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Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3)

Act current to 2022-11-16 and last amended on 2022-09-01. Previous Versions

PART IIIProposals (continued)

DIVISION IGeneral Scheme for Proposals (continued)

Marginal note:Security or charge relating to director’s indemnification

  •  (1) On application by a person in respect of whom a notice of intention is filed under section 50.4 or a proposal is filed under subsection 62(1) and on notice to the secured creditors who are likely to be affected by the security or charge, a court may make an order declaring that all or part of the property of the person is subject to a security or charge — in an amount that the court considers appropriate — in favour of any director or officer of the person to indemnify the director or officer against obligations and liabilities that they may incur as a director or officer after the filing of the notice of intention or the proposal, as the case may be.

  • Marginal note:Priority

    (2) The court may order that the security or charge rank in priority over the claim of any secured creditor of the person.

  • Marginal note:Restriction — indemnification insurance

    (3) The court may not make the order if in its opinion the person could obtain adequate indemnification insurance for the director or officer at a reasonable cost.

  • Marginal note:Negligence, misconduct or fault

    (4) The court shall make an order declaring that the security or charge does not apply in respect of a specific obligation or liability incurred by a director or officer if in its opinion the obligation or liability was incurred as a result of the director’s or officer’s gross negligence or wilful misconduct or, in Quebec, the director’s or officer’s gross or intentional fault.

  • 2005, c. 47, s. 42
  • 2007, c. 36, s. 24

Marginal note:Court may order security or charge to cover certain costs

  •  (1) On notice to the secured creditors who are likely to be affected by the security or charge, the court may make an order declaring that all or part of the property of a person in respect of whom a notice of intention is filed under section 50.4 or a proposal is filed under subsection 62(1) is subject to a security or charge, in an amount that the court considers appropriate, in respect of the fees and expenses of

    • (a) the trustee, including the fees and expenses of any financial, legal or other experts engaged by the trustee in the performance of the trustee’s duties;

    • (b) any financial, legal or other experts engaged by the person for the purpose of proceedings under this Division; and

    • (c) any financial, legal or other experts engaged by any other interested person if the court is satisfied that the security or charge is necessary for the effective participation of that person in proceedings under this Division.

  • Marginal note:Priority

    (2) The court may order that the security or charge rank in priority over the claim of any secured creditor of the person.

  • Marginal note:Individual

    (3) In the case of an individual,

    • (a) the court may not make the order unless the individual is carrying on a business; and

    • (b) only property acquired for or used in relation to the business may be subject to a security or charge.

  • 2005, c. 47, s. 42
  • 2007, c. 36, s. 24

Marginal note:Where proposal is conditional on purchase of new securities

 A proposal made conditional on the purchase of shares or securities or on any other payment or contribution by the creditors shall provide that the claim of any creditor who elects not to participate in the proposal shall be valued by the court and shall be paid in cash on approval of the proposal.

  • R.S., 1985, c. B-3, s. 65
  • 2004, c. 25, s. 35(F)

Marginal note:Certain rights limited

  •  (1) If a notice of intention or a proposal has been filed in respect of an insolvent person, no person may terminate or amend any agreement, including a security agreement, with the insolvent person, or claim an accelerated payment, or a forfeiture of the term, under any agreement, including a security agreement, with the insolvent person, by reason only that

    • (a) the insolvent person is insolvent; or

    • (b) a notice of intention or a proposal has been filed in respect of the insolvent person.

  • Marginal note:Idem

    (2) Where the agreement referred to in subsection (1) is a lease or a licensing agreement, subsection (1) shall be read as including the following paragraph:

    • “(c) the insolvent person has not paid rent or royalties, as the case may be, or other payments of a similar nature, in respect of a period preceding the filing of

      • (i) the notice of intention, if one was filed, or

      • (ii) the proposal, if no notice of intention was filed.”

  • Marginal note:Idem

    (3) Where a notice of intention or a proposal has been filed in respect of an insolvent person, no public utility may discontinue service to that insolvent person by reason only that

    • (a) the insolvent person is insolvent;

    • (b) a notice of intention or a proposal has been filed in respect of the insolvent person; or

    • (c) the insolvent person has not paid for services rendered, or material provided, before the filing of

      • (i) the notice of intention, if one was filed, or

      • (ii) the proposal, if no notice of intention was filed.

  • Marginal note:Certain acts not prevented

    (4) Nothing in subsections (1) to (3) shall be construed

    • (a) as prohibiting a person from requiring immediate payment for goods, services, use of leased or licensed property or other valuable consideration provided after the filing of

      • (i) the notice of intention, if one was filed, or

      • (ii) the proposal, if no notice of intention was filed;

    • (b) as requiring the further advance of money or credit; or

    • (c) [Repealed, 2012, c. 31, s. 415]

  • Marginal note:Provisions of section override agreement

    (5) Any provision in an agreement that has the effect of providing for, or permitting, anything that, in substance, is contrary to subsections (1) to (3) is of no force or effect.

  • Marginal note:Powers of court

    (6) The court may, on application by a party to an agreement or by a public utility, declare that subsections (1) to (3) do not apply, or apply only to the extent declared by the court, where the applicant satisfies the court that the operation of those subsections would likely cause it significant financial hardship.

  • Marginal note:Eligible financial contracts

    (7) Subsection (1) does not apply

    • (a) in respect of an eligible financial contract; or

    • (b) to prevent a member of the Canadian Payments Association established by the Canadian Payments Act from ceasing to act as a clearing agent or group clearer for an insolvent person in accordance with that Act and the by-laws and rules of that Association.

  • (8) [Repealed, 2007, c. 29, s. 92]

  • Marginal note:Permitted actions

    (9) Despite subsections 69(1) and 69.1(1), the following actions are permitted in respect of an eligible financial contract that is entered into before the filing, in respect of an insolvent person of a notice of intention or, where no notice of intention is filed, a proposal, and that is terminated on or after that filing, but only in accordance with the provisions of that contract:

    • (a) the netting or setting off or compensation of obligations between the insolvent person and the other parties to the eligible financial contract; and

    • (b) any dealing with financial collateral including

      • (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and

      • (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.

  • Marginal note:Net termination values

    (10) If net termination values determined in accordance with an eligible financial contract referred to in subsection (9) are owed by the insolvent person to another party to the eligible financial contract, that other party is deemed, for the purposes of paragraphs 69(1)(a) and 69.1(1)(a), to be a creditor of the insolvent person with a claim provable in bankruptcy in respect of those net termination values.

  • 1992, c. 27, s. 30
  • 1997, c. 12, s. 41
  • 2001, c. 9, s. 573
  • 2004, c. 25, s. 36(E)
  • 2005, c. 47, s. 43
  • 2007, c. 29, s. 92
  • 2012, c. 31, s. 415

Marginal note:Disclaimer or resiliation of agreements

  •  (1) Subject to subsections (3) and (4), a debtor in respect of whom a notice of intention was filed under section 50.4 or a proposal was filed under subsection 62(1) may — on notice given in the prescribed form and manner to the other parties to the agreement and the trustee — disclaim or resiliate any agreement to which the debtor is a party on the day on which the notice of intention or proposal was filed. The debtor may not give notice unless the trustee approves the proposed disclaimer or resiliation.

  • Marginal note:Individuals

    (2) In the case of an individual,

    • (a) they may not disclaim or resiliate an agreement under subsection (1) unless they are carrying on a business; and

    • (b) only an agreement in relation to the business may be disclaimed or resiliated.

  • Marginal note:Court may prohibit disclaimer or resiliation

    (3) Within 15 days after the day on which the debtor gives notice under subsection (1), a party to the agreement may, on notice to the other parties to the agreement and the trustee, apply to a court for an order that the agreement is not to be disclaimed or resiliated.

  • Marginal note:Court ordered disclaimer or resiliation

    (4) If the trustee does not approve the proposed disclaimer or resiliation, the debtor may, on notice to the other parties to the agreement and the trustee, apply to a court for an order that the agreement be disclaimed or resiliated.

  • Marginal note:Factors to be considered

    (5) In deciding whether to make the order, the court is to consider, among other things,

    • (a) whether the trustee approved the proposed disclaimer or resiliation;

    • (b) whether the disclaimer or resiliation would enhance the prospects of a viable proposal being made in respect of the debtor; and

    • (c) whether the disclaimer or resiliation would likely cause significant financial hardship to a party to the agreement.

  • Marginal note:Date of disclaimer or resiliation

    (6) An agreement is disclaimed or resiliated

    • (a) if no application is made under subsection (3), on the day that is 30 days after the day on which the debtor gives notice under subsection (1);

    • (b) if the court dismisses the application made under subsection (3), on the day that is 30 days after the day on which the debtor gives notice under subsection (1) or any later day fixed by the court; or

    • (c) if the court orders that the agreement is disclaimed or resiliated under subsection (4), on the day that is 30 days after the day on which the debtor gives notice or any later day fixed by the court.

  • Marginal note:Intellectual property

    (7) If the debtor has granted a right to use intellectual property to a party to an agreement, the disclaimer or resiliation does not affect the party’s right to use the intellectual property — including the party’s right to enforce an exclusive use — during the term of the agreement, including any period for which the party extends the agreement as of right, as long as the party continues to perform its obligations under the agreement in relation to the use of the intellectual property.

  • Marginal note:Loss related to disclaimer or resiliation

    (8) If an agreement is disclaimed or resiliated, a party to the agreement who suffers a loss in relation to the disclaimer or resiliation is considered to have a provable claim.

  • Marginal note:Reasons for disclaimer or resiliation

    (9) A debtor shall, on request by a party to the agreement, provide in writing the reasons for the proposed disclaimer or resiliation within five days after the day on which the party requests them.

  • Marginal note:Exceptions

    (10) This section does not apply in respect of

    • (a) an eligible financial contract;

    • (b) a lease referred to in subsection 65.2(1);

    • (c) a collective agreement;

    • (d) a financing agreement if the debtor is the borrower; or

    • (e) a lease of real property or of an immovable if the debtor is the lessor.

Marginal note:Application for authorization to serve a notice to bargain

  •  (1) An insolvent person in respect of whom a notice of intention is filed under section 50.4 or a proposal is filed under subsection 62(1) who is a party to a collective agreement and who is unable to reach a voluntary agreement with the bargaining agent to revise any of its provisions may, on giving five days notice to the bargaining agent, apply to the court for an order authorizing the insolvent person to serve a notice to bargain under the laws of the jurisdiction governing collective bargaining between the insolvent person and the bargaining agent.

  • Marginal note:Conditions for issuance of order

    (2) The court may issue the order only if it is satisfied that

    • (a) the insolvent person would not be able to make a viable proposal, taking into account the terms of the collective agreement;

    • (b) the insolvent person has made good faith efforts to renegotiate the provisions of the collective agreement; and

    • (c) the failure to issue the order is likely to result in irreparable damage to the insolvent person.

  • Marginal note:No delay on vote on proposal

    (3) The vote of the creditors in respect of a proposal may not be delayed solely because the period provided in the laws of the jurisdiction governing collective bargaining between the insolvent person and the bargaining agent has not expired.

  • Marginal note:Claims arising from revision of collective agreement

    (4) If the parties to the collective agreement agree to revise the collective agreement after proceedings have been commenced under this Act in respect of the insolvent person, the bargaining agent that is a party to the agreement has a claim, as an unsecured creditor, for an amount equal to the value of concessions granted by the bargaining agent with respect to the remaining term of the collective agreement.

  • Marginal note:Order to disclose information

    (5) On the application of the bargaining agent and on notice to the person to whom the application relates, the court may, subject to any terms and conditions it specifies, make an order requiring the person to make available to the bargaining agent any information specified by the court in the person’s possession or control that relates to the insolvent person’s business or financial affairs and that is relevant to the collective bargaining between the insolvent person and the bargaining agent. The court may make the order only after the insolvent person has been authorized to serve a notice to bargain under subsection (1).

  • Marginal note:Unrevised collective agreements remain in force

    (6) For greater certainty, any collective agreement that the insolvent person and the bargaining agent have not agreed to revise remains in force.

  • Marginal note:Parties

    (7) For the purpose of this section, the parties to a collective agreement are the insolvent person and the bargaining agent who are bound by the collective agreement.

  • 2005, c. 47, s. 44
 
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