November 2007, vol. 9, no. 3 - Business Insolvencies

Business insolvencies, which include bankruptcies¹ and proposals,² totalled 1908 by the end of the second quarter of 2007, representing a 9.1-percent decrease from the first quarter of 2007. The decrease was driven by the 10.6-percent decrease in bankruptcies along with the 1.7-percent decrease in proposals during the same period. When compared with the same quarter in 2006, bankruptcies and proposals experienced a year-over-year decrease of 13.4 percent and 4.7 percent, respectively, resulting in a 12-percent decrease in business insolvencies.

Overall, the total liabilities of insolvencies for all sectors showed a year-over-year decrease of 43 percent, and a decrease of 73 percent between the first and second quarters of 2007. As shown in Figure 1, following the dramatic first-quarter jump in the average liability value, this value saw a drop from $1 894 758 to $556 510, which is more in line with the average in previous quarters. The unusual increase in liabilities recorded in the first quarter of 2007 was associated with high-valued bankruptcies in the information and cultural industries sector. A year-over-year comparison from the second quarter of 2006 shows a decrease in the average liability of insolvencies by 35.6 percent from $863 576.

During the second quarter of 2007, four industry sectors accounted for more than half the volume of insolvencies: construction (326), retail trade (247), manufacturing (202), and transportation and warehousing (197). When compared with the same period in 2006, the decrease in the volume of "professional, scientific and technical services" insolvencies (46) was the highest among all sectors.

The agriculture, forestry, fishing and hunting sector experienced the highest year-over-year monetary increase in insolvencies when compared with the second quarter of 2006. Although the volume of total insolvencies for this sector decreased by 30 percent during this period, the liability increased by 129 percent. Within the same period, the finance and insurance sector experienced the highest year-over-year monetary decrease in insolvencies at 98 percent.

For more information on business insolvencies, visit the website of the Office of the Superintendent of Bankruptcy Canada at www.osb.ic.gc.ca.

¹ Bankruptcy refers to the liquidation of the debtor's business assets and the end of the commercial entity's operations.

² Proposals involve the settling of debts between the debtor and its creditors while still allowing the business to continue operating.

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