Section C: Realization and Claim Submission
A claim for loss may be submitted as a regular claim, an interim claim, or an incremental claim. A lender may also submit an appeal of a claim decision.
A regular claim for loss is made after realization on all security, guarantees or suretyships and/or personal liability (as in the case of a sole proprietorship or partnership) is complete, and all proceeds have been applied to the loan.
If a lender submits a claim for loss before realizing on asset security, the claim will be considered premature and rejected. However, it is important to note that the 36-month claim submission limitation continues to run and the complete claim, including the realization on the assets, must be submitted within the 36 month calculation period explained in Item 1.2 of this section.
Where no proceeds were realized or if it is not cost effective or impossible to realize on any of the primary security, additional security, and/or guarantees or suretyships etc., a claim for loss may still be submitted. The claim should include an explanation and all supporting documents to substantiate why realization was not possible, not cost effective or was abandoned and why no further recovery can be made. Since all means of recovery have been exhausted, a regular claim is also considered a final claim.
An interim claim for loss is made when realization on the primary security and any additional security on the business assets is complete, but before the lender has fully implemented a compromise or fully realized on the guarantees or suretyships or personal liability of the sole proprietor or partner. A portion of the claim payment will be held back.
In addition to expediting payment of claims to lenders, the objectives of the interim claim are to allow lenders sufficient time:
- to fully implement a compromise settlement (including a proposal under the Bankruptcy and Insolvency Act)
- to fully realize on guarantees or suretyships and/or on the personal liability of sole proprietors or partners.
Realizing on guarantees or suretyships or on the personal liability of sole proprietors or partners means:
- fully recovering the amount owing under a guarantee or suretyship and/or a personal liability;
- negotiating and fully settling a compromise agreement;
- registering a judgment and filing a writ of execution, where appropriate
If, following an interim claim, a lender's realization efforts fail to bring full payment of the compromise, guarantee or suretyship amount or the personal liability amount, it can submit a final claim for the shortfall. If an interim claim is not followed by a final claim or a request for extension, within the established deadline, the interim claim becomes the final claim. The date of the proposed final claim submission indicated by the lender in the interim claim form must be a reasonable one; otherwise, the CSBFP Directorate will contact the lender in order to establish an acceptable date. Regs ss.39(5)
Note: A lender may choose to submit an interim claim for loss for loans made under the Small Business Loans Act using the provisions of the CSBF Regulations. Payment of interest in this case is calculated for 24 months, not 36 months. Regs ss.38(8)
The holdback from the interim claim payment is the Minister's share (85%) of:
- any compromise not yet paid;
- the amount of any guarantee or suretyship or personal obligation that is outstanding;
- the amount owing under any judgment order, including accrued/accruing interest and costs owing;
- proposals to creditors
As the holdback is only an estimate, there may be instances where a lender collects more than the amount on which the holdback was calculated. In such situations, the Minister's share of the excess must be remitted to the CSBFP Directorate.
If the lender has advised when a compromise settlement will be fully implemented, or a guarantee or suretyship, or personal liability realized, the final claim submission date will be set accordingly. If the date is not known, a final claim submission date will be established by the lender and the CSBFP Directorate. The date for submission of the final claim will be, at the least, 36 months from the date specified in the Notice of Default or the date of last payment on the loan in the event there was no Notice of default (Refer to Item 1.1 of this Section). In any event, the CSBFP Directorate will advise the lender of the final claim submission date on the Claim Calculation Summary for an interim claim and the lender will be required to submit a final claim or a request for extension before the established date.
It is the lender's responsibility to ensure that a final claim for loss or a request for an extension is submitted within the established deadline. If the CSBFP Directorate does not receive a final claim or a request for an extension before the established date, the interim claim is deemed to be final. The Minister then becomes subrogated to the rights of the lender to the extent of the amount paid. Regs ss.39(4) and (5); Bulletin – January 2000
An incremental claim for loss is made to request payment of amounts in addition to the total claimed on a regular, interim, or final claim for loss. For example, if a lender receives additional legal or other costs after its final claim for loss has been paid, it can submit an incremental claim.
An appeal is a request to the CSBFP Directorate to review a decision (communicated in a Claim Calculation Summary) to disallow all or part of a claim for loss. In some cases, the lender need only provide some new information or documentation to have the previous decision revised. In other cases, it must provide a detailed explanation of why the contravention or non-compliance cited in the Claim Calculation Summary does not apply to the loan.
Where there is missing information or documentation needed to process the claim payment, the CSBFP Directorate will notify the lender by telephone (followed by a fax confirmation) or in writing and allow the lender five weeks to supply the missing documents or information. If no reply is received within that time frame, the claim will be adjusted or rejected in accordance with the information already provided.
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