Directive No. 21R
Date: July 21, 2011
The Office of the Superintendent of Bankruptcy has amended Directive No. 21, Estate Security, to modify the wording in the French language version of subparagraph 5(c) of the Directive to more accurately reflect the English wording of this subparagraph.
If you require further information, please do not hesitate to contact the OSB office nearest you.
Superintendent of Bankruptcy
Issued: July 21, 2011
(Supersedes Directive No. 21 issued on August 14, 2009, on the same topic)
1. In this Directive,
"Act" means the Bankruptcy and Insolvency Act;
"OSB" means the Office of the Superintendent of Bankruptcy.
Authority and Purpose
2. This Directive is issued pursuant to paragraphs 5(4)(b) and (c) of the Act.
3. The purpose of this Directive is to provide guidance to official receivers, trustees and administrators of consumer proposals as to when the official receiver will set a security and how to determine the amount.
4. If the appropriate amount can be ascertained, the security shall be set at the time the assignment is filed with the official receiver.
5. The following shall be taken into consideration in deciding the appropriateness of any security:
(a) in fixing the amount of the security, if any, the official receiver shall consider the risks to creditors and costs to the estate and take into consideration other forms of creditor protection, such as insurance coverage;
(b) the security shall be set in relation to the anticipated realization that will be available for distribution to preferred and unsecured creditors after payment of the trustee’s costs of administration;
(c) where a "range of security amounts" cost a fixed premium, the security shall be set at the highest amount within the range to avoid the need for later increases within the range;
(d) subject to the provisions of paragraph (c), the estate security shall not be fixed at an amount in excess of the largest amount to be on hand at any one time;
(e) if the estimated amount to be available to preferred and unsecured creditors, as per paragraph (b), is less than $3,000, no security will normally be fixed; and
(f) if a security is to be considered in excess of $25,000, the official receiver may review other avenues, including additional controls such as multiple counter-signatures of principals of the corporate trustee, with a view to fixing a lower security and reducing costs to the estate.
Changing the Amount of the Security
6. The trustee and the inspectors shall periodically review the adequacy of the security in accordance with subsection 120(3) of the Act.
7. When circumstances warrant increasing or decreasing the amount of a security, the trustee shall notify the official receiver detailing the change in the anticipated realization and the suggested adjustment to the amount of the security.
8. When deemed appropriate, the official receiver may revise the adequacy of the security.
Coming into Force
9. This Directive comes into force on the date that it is issued.
10. For any questions pertaining to this Directive, please contact your local OSB office.
Superintendent of Bankruptcy
The HTML version of this Directive is not the official version. In the event of an inconsistency between the HTML and PDF versions of this Directive, the PDF version prevails. Users are required to exercise due diligence with respect to the HTML version.
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