superintendent may require that the newly licensed trustee appoint a sponsor who will provide supervision in the administration of such estates.
29. The Superintendent may also require that the trustee practise under the direct supervision of an established trustee.
30. After the period of time for which the conditions attached to a new licence are imposed, the trustee must, in order to have them removed, request in writing that the Superintendent lift these conditions. The Superintendent may lift, modify or maintain the conditions depending on the recommendation of the Designated Assistant Superintendent as to the performance of the trustee.
B. Licence Subject to Limitations
31. Where the Superintendent offers a licence with limitations pursuant to paragraph 15 of the Directive, the applicant has thirty (30) days to accept the offer.
B. Process Regarding Issuance of a Corporate Trustee Licence
Application
32. Form 3, Application for Trustee Licence (Corporation) is filed after the Superintendent has approved the proposed name of the corporate trustee.
33. The requirements as set out in paragraphs 21 (restrictions on the corporation's business) and 23 (private or closed company) of the Directive shall be contained in the constituting documents of the corporation.
C. Process Regarding Conditions of Practise
Inquiry
34. The Superintendent may, from time to time, conduct an inquiry in order to verify that a trustee continues to meet all requirements and qualifications as set out in paragraphs 14 and 26 of the Directive.
35. Within such an inquiry, the Superintendent may require that the trustee provide additional information and documentation, such as the trustee's financial statements. The Superintendent may also conduct any other form of investigation deemed necessary under paragraphs 16 to 19 of this Appendix.
Designated Trustee
36. An individual trustee who, in accordance with paragraph 30 of the Directive, has been designated by the corporate trustee to be responsible for the administration of a professional engagement shall acknowledge acceptance of the designation in writing to the Designated Senior Bankruptcy Analyst.
37. Where the individual trustee designated by the corporate trustee is to be replaced, the corporate trustee shall forthwith notify the Designated Senior Bankruptcy Analyst of the reason for such replacement and of the name of the newly designated trustee.
Geographical Jurisdiction
38. A trustee may offer services from a location other than the resident office. All locations other than the resident office must be authorized by the Designated Senior Bankruptcy Analyst in accordance with the provisions of Directive No. 28 (Non-Resident Office).
D. Other General Information
Clarification of Certain Issues
39. If any doubt should arise regarding any issue related to this Directive, the trustee or trustee applicant should obtain clarification from the Superintendent, for example:
(a) what is or what is not an incompatible occupation; and
(b) what constitutes a state of insolvency.
Important notice: The XHTML version of this Directive is not the official version. In the event of an inconsistency between the XHTML and PDF versions of this Directive, the PDF version prevails. Users are required to exercise due diligence with respect to the XHTML version.
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