Draft Directive No. 13R4

Trustee Licensing

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Issued:

(Supersedes Directive No. 13R3 issued on December 8, 2011, on the same topic)

Interpretation

1. In this Directive,

“Act” means the Bankruptcy and Insolvency Act;

“applicant” means a person who applies for a trustee licence under the Act;

“CAIRP” means the Canadian Association of Insolvency and Restructuring Professionals;

“Directive” means a directive issued by the Superintendent pursuant to subsection 5(4) of the Act;

“licence” means a licence issued by the Superintendent of Bankruptcy pursuant to the Act;

“MOU” means the Memorandum of Understanding between CAIRP and the OSB signed on October 8, 2009. The MOU sets out the roles, responsibilities and interests of the parties with respect to the delivery of a professional qualification program for insolvency and restructuring professionals seeking a licence to act as a trustee in bankruptcy;

“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;

“Rules” means the Bankruptcy and Insolvency General Rules;

“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

2. This Directive is issued pursuant to paragraph 5(4)(d) of the Act for the purpose of specifying the criteria and qualifications required to obtain and maintain a trustee licence.

Part I

Criteria to Obtain a Trustee Licence

A. Trustee Licence — Individual

Application

3. Application by an individual for a trustee licence shall be made using Form 2, Application for Trustee Licence (Individual).

Prerequisite Qualifications

4. An individual is eligible to apply for a licence if the individual meets the following prerequisites:

(a) the individual is not an insolvent person and has not been in a state of insolvency within five (5) years preceding the date of the application;

(b) the individual has successfully completed:

(i) the Chartered Insolvency and Restructuring Professional (CIRP) Qualification Program (CQP), unless otherwise exempted;

(ii) the National Insolvency Examination (NIE); and

(iii) the Insolvency Counsellor’s Qualification Course (ICQC),

all of which are administered and governed by CAIRP in accordance with the MOU; and

(c) the individual is in good standing with and is not subject to any current disciplinary action by any professional organization of which the applicant is a member.

Personal Suitability

5. An applicant who meets the prerequisite qualifications must also satisfy the reputation and suitability requirements described below.

(i) Reputation

6. 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 bankruptcy and insolvency system.

7. An applicant who has been found guilty of an indictable offence for which a pardon has not been granted must satisfy the Superintendent that such finding is not of a nature that would impair the trustee’s capacity to perform his or her fiduciary duties nor impair public confidence in the bankruptcy and insolvency system.

8. An applicant who has been found guilty of professional misconduct by any professional organization of which the applicant is a member shall satisfy the Superintendent that such finding is not of a nature that would impair the trustee’s capacity to perform his or her fiduciary duties nor impair public confidence in the bankruptcy and insolvency system.

(ii) Suitability

9. The suitability of an applicant to become a trustee is evaluated during an oral examination before a Board of Examination that will assess the skills of the applicant.

10. The applicant shall demonstrate before the Board of Examination:

(a) the ability to administer professional engagements;

(b) the ability to apply related legislation and jurisprudence;

(d) good judgment in the administration of professional engagements; and

(e) a high standard of business ethics and professionalism.

11. After three unsuccessful attempts before the Board of Examination or after five (5) years following successful completion of the NIE, whichever comes first, the onus is on the applicant to submit a request to the Superintendent for additional time or attempts to pass the oral examination and shall provide credible reasons for such a request.

Conditions

12. An individual licence is issued subject to the following conditions:

(a) the trustee continues to meet the requirements of this Directive at all times;

(b) the trustee complies with the Act, Rules and Directives; and

Limitations

13. A licence may be limited to

(a) corporate bankruptcies and corporate proposals; or

(b) consumer bankruptcies and consumer proposals;

or be subject to any other limitation that the Superintendent considers appropriate taking into account the Board of Examination’s evaluation and the professional environment in which the applicant will operate.

14. For the purposes of this Directive only, where a trustee licence is limited to consumer bankruptcies pursuant to paragraph 13(b) of this Directive, a “consumer bankruptcy” means a bankruptcy in which an individual has, directly or indirectly, no business liabilities.

15. Where a bankruptcy does not constitute a “consumer bankruptcy” as defined in paragraph 14 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

16. Application for a corporate trustee licence shall be made using Form 3, Application for Trustee Licence (Corporation).

Pre-approval of Name

17. A person who wishes to apply for a corporate trustee licence must

(a) first obtain pre-approval from the Superintendent for the proposed corporate trustee name; and

(b) then obtain the approval of the appropriate federal or provincial regulatory body regarding the proposed corporate name.

Corporate Requirements

18.

(1) Subject to paragraph 18(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, came into force.

(3) The corporate trustee must be a corporation incorporated under an Act of Parliament or of the legislature of a province.

19. 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.

20. A majority of the directors and a majority of the officers of a corporate trustee shall be licensed trustees.

21. A corporate trustee shall be a private or closed company as defined in the applicable legislation.

22. 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

23. Notwithstanding paragraph 22, 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

24. A corporate licence is issued subject to the following conditions:

(a) the corporate trustee continues to meet the requirements of this Directive at all times;

(b) the corporate trustee complies with the Act, Rules and Directives; and

Part II

Conditions to Practise

General Requirements

25. 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;

(d) have adequate professional liability insurance and adequate employee dishonesty (also known as fidelity) insurance, a bond or other suitable financial arrangements.

Corporate Representation

26. Subject to paragraph 27 of this Directive, a corporate trustee must, at all times and in each district for which it holds a licence, operate through an individual trustee.

27. In extraordinary circumstances where the corporate trustee is left with no individual trustee in a given district due to an unforeseen event, such as death, sickness or resignation of an individual trustee, the corporate trustee shall request authorization from the Superintendent to maintain its operation in the given district for a specified period of time.

Designated Trustee

28. A corporate trustee shall, for each professional engagement, designate an individual trustee who shall be responsible for the administration of that engagement.

29. An individual trustee designated pursuant to paragraph 28 of this Directive shall acknowledge acceptance of the designation in writing to the Designated Senior Bankruptcy Analyst.

30. The designation of an individual trustee shall not relieve the corporate trustee of its ethical responsibility under any professional engagement it has accepted.

31. An individual trustee designated pursuant to paragraph 28 of this Directive shall not accept professional engagements under the individual trustee’s personal name.

32. 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.

Incompatible Occupation

33. An individual trustee shall not act as a trustee if that trustee practises an incompatible occupation.

34. “Incompatible occupation” includes a collection agent, a bailiff, a trade association representative, an employee of the 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, an individual trustee who requests that his or her licence be transferred or extended from a common law province to a civil law province, or vice versa, will be required to appear before a Board of Examination.

42. The Policy on Multi-Jurisdictional Licences sets out the various elements considered by the Superintendent in reviewing a trustee’s request to extend and/or transfer his or her licence to a province in which he or she does not maintain a resident office, as well as the procedures to follow in dealing with such a request.

Part III

Maintenance of a Trustee Licence

Notification of Changes

43. The trustee shall submit a written request to the Superintendent and receive prior approval before any of the following changes to the trustee’s licence can be effected:

(a) a change of district or of the resident office of the trustee;

(b) a change of firm for which the individual trustee practises;

(d) reactivation or reinstatement of a trustee licence; and

(e) a merger or purchase agreement of two or more corporate trustees.

44. 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

45. A corporate trustee shall operate and do business only under the name under which it is licensed.

46. 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

47. An individual trustee may be active or inactive.

Applicable Factors

48. The following factors are taken into consideration in determining whether a trustee is active, semi-active or inactive:

(a) activity in the day-to-day administration of professional engagements;

(b) a supervisory role or control in an insolvency practice;

(d) the inventory of open estates in the trustee’s personal name or in the trustee’s name on behalf of a corporate trustee; and

(e) the intent to file new bankruptcy and insolvency proceedings.

Active Trustee

49. 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.

50. The trustee must obtain pre-approval from the Superintendent before that trustee can begin accepting professional engagements.

Inactive Trustee

51. 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.

52. 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.

53. An inactive trustee must pay the prescribed annual fees.

54. 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.

55. 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 Examination.

Honorary Trustee

56. 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 retired from active insolvency practise;

and, at the discretion of the Superintendent,

(d) the trustee is generally recognized by peers as having made a significant contribution to the insolvency community.

57. An honorary trustee shall not accept any professional engagements and will not be subject to any fees.

Part V

Reinstating a Trustee Licence

58. 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.

59. The Policy on Reinstating a Licence that has Ceased to be Valid by Reason of the Trustee Becoming Bankrupt sets out the factors the Superintendent may consider when deciding whether to reinstate the licence of a trustee pursuant to paragraph 13.2(4)(b) of the Act.

Part VI

General Provisions

Temporary Absence

60. 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

61. A corporate trustee may continue to use a name approved by the Superintendent prior to the date of coming into force of this Directive.

62. The requirements of paragraph 18(1) of this Directive may be waived or varied in circumstances where the Superintendent is satisfied it is appropriate.

Compliance and Enforcement

63. Failure to comply with any provision of this Directive may constitute 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

64. This Directive comes into force on __________, 2012.

Enquiries

65. For any questions pertaining to this Directive, please contact the Assistant Superintendent (Licensing) at the OSB.

Bill James
Superintendent of Bankruptcy

Appendix A – Licensing Process

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