Winding-up and Restructuring Act (R.S.C., 1985, c. W-11)

Fraudulent Preferences

Marginal note:Gratuitous contracts

96 All gratuitous contracts, or conveyances or contracts without consideration or with a merely nominal consideration, respecting either real or personal property, made by a company in respect of which a winding-up order under this Act is afterwards made, with or to any person whatever, whether a creditor of the company or not, within three months immediately preceding the commencement of the winding-up, or at any time afterwards, shall be presumed to have been made with intent to defraud the creditors of the company.

Marginal note:Contracts injuring or obstructing creditors

97 All contracts by which creditors are injured, obstructed or delayed, made by a company unable to meet its engagements, and in respect of which a winding-up order under this Act is afterwards made, with a person whether a creditor of the company or not, who knows of that inability or has probable cause for believing that inability exists, or after that inability has become public and notorious, shall be presumed to be made with intent to defraud the creditors of the company.

Marginal note:When contracts with consideration voidable

98 A contract or conveyance for consideration, respecting either real or personal property, by which creditors are injured or obstructed, made by a company unable to meet its engagements with a person ignorant of that inability, whether a creditor of the company or not, and before that inability has become public and notorious, but within thirty days next before the commencement of the winding-up of the business of the company under this Act, or at any time afterwards, is voidable, and may be set aside by any court of competent jurisdiction, on such terms with respect to the protection of that person from actual loss or liability by reason of that contract as the court orders.

Marginal note:Contracts made with intent to defraud or delay creditors

99 All contracts or conveyances made and acts done by a company respecting either real or personal property, with intent fraudulently to impede, obstruct or delay the creditors of the company in their remedies against the company, or with intent to defraud the creditors of the company or any of them, and so made, done and intended with the knowledge of the person contracting or acting with the company, whether a creditor of the company or not, and that have the effect of impeding, obstructing or delaying the creditors in their remedies, or of injuring them, or any of them, are void.

Marginal note:Sale or transfer in contemplation of insolvency

• 100 (1) Where any sale, deposit, pledge or transfer is made of any property, real or personal, by a company in contemplation of insolvency under this Act by way of security for payment to any creditor, or where any property, real or personal, goods, effects or valuable security are given by way of payment by the company to any creditor, whereby that creditor obtains or will obtain an unjust preference over the other creditors, the sale, deposit, pledge, transfer or payment is void, and the subject thereof may be recovered back by the liquidator by suit or action in any court of competent jurisdiction.

• Marginal note:Presumption if within thirty days

  (2) Where the sale, deposit, pledge or transfer under subsection (1) is made within thirty days next before the commencement of the winding-up of the company under this Act, or at any time afterwards, it shall be presumed to have been so made in contemplation of insolvency, whether or not it was made voluntarily or under pressure and evidence of pressure shall not be admissible to support the transaction.

• Marginal note:Exception

  (3) The presumption referred to in subsection (2) does not apply to a sale, deposit, pledge or transfer of financial collateral made in accord- ance with the provisions of an eligible financial contract.

Marginal note:Payments by company within thirty days

• 101 (1) Every payment made within thirty days next before the commencement of the winding-up under this Act by a company unable to meet its engagements in full, to a person who knows of that inability or has probable cause for believing that inability exists, is void, and the amount paid may be recovered back by the liquidator by suit or action in any court of competent jurisdiction.

• Marginal note:Restoration of security

  (2) Where any valuable security is given in consideration of a payment described in subsection (1), the security or the value thereof shall be restored to the creditor on the return of the payment.

• Marginal note:Exception

  (3) Subsection (1) does not apply to a payment made in connection with financial collateral in accordance with the provisions of an eligible financial contract.

Marginal note:Definitions

101.1 In subsections 100(3) and 101(3), eligible financial contract and financial collateral have the same meanings as in subsection 22.1(2).

Marginal note:Debts of company transferred to contributories

102 When a debt due or owing by a company has been transferred within the time and under the circumstances mentioned in section 101, or at any time afterwards, to a contributory, or to any person indebted or liable in any way to the company, who knows or has probable cause for believing the company is unable to meet its engagements, or in contemplation of its insolvency under this Act, for the purpose of enabling that contributory or person to set up, by way of compensation or set-off, the debt so transferred, the debt shall not be set up by way of compensation or set-off against the claim on that contributory or person.

Marginal note:Inquiry into dividends and redemptions of shares

• 102.1 (1) If a company that is being wound up under this Act has, within 12 months preceding the commencement of the winding-up, paid a dividend in respect of any share of the company, other than a stock dividend, — or, in the case of a federal credit union, paid a dividend in respect of a share or membership share, other than a share or membership share dividend — or redeemed or purchased for cancellation any of the shares of the capital stock of the company — or any of the shares or the membership shares of the company, if it is a federal credit union — the court may, on the application of the liquidator, inquire into whether the dividend was paid or the shares or membership shares redeemed or purchased for cancellation at a time when the company was insolvent, or whether the payment of the dividend or the redemption or purchase for cancellation of its shares or membership shares rendered the company insolvent.

• Marginal note:Judgment against directors

  (2) The court may give judgment to the liquidator against the directors of the company, jointly and severally, in the amount of the dividend or redemption or purchase price, with interest thereon, as has not been paid to the company where the court finds that

  • (a) the transaction occurred at a time when the company was insolvent or the transaction rendered the company insolvent; and

  • (b) the directors did not have reasonable grounds to believe that the transaction was occurring at a time when the company was solvent or the transaction would not render the company insolvent.

• Marginal note:Criteria

  (3) In making a determination under paragraph (2)(b), the court shall consider whether the directors acted as prudent and diligent persons would have acted in the same circumstances and whether the directors in good faith relied on

  • (a) financial or other statements of the company represented to them by officers of the company or the auditor of the company, as the case may be, or by written reports of the auditor to fairly reflect the financial condition of the company; or

  • (b) a report relating to the company’s affairs prepared pursuant to a contract with the company by a lawyer, notary, an accountant, engineer or appraiser or other person whose profession gave credibility to the statements made in the report.

• Marginal note:Judgment against shareholders

  (4) If a transaction referred to in subsection (1) has occurred and the court makes a finding referred to in paragraph (2)(a), the court may give judgment to the liquidator against a shareholder, or a member of a federal credit union, who is related to one or more directors or to the company or who is a director not liable by reason of paragraph (2)(b) or subsection (5), in the amount of the dividend or redemption or purchase price referred to in subsection (1) and the interest on it, as was received by the shareholder or member and not repaid to the company.

• Marginal note:Directors exonerated by law

  (5) A judgment under subsection (2) may not be entered against or be binding on a director who had, in accordance with any applicable law governing the operation of the company, protested against the payment of the dividend or the redemption or purchase for cancellation of the shares of the capital stock of the company or of the shares or membership shares of the federal credit union and had exonerated himself or herself under that law from any liability for it.

• Marginal note:Directors’ right to recover

  (6) Nothing in this section is to be construed to affect any right, under any applicable law governing the operation of the company, of the directors to recover from a shareholder, or from a member of a federal credit union, the whole or any part of any dividend, or any redemption or purchase price, made or paid to the shareholder or member when the company was insolvent or that rendered the company insolvent.

• Marginal note:Onus

  (7) For the purposes of an inquiry under this section, the onus of proving

  • (a) that the company was not insolvent lies on the directors and the shareholders of the company or, if the company is a federal credit union, on the directors, members and shareholders of the company; and

  • (b) that there were reasonable grounds to believe any of the following lies on the directors:

    • (i) that the company was not insolvent when a dividend was paid or shares, or membership shares of a federal credit union, were redeemed or purchased for cancellation, or

    • (ii) that the payment of a dividend or a redemption of shares, or membership shares of a federal credit union, did not render the company insolvent.

• Marginal note:Meaning of dividend

  (8) In this section, dividend includes a patronage allocation within the meaning of section 2 of the Bank Act.

Appeals

Marginal note:Appeals

103 Any person dissatisfied with an order or decision of the court or a single judge in any proceeding under this Act may,

• (a) if the question to be raised on the appeal involves future rights,

• (b) if the order or decision is likely to affect other cases of a similar nature in the winding-up proceedings, or

• (c) if the amount involved in the appeal exceeds five hundred dollars,

by leave of a judge of the court, or by leave of the court or a judge of the court to which the appeal lies, appeal therefrom.

Marginal note:Court of Appeal

104 An appeal under section 103 lies to the highest court of final resort in or for the province or territory in which the proceeding originated.

Marginal note:Practice

105 All appeals shall be regulated, as far as possible, according to the practice in other cases of the court appealed to, but no appeal hereinbefore authorized shall be entertained unless the appellant has, within fourteen days from the rendering of the order or decision appealed from, or within such further time as the court or judge appealed from allows, taken proceedings therein to perfect his appeal, or unless, within that time, he has made a deposit or given sufficient security according to the practice of the court appealed to that he will duly prosecute the appeal and pay such damages and costs as may be awarded to the respondent.

Marginal note:Dismissing appeal

106 Where an appellant does not proceed with his appeal according to this Act and the rules of practice applicable, the court appealed to, on the application of the respondent, may dismiss the appeal with or without costs.

Marginal note:Appeal to Supreme Court of Canada

107 An appeal, if the amount involved therein exceeds two thousand dollars, lies by leave of the Supreme Court of Canada to that Court from the highest court of final resort in or for the province or territory in which the proceeding originated.