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CCAA: International insolvencies / UNCITRAL
Clause by Clause Briefing Book
An Act to establish the Wage Earner Protection Program Act,
to amend the Bankruptcy and Insolvency Act and
the Companies' Creditors Arrangement Act and
to make consequential amendments to other Acts
- Bill Clause No. 131 - CCAA Section 51
- Bill Clause No. 131 - CCAA Section 52
- Bill Clause No. 131 - CCAA Section 53
- Bill Clause No. 131 - CCAA Section 54
- Bill Clause No. 131 - CCAA Section 55
- Bill Clause No. 131 - CCAA Section 56
- Bill Clause No. 131 - CCAA Section 57
- Bill Clause No. 131 - CCAA Section 58
- Bill Clause No. 131 - CCAA Section 59
- Bill Clause No. 131 - CCAA Section 60
- Bill Clause No. 131 - CCAA Section 61
- Bill Clause No. 131 - CCAA Section 62
Bill Clause No. 131
Section No. 51
Topic: UNCITRAL Model Law
Proposed Wording
51. If an order is made recognizing a foreign proceeding, the foreign representative may commence and continue proceedings under this Act in respect of a debtor company as if the foreign representative were a creditor of the debtor company, or the debtor company, as the case may be.
Rationale
Section 51 gives the foreign representative the same standing to initiate or continue insolvency proceedings under the CCAA as Canadian debtors and creditors once a foreign proceeding is recognized by the court in Canada.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 52
Topic: UNCITRAL Model Law
Proposed Wording
52. (1) If an order recognizing a foreign proceeding is made, the court shall cooperate, to the maximum extent possible, with the foreign representative and the foreign court involved in the foreign proceeding.
(2) If any proceedings under this Act have been commenced in respect of a debtor company and an order recognizing a foreign proceeding is made in respect of the debtor company, every person who exercises powers or performs duties and functions under the proceedings under this Act shall cooperate, to the maximum extent possible, with the foreign representative and the foreign court involved in the foreign proceeding.
Rationale
The purpose of section 52 is to enable courts and insolvency administrators from two or more countries to be efficient and achieve optimal results. In cross-border insolvencies, cooperation is often the only realistic way, for example, to prevent the dissipation of assets, to maximize the value of assets or to find the best solutions for the reorganization of businesses.
Section 52 not only authorizes cross-border cooperation, it mandates it. This is useful in eliminating any uncertainties that may exist with regards to the court or administrator's discretion to operate outside areas of express statutory authorization in order to cooperate with the foreign representative or foreign court in cross-border cases.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 53
Topic: UNCITRAL Model Law
Proposed Wording
53. If an order recognizing a foreign proceeding is made, the foreign representative who applied for the order shall
- (a) without delay, inform the court of
- (i) any substantial change in the status of the recognized foreign proceeding,
- (ii) any substantial change in the status of the foreign representative's authority to act in that capacity, and
- (iii) any other foreign proceeding in respect of the same debtor company that becomes known to the foreign representative; and
- (b) publish, without delay after the order is made, once a week for two consecutive weeks, or as otherwise directed by the court, in one or more newspapers in Canada specified by the court, a notice containing the prescribed information.
Rationale
Paragraph 53(a) ensures that the court is informed of any important change regarding the foreign proceeding. It is possible that, after recognition, changes occur in the foreign proceeding that would have affected the decision on recognition or the relief granted on the basis of recognition. For example, the foreign proceeding may be terminated or transformed from a liquidation proceeding into a reorganization proceeding or the terms of the appointment of the foreign representative may be modified or terminated.
Paragraph 53(b) is modelled on clause 131 of the Bill, subparagraph 23(1)(a)(i) of the CCAA. It provides a specific mechanism to ensure that all parties who may be affected by any substantial changes to the recognized foreign proceeding or in respect of the foreign representative receive adequate notice of these changes, allowing them to better protect their interests.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 54
Topic: UNCITRAL Model Law
Proposed Wording
54. If any proceedings under this Act in respect of a debtor company are commenced at any time after an order recognizing the foreign proceeding is made, the court shall review any order made under section 49 and, if it determines that the order is inconsistent with any orders made in the proceedings under this Act, the court shall amend or revoke the order.
Rationale
Section 54 gives the court guidance to deal with cases where the same debtor is subject to a foreign proceeding followed by a local proceeding. The most important principle in this section is that the commencement of a local proceeding does not terminate the recognition of a foreign proceeding. This principle allows Canadian courts to provide relief in favour of the foreign proceeding in all circumstances. However, section 54 maintains a pre-eminence of the local proceeding over the foreign proceeding (i.e., any relief that has already been granted to the foreign proceeding must be reviewed to ensure consistency with the local proceeding). It is worth noting that, contrary to the parallel provision in the BIA (section 277), stay orders made on the making of an order recognizing a foreign main proceeding remain in force until the reorganization is complete. Hence, they cannot be terminated. This is compatible with the CCAA process.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 55
Topic: UNCITRAL Model Law
Proposed Wording
55. (1) If, at any time after an order is made in respect of a foreign non-main proceeding in respect of a debtor company, an order recognizing a foreign main proceeding is made in respect of the debtor company, the court shall review any order made under section 49 in respect of the foreign non-main proceeding and, if it determines that the order is inconsistent with any orders made under that section in respect of the foreign main proceedings, the court shall amend or revoke the order.
(2) If, at any time after an order is made in respect of a foreign non-main proceeding in respect of the debtor company, an order recognizing another foreign non-main proceeding is made in respect of the debtor company, the court shall, for the purpose of facilitating the coordination of the foreign non-main proceedings, review any order made under section 49 in respect of the first recognized proceeding and amend or revoke the order if it considers it appropriate.
Rationale
Section 55 deals with cases where the debtor is subject to insolvency proceedings in more than one foreign State and foreign representatives of more than one foreign proceeding seek recognition or relief in Canada.
The objective of section 55 is similar to that of section 54 in that the key issue when there are concurrent proceedings is to promote cooperation, coordination and consistency of relief granted to different proceedings. Such consistency is achieved by appropriately tailoring relief to be granted or by modifying or terminating relief already granted.
The only priority in this section is given to the foreign main proceeding. That priority is reflected in the requirement that any relief in favour of a foreign non-main proceeding must be consistent with the foreign main proceeding (subsection 55(1)).
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 56
Topic: UNCITRAL Model Law
Proposed Wording
56. The court may authorize any person or body to act as a representative in respect of any proceeding under this Act for the purpose of having them recognized in a jurisdiction outside Canada.
Rationale
The purpose of section 56 is to allow Canadian insolvency administrators, appointed in Canadian insolvency proceedings, to act abroad as foreign representatives of those proceedings. The lack of such authorization has proven, in some cross-border cases, to be an obstacle to effective international cooperation. This section is aimed at avoiding just that.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 57
Topic: UNCITRAL Model Law
Proposed Wording
57. An application by a foreign representative for any order under this Part does not submit the foreign representative to the jurisdiction of the court for any other purpose except with regard to the costs of the proceedings, but the court may make any order under this Part conditional on the compliance by the foreign representative with any other order of the court.
Rationale
Section 57 is the same as the current section 18.6(7) of the CCAA. Language was simply added to reflect the fact that the new Part IV on cross-border insolvencies has introduced the concept of court "orders" recognizing foreign insolvency proceedings. These "orders" give foreign insolvency proceedings standing in Canada.
Present Law
18.6 (7) An application to the court by a foreign representative under this section does not submit the foreign representative to the jurisdiction of the court for any other purpose except with regard to the costs of the proceedings, but the court may make any order under this section conditional on the compliance by the foreign representative with any other order of the court.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 58
Topic: UNCITRAL Model Law
Proposed Wording
58. A foreign representative is not prevented from making an application to the court under this Part by reason only that proceedings by way of appeal or review have been taken in a foreign proceeding, and the court may, on an application if such proceedings have been taken, grant relief as if the proceedings had not been taken.
Rationale
Section 58 is the same as the current section 273 of the BIA. It is also applicable in the CCAA.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 59
Topic: UNCITRAL Model Law
Proposed Wording
59. For the purposes of this Part, if an insolvency or a reorganization or a similar order has been made in respect of a debtor company in a foreign proceeding, a certified copy of the order is, in the absence of evidence to the contrary, proof that the debtor company is insolvent and proof of the appointment of the foreign representative made by the order.
Rationale
Section 59 is the same as the current subsection 268(1) of the BIA. It is also applicable in the CCAA.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 60
Topic: UNCITRAL Model Law
Proposed Wording
60. (1) In making a compromise or an arrangement of a debtor company, the following shall be taken into account in the distribution of dividends to the company's creditors in Canada as if they were a part of that distribution:
- (a) the amount that a creditor receives or is entitled to receive outside Canada by way of a dividend in a foreign proceeding in respect of the company; and
- (b) the value of any property of the company that the creditor acquires outside Canada on account of a provable claim of the creditor or that the creditor acquires outside Canada by way of a transfer that, if it were subject to this Act, would be a preference over other creditors or a transfer at undervalue.
(2) Despite subsection (1), the creditor is not entitled to receive a dividend from the distribution in Canada until every other creditor who has a claim of equal rank in the order of priority established under this Act has received a dividend whose amount is the same percentage of that other creditor's claim as the aggregate of the amount referred to in paragraph (1)(a) and the value referred to in paragraph (1)(b) is of that creditor's claim.
Rationale
Section 60 is the same as the current section 274 of the BIA. It was only reorganized and adapted to reflect the changes made to the preferences and transfers at undervalue provisions in clauses 71-76 of the Bill. This provision is also applicable in the CCAA.
Present Law
None.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 61
Topic: UNCITRAL Model Law
Proposed Wording
61. (1) Nothing in this Part prevents the court, on the application of a foreign representative or any other interested person, from applying any legal or equitable rules governing the recognition of foreign insolvency orders and assistance to foreign representatives that are not inconsistent with the provisions of this Act.
(2) Nothing in this Part requires the court to make any order that is not in compliance with the laws of Canada or to enforce any order made by a foreign court.
Rationale
Section 61 is the same as current subsections 18.6(4) and (5) of the CCAA.
Present Law
18.6 (4) Nothing in this section prevents the court, on the application of a foreign representative or any other interested person, from applying such legal or equitable rules governing the recognition of foreign insolvency orders and assistance to foreign representatives as are not inconsistent with the provisions of this Act.
18.6 (5) Nothing in this section requires the court to make any order that is not in compliance with the laws of Canada or to enforce any order made by a foreign court.
Senate Recommendation
The Senate recommendation with regards to the UNCITRAL Model Law on Cross-Border Insolvencies was fairly general. The proposed amendment follows the Senate recommendation to adopt the Model Law. Consideration was given to adding a reciprocity clause and provisions to ensure the creation of Canadian creditors' committees, as recommended by the Senate. However, it was determined that these would not be consistent with furtherance of international harmony in insolvency laws that the Senate Committee endorsed and would not be consistent with Canadian support for the Model Law, which it helped to develop.
Bill Clause No. 131
Section No. 62
Topic: Regulation Making Power
Proposed Wording
62. The Minister may make regulations for carrying out the purposes and provisions of this Act, including regulations
- (a) specifying documents for the purpose of paragraph 23(1)(f); and
- (b) prescribing anything that by this Act is to be prescribed.
Rationale
The reform reflects one of the current standards for regulation making. The Minister of Industry, responsible for the CCAA, will have the specialized knowledge necessary to create regulations for the better operation of the Act. In addition, to ensure that the Act remains flexible and efficient, the Minister may be able to address compelling issues quickly.
Present Law
18. (1) The Governor in Council may make, alter or revoke, and may delegate to the judges of the courts exercising jurisdiction under this Act the power to make, alter or revoke, general rules for carrying into effect the objects of this Act.
(2) The rules referred to in subsection (1) shall not extend the jurisdiction of the court.
(3) All general rules as are from time to time made by the Governor in Council shall be laid before Parliament within three weeks after they are made, or, if Parliament is not then sitting, within three weeks after the beginning of the next session.
(4) All rules referred to in subsection (1) shall be judicially noticed and shall have effect as if enacted by this Act.
Senate Recommendation
None.
