The Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act are the most frequently used Canadian insolvency statutes. The BIA and the CCAA allow an insolvent debtor to undertake a restructuring or liquidation process.
Canada’s insolvency regime is well positioned to handle emerging challenges from insolvencies in new industries and technologies such as cannabis, digital assets (discussed below) and artificial intelligence, as well as insolvencies in traditional industries. Canadian insolvency proceedings are generally practical, effective and responsive. Canada’s system of insolvency and restructuring proceedings is governed by a combination of statutes and court-developed jurisprudence. The Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA) are the most frequently used Canadian insolvency statutes. The BIA and the CCAA allow an insolvent debtor to undertake a restructuring or liquidation process. Increasingly, complex restructurings are also implemented using the Canada Business Corporations Act (CBCA). It is a fundamental principle of Canadian insolvency law that foreign creditors have the same rights as domestic creditors in local insolvency proceedings. Canadian Insolvency Proceedings There are six key insolvency mechanisms in Canada: – CCAA proceedings
– a plan of arrangement under the CBCA – receivership (court-appointed and private) – BIA proposal – bankruptcy – Winding-up and Restructuring Act (WURA) proceedings
STAY OF PROCEEDINGS Other than private receivership, each type of Canadian insolvency process provides for a stay of proceedings prohibiting stakeholders from taking any enforcement steps against the debtor. In bankruptcy or BIA proposal proceedings, the stay is automatic and the scope is statutory. In a court- appointed receivership or CCAA, CBCA or WURA proceedings, the stay is imposed by court order and the scope is discretionary. As a result of the stay, while such a proceeding is pending, creditors (including secured creditors) usually cannot exercise the rights and remedies that they would otherwise have against the debtor and its assets. Such claims must be pursued within the
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Doing Business in Canada
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