Bankruptcy Flashcards
Who may have access to the Court or the provisions of the BIA for relief?
2.1 Overview
Various stakeholders or interested persons.
What obligation does the BIA impose on individuals involved in proceedings under it?
2.1 Overview
The obligation to act in good faith with respect to those proceedings.
Does the BIA define what constitutes good faith or when it may be lacking?
2.1 Overview
No, the BIA does not provide an explanation of what constitutes good faith or when it may be lacking.
What could be the range of behaviors covered by the standard of good faith?
2.1 Overview
The standard of good faith could range from an absence of bad faith to taking positive steps to achieve the best outcome for other counterparties, and everything in between.
Is it possible to determine the exact standard of good faith at this point?
2.1 Overview
No, the exact standard of good faith cannot be assessed at this point and will likely depend on specific facts on a case-by-case basis.
What is the concern in the legal community regarding the obligation of good faith?
2.1 Overview
There is some concern about the extent of the obligation, but it is likely that it will not be overly onerous.
Can individual stakeholders still pursue their personal interests under the duty of good faith?
2.1 Overview
Yes, individual stakeholders can still try to achieve the best result in their personal interest as long as they do not take actions to hinder others’ rights or interests or abuse their rights to harm a third party.
How may a duty of good faith be interpreted?
2.1 Overview
A duty of good faith may be interpreted as a requirement to take timely action, honestly and fairly.
What can the court do if it determines that the duty of good faith is lacking?
2.1 Overview
The court may make any appropriate order in the circumstances upon application by any interested person.
How can an insolvent person become bankrupt?
2.1 Overview
An insolvent person can become bankrupt voluntarily or involuntarily.
How are voluntary bankruptcy proceedings commenced?
2.1 Overview
Voluntary bankruptcy proceedings are commenced when an insolvent person makes an assignment of his property for the general benefit of his creditors.
How are involuntary bankruptcy proceedings commenced?
2.1 Overview
Involuntary bankruptcy proceedings are commenced when one or more creditors make an application to the court for a bankruptcy order.
When does a person become bankrupt in involuntary proceedings?
2.1 Overview
In involuntary proceedings, the person becomes a bankrupt only if and when the court makes the bankruptcy order.
When will an insolvent person who files a notice of intention or a proposal under Division I of Part III of the BIA be deemed to have made an assignment?
There are six situations
2.1 Overview
An insolvent person will be deemed to have made an assignment in the following situations:
- If the required statements and reports, or the proposal, are not filed according to the prescribed deadlines after filing a notice of intention.
- When the creditors refuse a Division I proposal made by the debtor.
- When the court refuses to approve a Division I proposal approved by creditors.
- When the court makes an order annulling a Division I proposal.
- When the court decides to terminate the period in which to file a proposal.
- When the court declares that the proposal is deemed to have been rejected by the creditors.
What is the effect of a deemed assignment?
2.1 Overview
A deemed assignment has the same effect as a voluntary assignment.
Are there any differences in the procedures and requirements for the administration of a bankrupt estate based on the type of assignment?
2.1 Overview
No, once bankruptcy occurs, the procedures and requirements for the administration of a bankrupt estate are the same whether bankruptcy resulted following the making of a voluntary assignment, a bankruptcy order, or a deemed assignment.
What is the significance of the date of bankruptcy in relation to the administration of estates?
2.1 Overview
The date of bankruptcy determines the property of a debtor that vests in the trustee and the claims that are provable in the estate, both present and future.
When does the date of bankruptcy occur?
There are three occasions
2.1 Overview
The date of bankruptcy occurs on the following occasions:
- When the court grants a bankruptcy order.
- When the Official Receiver accepts an assignment filed by an insolvent debtor and issues the Certificate of Appointment of Trustee to the trustee.
- When an insolvent person is deemed to have made an assignment, as outlined above.
How is the review period for pre-bankruptcy transfers, payments, or transactions calculated?
2.1 Overview
The review period is calculated by counting backwards from the “date of the initial bankruptcy event,” not the date of bankruptcy.
What is the “date of the initial bankruptcy event”?
2.1 Overview
The “date of the initial bankruptcy event” is defined as the earliest date of filing, commencement, or making of an assignment, a proposal made pursuant to Division I of Part III of the BIA, a notice of intention to Make a Proposal, a proposal made under Division II of Part III of the BIA, the first application for a bankruptcy order, or proceedings under the CCAA.
How does the concept of the “date of the initial bankruptcy event” relate to the “date of bankruptcy”?
2.1 Overview
The “date of the initial bankruptcy event” is not the “date of bankruptcy.” It serves as a reference point to anchor the period during which certain transactions can be reviewed and challenged as void or voidable.
What happens in the situation of a failed consumer proposal?
2.1 Overview
In the case of a failed consumer proposal, the resulting effect is similar to if the proposal had never been filed, except for some consequences. The failed consumer proposal itself does not cause the debtor to become bankrupt, and the debtor may never become bankrupt or there could be a long period of time before an eventual bankruptcy.
What is considered the “date of the initial bankruptcy event” in the case of a failed consumer proposal?
2.1 Overview
The better view is that the “date of the initial bankruptcy event” will be the date of the consumer proposal only if the consumer proposal does not become annulled. If the consumer proposal is annulled, the “date of the initial bankruptcy event” would be the date of the eventual assignment, deemed assignment, or bankruptcy order that causes the debtor to become bankrupt.
What can an insolvent person do to benefit his creditors?
An insolvent person can assign all his property to a Licensed Insolvency Trustee for the general benefit of his creditors.
Where is the assignment filed?
The assignment is filed with the Official Receiver.
What is the role of the Official Receiver in the assignment process?
The Official Receiver reviews the documents to ensure they are in the prescribed form and accompanied by a sworn declaration.
What does the Official Receiver issue to the trustee upon completing the review?
The Official Receiver issues a Certificate of Appointment of Trustee to the trustee.
When does the property of a bankrupt pass to the trustee?
The property of the bankrupt (excluding exempt assets) passes to the trustee at the time of appointment, including property located outside Canada.
What does the term “property” encompass in bankruptcy?
The term “property” includes all property of the bankrupt at the date of bankruptcy and property acquired by or that may pass to the bankrupt before the date of discharge.
Which types of property are not divisible among the creditors of a bankrupt?
There are five properties not divisble
The following types of property are not divisible among the creditors of a bankrupt:
- Property held by the bankrupt in trust for another person.
- Property that is exempt from execution or seizure under applicable federal or provincial statutes in the province where the assets are located and where the bankrupt resides.
- Goods and services tax credit payments in prescribed circumstances.
- Prescribed payments relating to the essential needs of an individual, in prescribed circumstances.
- Property that is not otherwise unseizable by virtue of provincial or federal laws and constitutes a fund contributed to a registered retirement income fund, registered retirement savings plan, or registered disability savings plan more than one year before the bankruptcy.
What are the primary purposes of proceedings commenced under the BIA?
There are five purposes
Proceedings under the BIA are primarily commenced for the following purposes:
- Providing for the orderly and fair distribution of property among the creditors of a bankrupt.
- Investigating the affairs of the bankrupt.
- Setting aside preference payments, settlements, and other fraudulent transactions.
- Rehabilitation.
- Permitting an honest but unfortunate debtor to obtain a discharge from his debts.
Who can make an assignment in bankruptcy voluntarily?
An insolvent person can make an assignment in bankruptcy voluntarily.
Who can make an assignment in bankruptcy with the leave of the court?
The executor or administrator of the estate or the liquidator of the succession, if deceased, can make an assignment in bankruptcy with the leave of the court.
How does the BIA define an “insolvent person”?
There are four points
An “insolvent person” is defined under the BIA as a person who:
- Is not bankrupt.
- Resides or carries on business or has property in Canada.
- Has liabilities to creditors provable as claims under the BIA amounting to at least $1,000.
- Meets one of the following three conditions:
* Is unable to meet obligations as they generally become due for any reason.
* Has ceased paying current obligations in the ordinary course of business as they generally become due.
* Has obligations exceeding the fair value of his property.
Can a person make a valid assignment in bankruptcy without having assets?
Yes, a person can make a valid assignment in bankruptcy even if they do not have assets, as long as they satisfy the BIA definition of an insolvent person.
What does the term “person” encompass in the context mentioned?
There are six possible definitions
The term “person” includes:
- A partnership.
- An unincorporated association.
- A corporation.
- A cooperative society or organization.
- The successors of any of the above.
- The heirs, executors, liquidators of the succession, administrators, or other legal representatives of a person.
Can a corporation file an assignment in bankruptcy?
Yes, a corporation can file an assignment in bankruptcy if it is properly authorized to do so, typically through a resolution passed by the board of directors at a properly constituted meeting or as provided for in the corporation’s articles.
What happens when a corporation makes an assignment in bankruptcy?
When a corporation makes an assignment in bankruptcy, it divests itself of all its assets to the Licensed Insolvency Trustee.
Are there any exclusions to the definition of “corporation” under the BIA?
Yes, the BIA definition of “corporation” includes an income trust but excludes incorporated banks governed by the Bank Act, savings banks, insurance companies, trust companies, loan companies, and railway companies.
Can a provisional liquidator appointed by the court file an assignment in bankruptcy on behalf of a corporation?
Yes, the courts have held that a provisional liquidator appointed by the court to wind up a company can file an assignment in bankruptcy on behalf of that corporation.
Has there been a consistent ruling regarding the assignment by the receiver of a company?
No, the courts have ruled both for and against an assignment by the receiver of a company.
Can a partner of a partnership make a valid assignment of the partnership’s property without unanimous authorization?
No, a partner of a partnership may not make a valid assignment of the partnership’s property for the benefit of all creditors without unanimous authorization from the other partners.
Can bankruptcy proceedings be initiated by a partner for the partnership without unanimous authorization?
No, bankruptcy proceedings initiated by a partner for the partnership are not considered to be “in the ordinary course of business,” and therefore require unanimous authorization from all partners.
What happens if an assignment in bankruptcy is made by only some of the partners?
If the assignment in bankruptcy is made by only some of the partners, it would only affect the personal assets of the bankrupt partners and their share of the partnership, not the partnership’s property.
Do assignments in bankruptcy made by all partners in a partnership include the assignment of the partnership’s property?
Yes, assignments in bankruptcy made by all partners in a partnership operate as an assignment of the partnership’s property as well, according to Section 85 of the BIA.
Does the BIA also apply to limited partnerships?
Yes, the BIA applies to limited partnerships as if they were ordinary partnerships.
What is the purpose of individuals filing an assignment in bankruptcy?
Individuals file an assignment in bankruptcy to obtain a fresh financial start.
What are some factors that can lead to the bankruptcy of a debtor?
Some factors that can lead to the bankruptcy of a debtor are:
- When debts exceed the income and assets the debtor can support.
- Inability to pay off total debts when due or within a reasonable time.
- Having a large number of creditors, making informal proposals difficult.
- Salary garnishment or attachment by one or more creditors.
- Harassment by creditors.
- Other proceedings initiated by creditors.
Under what circumstances can individuals file a joint assignment in bankruptcy?
Individuals, including spouses, can file a joint assignment in bankruptcy if their debts are substantially the same and their individual estates would qualify as summary bankruptcy estates. In such cases, the otherwise individual estates may be administered as one.
Can an insolvent debtor withdraw an assignment after filing it?
No, an insolvent debtor cannot withdraw an assignment after filing it.
How can an assignment or bankruptcy order be annulled?
An assignment or bankruptcy order can be annulled by a court order in certain situations.
In what situations can a court issue an order annulling an assignment or bankruptcy order?
There are three situations
Examples of situations where a court can issue an order annulling an assignment or bankruptcy order include:
- When, in the opinion of the court, the assignment or bankruptcy order should not have been made.
- If the bankrupt has a restraining order under a provincial family law act and has not provided notice to his or her spouse.
- If it is shown that the debtor was not insolvent when the assignment was made.
Under what circumstances will an assignment or bankruptcy order be automatically annulled?
An assignment or bankruptcy order will be automatically annulled if the bankrupt makes a proposal that is subsequently accepted by the creditors and approved by the court. The approval of the proposal annuls the assignment or bankruptcy order.
What happens to payments made and acts done by the trustee when an assignment or bankruptcy order is annulled?
When an order is made annulling an assignment or bankruptcy order, all payments made and acts done by the trustee remain valid. The property of the bankrupt reverts to the bankrupt, or it vests in some other person appointed by the court.
What is a bankruptcy application?
A bankruptcy application is an application to the court made by one or more creditors, seeking a bankruptcy order that adjudges the debtor bankrupt.
What is the requirement for a creditor to make a bankruptcy application?
The creditor(s) must allege and be prepared to prove to the court’s satisfaction that the debtor owes at least $1,000 and that the debtor has committed an act of bankruptcy within six months prior to filing the application.
What is the purpose of a bankruptcy application?
The purpose of a bankruptcy application is to seek a court order that declares the debtor bankrupt.
Who can apply for a bankruptcy order?
One or more unsecured creditors can apply for a bankruptcy order.
What does a bankruptcy order do?
A bankruptcy order is made by the court and declares that an individual, corporation, or partnership is adjudged bankrupt.
What happens after a bankruptcy order is made?
The court appoints a licensed trustee to administer the estate of the bankrupt. Usually, a trustee nominated by the applicant creditor(s) and who has consented to act is appointed by the court and named in the bankruptcy order.
What is another term used to describe the making of a bankruptcy order?
The making of a bankruptcy order is sometimes referred to as an “involuntary bankruptcy”.
Under what circumstances can a secured creditor file an application for a bankruptcy order?
A secured creditor can file an application if:
- The creditor states in its application that it is willing to give up its security for the benefit of the creditors of the estate if a bankruptcy order is made, or
- The creditor gives an estimate of the value of its security, and the debt exceeds the value of the security by at least $1,000. The valuation of the security must be reasonable.
Can a secured creditor file an application for a bankruptcy order while retaining part of its security?
Yes, in practice, the court has allowed a secured creditor to file an application for a bankruptcy order even if it undertakes to abandon only part of its security, as long as the remaining unsecured debt is at least $1,000.
Who can file an application against a debtor?
A creditor can file an application against a debtor.
How does the BIA define “debtor”?
The BIA defines “debtor” to include an insolvent person and any person who resided or carried on business in Canada at the time an act of bankruptcy was committed.
Against which corporations can an application be made under the BIA?
An application can be made against any corporation that is incorporated in Canada or has an office or property in, or carries on business within, Canada.
Can an application for a bankruptcy order be filed against a partnership without involving all of the partners?
Yes, it is possible to file an application for a bankruptcy order against a partnership without involving all of the partners or even a single individual partner becoming bankrupt.
Is it necessary to mention all of the partners in the petition when filing an application against a partnership?
While it is not necessary to mention all of the partners in the petition, it is common practice to name each of the partners in the partnership, as well as the partnership itself, when filing.
What should be done if a bankruptcy order has been made against one member of a partnership and there is another application against a member of the same partnership?
In such a case, the other application should be filed in or transferred to the same court so that the court may consolidate the proceedings.
How are limited partnerships treated in terms of bankruptcy applications?
Limited partnerships are treated as ordinary partnerships, and therefore an application for a bankruptcy order can be filed against the limited partnership. The application would also be filed against the general partner(s) since they are fully liable for the debts of the limited partnership. Typically, the application would not be filed against the limited partners, as they do not have an obligation for the debts of the limited partnership beyond their investment.
How should an application against a sole proprietorship be made?
An application against a sole proprietorship should be made against the individual who operated the business and not against the proprietorship itself.
How should an application against a sole proprietorship be made?
An application against a sole proprietorship should be made against the individual who operated the business and not against the proprietorship itself.
Against whom can an application for a bankruptcy order be filed?
An application for a bankruptcy order can be filed against an individual debtor or the estate or succession of a deceased debtor.
Are there any individuals who are exempt from being subject to an application for a bankruptcy order?
Yes, individuals who have their principal occupation and means of livelihood in fishing, farming, or the tillage of soil, or who work for wages, salary, commission, or hire at a rate of compensation not exceeding $2,500 per year and do not carry on business on their own account, are exempt from having an application for a bankruptcy order filed against them.
Can these exempt individuals still make a voluntary assignment?
Yes, although an application for a bankruptcy order cannot be filed against these individuals, they can still make a voluntary assignment.
What requirements must be established by the creditors to file an application for bankruptcy?
There are three requirements
The creditors must establish the following:
- The debts owing to them are at least $1,000.
- The debtor has committed an act of bankruptcy.
- The act of bankruptcy was committed within the six months preceding the filing of the application.
What is the reference date for determining the act of bankruptcy within the six-month period?
The date of filing the application serves as the reference date for determining the act of bankruptcy within the six months preceding the filing.
What is the minimum debt requirement for an applicant creditor in order to make a bankruptcy application?
The applicant creditor must be owed $1,000 or more. If there are multiple applicant creditors, the total debts must amount to a minimum of $1,000.
What must the court be satisfied about before making a bankruptcy order?
Before making a bankruptcy order, the court must be satisfied that the debt due to the applicant creditor is actually owed. If the debt has not been clearly established, the application may be dismissed.
Is it necessary for the court to determine the precise amount owed to the applicant creditor?
No, as long as the court is satisfied that the debtor is indebted to the applicant for at least $1,000, it is not necessary for the court to determine the precise amount owed to the applicant creditor.
Can a dispute regarding the state of the account of an applicant creditor result in the application being stayed?
No, a dispute regarding the state of the account of an applicant creditor is not grounds for staying an application unless there is doubt that the amount owed is at least $1,000.
What are the grounds for filing an application for a bankruptcy order against a debtor?
The grounds for filing an application for a bankruptcy order against a debtor include having a debt of at least $1,000 and proving that one or more acts of bankruptcy have been committed within the six-month period preceding the application.
What is the most commonly cited act of bankruptcy in applications?
The most commonly cited act of bankruptcy in applications is ceasing to meet liabilities generally as they become due.
What must the applicant establish when alleging that the debtor has ceased to meet its liabilities generally as they become due?
When alleging that the debtor has ceased to meet its liabilities generally as they become due, the applicant must establish that there is debt other than their own as proof of the act of bankruptcy, unless special circumstances exist.
In what situations have the courts recognized special circumstances?
There are three situations
The courts have recognized special circumstances in the following situations:
- When the creditor is the only creditor, or a significantly large creditor, of a debtor who has failed to meet repeated demands for payment.
- When there is fraud on the part of the debtor, making it imperative to set in motion the processes of the BIA immediately for the protection of the whole class of creditors.
- When the debtor admits that they are generally unable to pay their creditors.
Is the determination of whether there has been a failure to meet liabilities generally a matter of fact or law?
The question of whether or not there has been a failure to meet liabilities generally is a matter of fact.
What is required to verify the allegations in an application?
The allegations in an application must be verified by an affidavit of the applicant or by someone duly authorized on his behalf who has personal knowledge of the facts alleged in the application.
What happens if an application is not verified by an affidavit?
If an application is not verified by an affidavit, the court will reject the application.
Who can provide the affidavit to verify the allegations in an application?
The applicant or someone duly authorized on his behalf, who has personal knowledge of the facts alleged in the application, can provide the affidavit to verify the allegations.
What is the court’s requirement at the hearing of the application?
At the hearing of the application, the court will require proof of the facts alleged in the application and proof of the service of the application.
What action will the court take if satisfied with the proof provided?
If satisfied with the proof of the facts alleged in the application and the service of the application, the court will make a bankruptcy order.
How have the courts emphasized the creditor’s obligation in bankruptcy proceedings?
The courts have repeatedly stressed that creditors seeking to take advantage of bankruptcy proceedings must strictly comply with the statute. Bankruptcy proceedings are considered quasi-criminal in nature, and therefore, strict adherence to the statutory requirements is required.
How is the “locality of a debtor” defined in the context of filing the application?
The “locality of a debtor” is defined under the Bankruptcy and Insolvency Act (BIA) as the principal place where the debtor has carried on business or resided during the year immediately preceding the bankruptcy. If the debtor has not carried on business or resided in Canada during that year, the locality is determined by where the greater portion of the debtor’s property is situated.
Who has the responsibility to demonstrate that the application has been filed in the locality of the debtor?
The onus or burden of proof falls on the applicant creditor to demonstrate that the application has been presented in the locality of the debtor.
What factors determine the locality of a debtor under the BIA?
The locality of a debtor is determined based on where the debtor has carried on business or resided during the year immediately preceding the bankruptcy. If neither of these conditions applies, the locality is determined by the location of the greater portion of the debtor’s property.
Under what circumstances can the court consolidate proceedings?
The court can consolidate proceedings when two or more applications are filed against the same debtor or against joint debtors.
What are the circumstances in which the court may dismiss the application?
There are four circumstances
- The court is not satisfied with the proof of the facts alleged in the application.
- The court is not satisfied with the service of the application.
- The debtor is able to demonstrate that they are capable of paying their debts.
- The court is satisfied that there is sufficient cause not to make an order.
What happens when there are multiple debtors named in the application?
What will the court do?
When there are multiple debtors named in the application, the court has the discretion to dismiss the application with respect to one or more of the debtors without affecting the application’s effect against the other debtors named in the application.
Can you explain what it means for the court to dismiss an application “without prejudice”?
Dismissing an application “without prejudice” means that it does not prevent or hinder future applications or legal actions. It allows for the possibility of pursuing the matter again in the future if circumstances change or new evidence emerges.
What must a debtor file in court if they intend to dispute an application?
There are three things they must file
If a debtor intends to dispute an application, they must file in court:
- A notice specifying the statements in the application they intend to dispute.
- The grounds of their dispute.
- Their address for service.
How much time should the debtor provide for serving a copy of the notice to the applicant creditor or its solicitor?
The debtor must serve a copy of the notice to the applicant creditor or its solicitor at least two full days before the date of the hearing stated in the application.
Can a disputed application be heard by a registrar in bankruptcy?
No, a disputed application must be heard by a judge. Registrars can only hear applications that are not disputed.
What must the debtor dispute in an application if they intend to challenge it?
If the debtor intends to dispute an application, they must either dispute the debt claimed or establish that they have not committed an act of bankruptcy. Challenging the amount of the debt alone is not sufficient unless it reduces the debt below the $1,000 minimum required to file an application.
What are some proper reasons for a creditor to file an application against a debtor?
There are four possible reasons
Some proper reasons for a creditor to file an application against a debtor include:
- Allowing a trustee to review preferences or fraudulent transactions, even if the rights of action may be statute-barred.
- Preventing the squandering or dissipation of assets and ensuring an equitable distribution of the debtor’s property among creditors.
- Determining the amount of loss for insurance or other purposes.
- Allowing creditors to take advantage of provisions in the Bankruptcy and Insolvency Act (BIA) that may provide certain priorities they would not otherwise have.
How does filing an application to review preferences or fraudulent transactions benefit creditors?
Filing an application to review preferences or fraudulent transactions allows creditors to potentially uncover transactions that may have been conducted to give certain creditors preferential treatment or to defraud creditors. It helps protect the rights and interests of all creditors involved.
Under what circumstances can the court stay proceedings on an application?
The court can stay proceedings on an application if the debtor denies the facts alleged in the application and there is a need to resolve the disputed facts at trial. The court can also stay proceedings for other sufficient reasons as determined by the court.
What action can the court take during the stay of proceedings?
During the stay of proceedings, the court may impose conditions on the debtor to prevent disposition of their property, ensuring the assets are preserved during the period of the stay.
When can the proceedings under the application be resumed?
The proceedings under the application can be resumed as soon as the trial to resolve the disputed facts is concluded.
Can the court stay proceedings under an application even if the facts are not disputed?
Yes, even if the facts are not disputed, the court has the authority to stay proceedings under an application, either altogether or for a limited time. However, in such cases, the debtor must provide the court with sufficient reasons to justify the stay.
What is the significance of an applicant residing outside Canada in legal proceedings in the context of security for costs?
An applicant residing outside Canada may be ordered to give security for costs. Proceedings may be stayed until the security is provided.
Is a creditor from a different province required to give security for costs?
No, a creditor who resides in a province other than the province of the debtor’s locality is not required to give security for costs.
What happens to the costs of an applicant creditor when a bankruptcy order is made?
When a bankruptcy order is made, the costs of the applicant creditor are to be taxed and paid out of the bankrupt estate, unless the court orders otherwise.
What occurs if the realization in the bankrupt estate is insufficient to cover the trustee’s fees and disbursements?
In such a scenario, the court may order the costs to be paid by the applicant creditor. This means the creditor may be responsible for covering some of the trustee’s fees and expenses if the assets in the bankrupt estate are not enough to cover them.
Can an application for a bankruptcy order be withdrawn without permission from the court?
Withdrawal of Application for Bankruptcy Order under BIA s. 43
No, an application for a bankruptcy order cannot be withdrawn without leave of the court, as it is considered a proceeding for the benefit of all creditors.
What does “leave of the court” mean in the context of withdrawing a bankruptcy order application?
“Leave of the court” refers to obtaining permission or approval from the court to withdraw the bankruptcy order application. It cannot be done unilaterally by the applicant.
What was the historical rationale for prohibiting debtors from making an assignment after filing an application for a bankruptcy order under the Bankruptcy and Insolvency Act (BIA)?
Conflict between assignment and application
BIA s. 14.04, 15.5, 38, 49, 155 and 163
The historical rationale behind this prohibition was that a bankruptcy order had a retroactive effect to the date of the application filing. Allowing debtors to make an assignment after the application could be perceived as enabling the debtor to assign assets after being declared bankrupt, which was considered impossible.
How did the 1997 modifications to the Bankruptcy and Insolvency Act (BIA) affect the rationale and the practice regarding debtors making assignments after filing a bankruptcy order application?
Conflict between assignment and application
BIA s. 14.04, 15.5, 38, 49, 155 and 163
The 1997 BIA amendments eliminated the retroactive effect of bankruptcy orders. However, the practice of disallowing debtors from making assignments after filing an application continued, and the court in the case of Re Archibald (2003) upheld this practice, setting aside an assignment in favor of a bankruptcy order made after the assignment.
Can an application for a bankruptcy order be filed against the estate or succession of a deceased debtor?
Yes, an application for a bankruptcy order can be filed against the estate or succession of a deceased debtor.
Who should the application be served upon when filing against the estate or succession of a deceased debtor, and what actions should the representative avoid until the application is disposed of?
The application should be served on the executor or administrator of the deceased debtor’s estate, or on the liquidator of the succession. The representative should refrain from making any payments or transferring any property of the deceased debtor, except for funeral and testamentary expenses, until the application has been dealt with. The representative can be personally liable for any payments, property transfers, or penalties incurred if they act contrary to this requirement.
What must a trustee do if a default occurs in any provision of a Division I proposal under the Bankruptcy and Insolvency Act (BIA)?
The trustee must advise the creditors and the Official Receiver within 60 days after the first day the default occurs, unless the default is waived by the inspectors or creditors, or remedied by the debtor within 30 days after the default.
What can an interested party do if a default in a proposal is not remedied and not waived by the inspectors or creditors?
An interested party, such as the trustee or a creditor, can make an application to the court for an order annulling the proposal and declaring the debtor bankrupt due to the default. However, there is no requirement that any party file such an application, and the debtor may not become bankrupt even if there is a default.
Apart from a default, what are other situations in which the court may make an order annulling a proposal?
The court may make an order annulling the proposal if it appears that the proposal cannot continue without injustice or undue delay, or if the court’s approval of the proposal was obtained through fraud.
What happens after the court issues an order annulling the proposal under the BIA?
Within five days of the court order annulling the proposal, the trustee must send a notice calling the first meeting of creditors in the bankruptcy. The meeting must be held within 21 days of the trustee’s appointment, but this time period can be extended by the Official Receiver or the court under specific circumstances.
What happens when the creditors reject a Division I proposal or the court refuses to approve it under the Bankruptcy and Insolvency Act (BIA)?
When the creditors reject a Division I proposal or the court refuses to approve it, the insolvent person is deemed to have made an assignment in bankruptcy. A trustee must file a report with the Official Receiver, who will issue a Certificate of Assignment, and the first meeting of creditors in the bankruptcy will proceed.
How does the first meeting of creditors in the bankruptcy take place after a Division I proposal is rejected?
If the creditors reject the proposal at a meeting to vote on it, the trustee will call and hold a meeting of creditors present. If no quorum exists, the trustee will send a notice pursuant to BIA s. 102, calling the first meeting of creditors. In the case of non-approval by the court, the trustee will send a similar notice calling the first meeting of creditors.
Can the court make a decision before the meeting of creditors, affecting the status of the Division I proposal?
Yes, the court can decide, upon application, at any time before the meeting of creditors, that the creditors are deemed to have refused the proposal. In this case, the debtor is deemed to have made an assignment, and the process continues the same way as if the creditors had voted against the proposal at a meeting.
What powers do the creditors have during the first meeting of creditors in the bankruptcy after a Division I proposal is rejected?
At the first meeting of creditors, the creditors may affirm the appointment of the trustee or appoint another trustee by ordinary resolution, regardless of the requirement for a special resolution under BIA s. 14 to appoint another trustee.
How does the Bankruptcy and Insolvency Act (BIA) define a trustee?
According to the BIA, a trustee is either a natural person or a corporation holding a licence issued by the Superintendent of Bankruptcy. If the trustee is a corporation, an officer of the corporation who personally holds a trustee licence must be designated as the person responsible for the administration of the bankrupt estate.
What rules and regulations govern the conduct of licensed trustees?
The conduct of licensed trustees is subject to the regulations and rules of the Bankruptcy and Insolvency Act (BIA) and the CAIRP (Canadian Association of Insolvency and Restructuring Professionals) Rules of Professional Conduct and Interpretations.
In the case of a corporate trustee, who must be designated as responsible for the administration of a bankrupt estate?
If the trustee of a bankrupt estate is a corporation, an officer of the corporation who personally holds a trustee licence must be designated as the person responsible for the administration of that estate.
To whom is the trustee responsible in a bankruptcy case?
The trustee is not the agent of the bankrupt or the creditors. Instead, the trustee acts as an officer of the court, and as such, has responsibilities to both the bankrupt and the creditors.
In what situations would a trustee require permission from the court to act due to potential conflicts of interest?
A trustee may need permission from the court to act if, at any time during the two preceding years, they were involved in any of the following roles or relationships with the debtor or related parties:
- A director or officer of the debtor
- An employer or employee of the debtor or its directors/officers
- Related to the debtor or any of its directors/officers
- The auditor, accountant, or legal counsel, or a partner or employee of the auditor, accountant, or legal counsel of the debtor
- The trustee under a trust indenture issued by the debtor or any related person
- The holder of a power of attorney under a hypothec within the meaning of the Civil Code of Québec granted by the debtor or any related person
- Related to the trustee under a trust indenture.
How does the Bankruptcy and Insolvency Act (BIA) and the CAIRP Rule of Professional Conduct address conflicts of interest for trustees?
The BIA and the CAIRP Rule of Professional Conduct impose restrictions on trustees to prevent conflicts of interest. The BIA sets out specific roles and relationships that may disqualify a trustee from acting without court permission, and the CAIRP Rule of Professional Conduct 4 further emphasizes the trustee’s ethical obligations in managing conflicts of interest.
What disclosure is required by a trustee under the Bankruptcy and Insolvency Act (BIA)?
A trustee cannot act as a trustee of the estate of a debtor unless they make full disclosure of any potential conflict of interest. This disclosure must be made at the time of appointment as trustee of the estate of the debtor and at the first meeting of creditors if the trustee is already involved as a trustee, receiver, or liquidator of the property of any person related to the debtor.
What is a dual mandate for a trustee in the context of bankruptcy proceedings?
A dual mandate occurs when the same licensed insolvency trustee acts as both a receiver or agent for a secured creditor to realize encumbered assets and as a trustee in a bankruptcy proceeding simultaneously. This approach aims to reduce costs associated with separate appointments.
How does a dual appointment as a licensed insolvency trustee raise concerns of conflict of interest, and what is required in such cases?
A dual appointment can potentially lead to conflicts of interest. Therefore, the trustee must disclose this dual role to all interested parties. Any interested party has the right to oppose the dual appointment, which could result in the termination of either one of the appointments.
What is the recommended action for a trustee if a conflict arises due to the dual appointment?
If the trustee believes that the dual appointment creates a conflict, they should voluntarily resign as a receiver since a trustee providing services in a bankruptcy cannot resign from their duties. This ensures transparency and ethical conduct in the bankruptcy proceedings.
Under what circumstances can a trustee act for a secured creditor while concurrently acting as the trustee of the bankrupt estate of a debtor?
A trustee can act for a secured creditor as an agent or receiver while also serving as the trustee of the bankrupt estate if they obtain a written opinion from a legal counsel who does not represent the secured creditor. This opinion must confirm the validity and enforceability of the security against the bankrupt’s estate.
What are the requirements for a trustee when commencing to act for a secured creditor?
Upon commencing to act for or assist a secured creditor, the trustee must notify the Superintendent of Bankruptcy and the creditors or inspectors. The notification must include details that the trustee is acting for the secured creditor, the basis of any remuneration received from the secured creditor, and the independent legal opinion regarding the validity of the security.
What obligations does the trustee have concerning the independent legal opinion obtained for the secured creditor’s work?
The trustee is required to provide the Superintendent of Bankruptcy with a copy of the independent legal opinion within two days after receiving a request, and they must also provide a copy to any creditor who requests one. This ensures transparency and accountability in the trustee’s actions while acting on behalf of the secured creditor.
What are the key requirements for a Licensed Insolvency Trustee (LIT) when acting for a secured creditor in a bankruptcy?
The key requirements for a LIT acting for a secured creditor in a bankruptcy are:
- Maintain a written record of the capacity and terms under which they operate on behalf of the secured creditor.
- Obtain an independent legal opinion confirming the validity and enforceability of the security instrument.
- Maintain adequate accounting records to segregate costs and activities for the benefit of the secured creditor.
What happens if a trustee fails to redeem the security instrument as required by the secured creditor?
If a trustee fails to redeem the security instrument as required by the secured creditor, the only exception to the rule that no creditor can receive more than 100 cents on the dollar plus interest under the BIA is applicable. In such a case, the secured creditor is entitled to retain the full realized value of the assets, even if it exceeds the creditor’s claim.
Under what circumstance can a trustee disallow the claim of a secured creditor?
A trustee can disallow the claim of a secured creditor if the trustee determines that the security held by the creditor is invalid. This means that the trustee has reason to believe that the security instrument is not legally enforceable or does not meet the necessary requirements.
How should a trustee maintain accounting records when acting for a secured creditor?
When acting for a secured creditor, a trustee must maintain adequate accounting records that segregate costs and activities specifically for the benefit of the secured creditor. This ensures transparency and helps in accurately tracking the financial transactions related to the secured assets.
Is there any situation where a secured creditor can receive more than 100 cents on the dollar plus interest in a bankruptcy?
Yes, there is an exception where a secured creditor can receive more than 100 cents on the dollar plus interest. This occurs when the trustee fails to redeem the security instrument as required by the secured creditor. In such a scenario, the secured creditor is entitled to retain the full realized value of the assets, even if it exceeds the creditor’s claim.
Under what circumstances can the trustee be substituted in a bankruptcy proceeding?
The trustee can be substituted in a bankruptcy proceeding either by the creditors or by the court. Creditors can appoint or substitute another Licensed Insolvency Trustee (LIT) for the trustee named in the assignment by passing a special resolution at a general meeting of creditors. The court, on the other hand, has the authority to remove a trustee for cause and appoint another LIT in their place, upon the application of any interested party.
What is the process for creditors to substitute the trustee in a bankruptcy case?
For creditors to substitute the trustee in a bankruptcy case, they must pass a special resolution at a general meeting of creditors. This special resolution is required to appoint or replace the existing Licensed Insolvency Trustee (LIT) with another LIT chosen by the creditors.
What does it mean to remove a trustee “for cause”?
To remove a trustee “for cause” means that there are very compelling reasons why the current trustee should be replaced. The term “for cause” indicates that there are serious issues or circumstances that warrant the removal of the trustee from their position, as determined by the court.
What happens to the property of the bankrupt once a trustee is appointed in a bankruptcy case?
Subject to the rights of secured creditors, all property of the bankrupt, regardless of its location, automatically vests in the trustee providing services in the bankruptcy. The trustee holds this property for the benefit of the creditors.
Are there any exceptions to the property that vests in the trustee?
Yes, there are exceptions to the property that vests in the trustee. The property divisible amongst the creditors does not include:
- Property held by the bankrupt in trust for others.
- Property that is exempt from seizure under any federal or provincial law applicable in the province where the bankrupt resides and where the property is situated.
- Goods and services tax credit payments not required for payment of the trustee’s fees.
- Certain prescribed payments relating to the essential needs of an individual.
- Contributions made to RRSP, RRIF, RDSP, or other prescribed plans that were made more than 12 months before the bankruptcy.
What are “after-acquired” assets in the context of bankruptcy?
“After-acquired” assets refer to any assets that the bankrupt acquires or that come into their possession between the date of bankruptcy and the date of the bankrupt’s discharge. If the trustee intervenes to obtain these assets, they can also vest in the estate and become part of the bankruptcy proceedings.
What is the role of the trustee in a bankruptcy proceeding, particularly in relation to acting as a receiver?
In a bankruptcy proceeding, the trustee plays a crucial role in managing the property of the bankrupt individual or entity. Specifically, the trustee is authorized, under the Bankruptcy and Insolvency Act (BIA) section 16, to act in a manner similar to a court-appointed receiver. This means that the trustee has the power to acquire or retain possession of the property that belongs to the bankrupt.
What authority does the trustee have to access the property and records of the bankrupt?
The trustee is granted the authority, under the Bankruptcy and Insolvency Act (BIA), to enter any premises where the books, records, or property of the bankrupt can be found. This authority allows the trustee to access relevant information and assets that are crucial for conducting a thorough inventory and managing the bankruptcy estate.
What is the requirement for a person who possesses or has control over property belonging to the bankrupt individual or company?
Under sections 16 and 17 of the Bankruptcy and Insolvency Act (BIA), if a person possesses or has control over any property that belongs to the bankrupt, and they are not entitled to legally retain that property, they are obligated to deliver the property to the trustee appointed in the bankruptcy case.
What is the duty of the trustee concerning the bankrupt’s records?
The trustee has a duty, under sections 16 and 23 of the BIA, to take possession of the deeds, books, records, and documents of the bankrupt. This includes all relevant financial and business-related documents necessary to understand and evaluate the affairs of the bankrupt. The trustee must also maintain their own documentation of the administration of the estate.
What kind of documents should the trustee obtain from the bankrupt?
The trustee should obtain various documents from the bankrupt, including but not limited to bank statements, cancelled cheques, contracts, leases, tax returns, notices of assessment, supplier invoices, and payroll records. Accounting journals, whether in hard copy or on computer disks, must also be obtained. It is crucial for the trustee to have access to all relevant financial information and documents to carry out their duties effectively.
What should the trustee do if there are any missing documents in the bankrupt’s possession?
The trustee should make an inventory of the records in the bankrupt’s possession and identify any significant missing documents. They must obtain an explanation from the bankrupt about the missing documents. This process is essential to ensure that the trustee has a comprehensive understanding of the bankrupt’s financial situation and can take appropriate actions during the bankruptcy process.
What rights does the trustee have to access records in possession of third parties?
The trustee must have access to the records no matter where they are located, including records in the possession of third parties such as the bankrupt’s accountant or solicitor. The BIA grants the trustee the authority to obtain a warrant to enter and seize records located on premises that do not belong to the bankrupt if the third party does not consent to releasing the information. Even if the records are subject to a solicitor’s lien, the trustee is entitled to review them, but they must be returned to the solicitor upon completion of the estate administration.
What are some of the issues that can arise when a trustee inspects the bankrupt’s records?
There are 6 potential issues
- Undisclosed assets: Assets that were not initially disclosed by the bankrupt may be identified during the inspection.
- Undisclosed liabilities, including deemed trust claims: The trustee may uncover undisclosed debts or liabilities, including claims that are subject to deemed trust provisions.
- Unpaid goods delivered within 30 days of bankruptcy: The inspection may reveal unpaid goods or services delivered to the bankrupt within 30 days before the bankruptcy filing.
- Settlements or preferences: The trustee may find evidence of settlements or preferences made by the bankrupt, potentially impacting the equitable distribution of assets among creditors.
- Payments of dividends or share redemptions when the debtor was insolvent: The inspection might reveal payments made by the debtor, such as dividends or share redemptions, during a period when the debtor was insolvent.
- Other reviewable transactions: The trustee may come across other transactions that require further investigation due to their nature or potential impact on the bankruptcy process.
What power does a trustee have regarding their ability to act in relation to the bankrupt’s property?
Under section 17 of the Bankruptcy and Insolvency Act (BIA), a trustee has the power to act anywhere for the purpose of obtaining possession of and realizing on the property of the bankrupt. This means that the trustee’s authority is not limited to a specific geographic location, and they have the jurisdiction to carry out their duties in various locations as needed.
Are there any practical considerations when a trustee seeks to act outside of Canada?
Yes, when a trustee intends to act outside of Canada, there are practical considerations to keep in mind. While the trustee has the power to act anywhere under the BIA, they may encounter challenges and complexities when dealing with assets or proceedings in foreign jurisdictions. In such cases, the trustee is likely to require assistance or orders from a foreign court to act effectively and legally in that foreign jurisdiction.
What actions can a trustee take to protect the interests of the bankrupt estate prior to the first meeting of creditors?
Prior to the first meeting of creditors, if necessary to protect the interests of the estate, the trustee has the authority to take several actions:
- Take conservatory measures and summarily dispose of property that is perishable or likely to decline in value rapidly.
- Carry on the business of the bankrupt until the first meeting of creditors.
- Obtain legal advice and institute court proceedings for the recovery or protection of the property of the bankrupt.
What are conservatory measures?
Conservatory measures refer to precautionary actions taken by the trustee to protect assets or property of the bankrupt estate from potential loss or decline in value. This may involve securing, safeguarding, or taking temporary possession of certain assets to prevent their deterioration or loss during the early stages of the bankruptcy process.
What can a trustee do in case of an emergency situation where necessary approvals cannot be obtained in time to take appropriate action?
In case of an emergency where the necessary approvals or inspector’s approval cannot be obtained in time to take appropriate action, the trustee is authorized to take immediate steps in the best interests of the estate of the bankrupt. To do so, the trustee can seek legal advice and institute legal proceedings to address the emergency situation promptly.
Under what circumstances can a trustee initiate criminal proceedings against a person under the Bankruptcy and Insolvency Act (BIA)?
The trustee can initiate criminal proceedings against a person believed to have committed an offence under the Bankruptcy and Insolvency Act (BIA) when authorized by the creditors, the inspectors, or the court. This authorization is necessary before the trustee can pursue criminal charges against an individual or entity suspected of violating the provisions of the BIA.
What returns does the trustee need to file in relation to the bankrupt’s affairs?
The trustee is responsible for filing all statutory returns that the bankrupt should have filed before the bankruptcy, such as income tax returns and any other required tax filings. Additionally, the trustee must file returns for the year of the bankruptcy and for the activities of the estate during the bankruptcy process.
What are the requirements regarding insuring the property of the bankrupt in a bankruptcy case?
Under section 24 of the Bankruptcy and Insolvency Act (BIA), the trustee is mandated to insure all the insurable property of the bankrupt. The trustee is responsible for determining the appropriate amount of insurance coverage and the hazards to be covered until the inspectors are appointed.
What is the requirement concerning the handling of money received by a trustee in a bankruptcy case?
Under section 25 of the Bankruptcy and Insolvency Act (BIA), the trustee is obligated to deposit all moneys received for an estate in a separate trust account. This means that the trustee must maintain a distinct and separate bank account for each estate they are administering, where all funds related to that specific estate are held.
What permission is required for the trustee to withdraw money from the trust account of an estate in a bankruptcy case?
According to section 25 of the Bankruptcy and Insolvency Act (BIA) and Directive 5R, the trustee is not allowed to withdraw any money from the trust account of an estate without obtaining written permission from the inspectors or approval from the court. There are specific exceptions, allowing the trustee to withdraw money to pay dividends and charges incidental to the administration of the estate.
What are the requirements concerning the books, records, and documents that a trustee must maintain during the administration of a bankruptcy estate?
There are 5 requirements
Under section 26 of the Bankruptcy and Insolvency Act (BIA) and Directive 16, the trustee is obligated to keep proper books and records of the administration of each bankruptcy estate. These books and records should include:
- A record of all monies received or disbursed during the administration of the estate.
- A list of all creditors who have filed claims, along with the amount and disposition of these claims.
- Copies of all notices sent out by the trustee during the course of the bankruptcy proceedings.
- Signed copies of all minutes, proceedings, and resolutions passed at any meeting of creditors or inspectors, as well as court orders related to the estate.
- Any other matters or proceedings necessary to provide a comprehensive account of the trustee’s administration of the estate.
What is the status of the books, records, and documents maintained by the trustee during the administration of a bankruptcy estate?
According to section 26 of the Bankruptcy and Insolvency Act (BIA), the books, records, and documents relating to the administration of a bankruptcy estate are considered the property of the estate. This means that these records are assets of the estate and are owned collectively by the creditors and stakeholders involved in the bankruptcy process.
What are the reporting obligations of the trustee in a bankruptcy case?
Under section 27 of the Bankruptcy and Insolvency Act (BIA), the trustee is required to provide reports on the condition of the bankrupt’s estate, the available funds, and details of any unrealized property. The trustee must issue these reports to various parties as follows:
Whenever required by the inspectors, the trustee must report to every creditor.
Upon request, the trustee must provide a report to any creditor who requests it.
The trustee is also obligated to submit reports to the Superintendent or the creditors when demanded by the Superintendent.
What powers does the trustee have when granted prior approval from the inspectors?
When given prior approval by the inspectors, the trustee in a bankruptcy case can exercise the following powers:
- Sell or dispose of any or all of the bankrupt’s property, including goodwill and book debts, except when selling to a related party, which requires court authorization.
- Lease real property or immovable assets.
- Carry on the bankrupt’s business as necessary for the beneficial administration of the estate.
- Initiate or defend legal proceedings related to the bankrupt’s property.
- Employ legal representatives, such as barristers, solicitors, or lawyers, to take any approved actions on behalf of the estate.
- Accept future payments as consideration for property sales, subject to inspectors’ stipulations and appropriate security.
- Incur obligations, borrow money, and provide security on the bankrupt’s property, with repayment prioritized over creditor claims.
- Settle debts owed to the bankrupt or compromise claims made against the estate.
In what circumstances can the trustee divide property among creditors instead of selling it?
The trustee, with approval from the inspectors, can divide among creditors any property of a peculiar nature or other special circumstances that cannot be readily or advantageously sold. This option allows for the distribution of unique or difficult-to-sell assets among the creditors directly, ensuring equitable treatment and maximum benefit for the estate.
Under what conditions can the trustee appoint the bankrupt to assist in administering the estate?
The trustee, with the direction of the inspectors, has the authority to appoint the bankrupt to aid in administering the estate. This appointment allows the bankrupt to play a role in managing certain aspects of the bankruptcy process, subject to specific terms set by the inspectors. The intention is to utilize the bankrupt’s knowledge and cooperation in achieving efficient estate administration.
What is the general rule regarding the trustee’s ability to sell assets in a bankruptcy case?
According to the Bankruptcy and Insolvency Act (BIA) sections 30 and 155, the trustee cannot sell assets without obtaining permission from the inspectors. The requirement for inspector approval is typically in place to ensure proper oversight and accountability in the administration of the estate.
What happens if no inspector is appointed in a bankruptcy case?
If no inspector is appointed in a bankruptcy case, recent amendments to the BIA provide a simplification to the administration process. In such cases, the trustee is granted the authority to perform all the actions specified in section 30 of the BIA, as if inspector approval had been obtained. This simplifies the decision-making process for the trustee, allowing them to carry out necessary tasks without awaiting specific approvals.
Is there any exception to the trustee’s authority to sell property without inspector approval?
Yes, there is an exception. In a summary administration, if the creditors determine that authorization is required, the trustee must seek court approval before selling property to a related party of the bankrupt. This additional requirement ensures a higher level of scrutiny and protection of the estate’s interests when dealing with transactions involving related parties.
Under what circumstances does the Bankruptcy and Insolvency Act (BIA) require court approval for the sale of assets to a related party in a bankrupt estate?
The BIA mandates that court approval must be sought and obtained before assets can be sold to a related party (as defined in sections 4 and 30(5) of the BIA) in the context of a bankrupt estate. This requirement applies regardless of whether inspectors have been appointed in the case.
What factors does the court consider when evaluating the sale of assets to a related party?
In considering the approval of the sale of assets to a related party, the court evaluates various factors, including:
- The reasonableness of the process leading to the proposed sale.
- The extent of consultation with creditors.
- The potential impact of the proposed sale on creditors and other interested parties.
- The fairness of the proposed consideration, considering the fair market value of the property.
- Efforts made to find a prospective purchaser who is not a related party.
- Whether the consideration offered is superior to other offers made during the sale process.
Prior to the appointment of inspectors, what powers can the court grant the trustee under BIA s. 31?
Under BIA s. 31, the court can authorize the trustee to make necessary advances, incur obligations, borrow money, and give security on the property of the debtor.
Under BIA s. 32, when is the trustee not obligated to carry on the business of the bankrupt?
According to BIA s. 32, the trustee is not obliged to carry on the business of the bankrupt if the realizable value of the property is insufficient to protect the trustee fully against possible loss and if the creditors or inspectors neglect or refuse to secure the trustee against any possible loss.
What role does the court play concerning the administration of the estate according to BIA s. 34?
Under BIA s. 34, the court provides direction on any matter affecting the administration of the estate. The trustee, being an officer of the court, can apply to the court for such directions.
What happens when an estate has not been fully administered within three years according to BIA s. 34?
As per BIA s. 34, if an estate has not been fully administered within three years after the bankruptcy, the Superintendent of Bankruptcy can require the trustee to report that fact to the court.
What are the responsibilities of a trustee of a bankrupt employer as per BIA s. 81.3, WEPPA s.21, 23, and WEPPR s. 15 and 16?
According to BIA s. 81.3, WEPPA s.21, 23, and WEPPR s. 15 and 16, a trustee of a bankrupt employer must:
- Determine the amount of wages owed to each employee for the period beginning six months preceding the initial bankruptcy event and ending on the date of bankruptcy.
- Determine the amount of eligible wages owed to each employee under the provisions of WEPPA.
- Advise the employees of their rights and requirements under the WEPPA.
- Report to the Minister under the WEPPA legislation providing a list of the employees and their respective claims.
- Provide each employee with a copy of the information provided to the Minister, as it relates to the employee.
- Comply with any directions of the Minister relating to the administration of the WEPPA.
- Advise the Minister of the discharge of the trustee.
What are the responsibilities of a former trustee when a substitute trustee is appointed as per BIA s. 36?
According to BIA s. 36, when a substituted trustee is appointed, the former trustee is required to:
- Apply to the court for taxation of his accounts and his discharge.
- Deliver to the substituted trustee all the property of the estate, including books, records, and documents of the bankrupt and of the administration.
What are the duties of a substituted trustee according to BIA s. 36?
As per BIA s. 36, a substituted trustee is required to:
- File with the court a copy of the minutes of the meeting of creditors that substituted him as trustee.
- Notify the Superintendent of his appointment.
- If required by the inspectors, register a notice of the appointment in the land register of any land titles or registry office where the assignment or bankruptcy order has been registered.
- As soon as funds are available, pay the former trustee his remuneration and disbursements as approved by the court.
What are the responsibilities of a trustee concerning the maintenance of trust accounts as per BIA s. 25 – 27, 120 and 155 and Directives 4R, 5R, and 16?
According to these statutes and directives, a trustee:
- Must deposit all receipts of an estate into a separate trust account for each estate.
- Must deposit funds received from third parties to guarantee the trustee’s fees and expenses into the individual estate trust account or a separate trust account maintained specifically for third party funds.
- Is allowed, with the approval of the Division Assistant Superintendent, to operate a consolidated bank account for all estates under summary administration.
- Is prohibited from depositing estate funds into his general operating account or his personal account.
- Must open estate trust accounts only in deposit-taking institutions where deposits are insured by the Canada Deposit Insurance Corporation or provincial insurance corporations.
- Must keep proper books and records accounting for all estate funds.
What are the roles of inspectors and the Superintendent of Bankruptcy in relation to the trustee’s handling of trust accounts, per BIA and the Directives?
As per BIA and the Directives:
- Inspectors are required to periodically examine the trustee’s accounts and verify the bank balance, ensuring funds are used correctly and all disbursements are properly made.
- The Superintendent of Bankruptcy has issued directives establishing strict standards for the operation and control of estate trust accounts, including aspects of internal control systems, banking and accounting records, treatment of estate funds and third party deposits, delegation of tasks, and operation of consolidated trust accounts.
What are a trustee’s obligations regarding changes to a banking or accounting system, and what is the role of the Superintendent of Bankruptcy in this context?
According to OSB programs, a trustee is required to notify the Superintendent of Bankruptcy of any changes to a banking or accounting system. The Superintendent of Bankruptcy has introduced a monitoring program, which includes a review of the trustee’s estate trust bank accounts. The aim of this monitoring program is to ensure uniform assessment of estate administration and maintain high standards of administration.
What are the regulations regarding the withdrawal of funds from trust accounts by a trustee, as per the BIA?
The trustee is not permitted to withdraw any funds from the estate as an advance of his remuneration without obtaining written permission from the inspectors, a resolution passed at a meeting of creditors, or a court order. However, the trustee is allowed to pay disbursements in the ordinary course of the administration of the estate. The provisions for summary administration estates specify the amounts and timing of withdrawals for fees and costs.
What are the bond or security requirements for trustees as per the BIA?
The Superintendent of Bankruptcy requires trustees to deposit one or more continuing guaranty bonds or suretyships. These act as security for the due accounting of all property received by trustees and for the due and faithful performance of their duties in the administration of estates. The Superintendent sets the amount and form of the security. Besides, trustees may be required to provide individual estate security, satisfactory to the Official Receiver, usually in the form of an estate bond or surety-ship of a guaranty company, for the benefit of the creditors.
What is the timing and amount of an estate bond according to the BIA?
The estate bond is set at the time of filing of the assignment with the Official Receiver. The amount is determined based on several factors such as risk to creditors, costs to the estate, insurance coverage and the general bond that the trustee has in force. Generally, the bond is set in relation to the anticipated realization available for distribution to preferred and unsecured creditors, after the trustee’s administration costs. The bond shouldn’t exceed the largest amount of assets to be on hand at any one time. Normally, a bond isn’t required if the estimated amount available to unsecured and preferred creditors is less than $3,000. If a bond is considered in excess of $25,000, the Official Receiver will review other controls to possibly reduce the bond and lessen costs to the estate.
What is the process for changing the amount of security in the BIA?
The trustee and the inspectors are expected to periodically review the adequacy of the estate bond or security. If circumstances warrant a change in the estate bond, the trustee is expected to notify the Official Receiver of the change in expected realization and request an adjustment of the bond amount.
What is the significance of the first meeting of creditors in bankruptcy administration?
The first meeting of creditors is a crucial event as it sets the stage for creditor involvement and allows creditors to give direction to the trustee. This is often the trustee’s first opportunity to meet with the creditors, so it’s important to establish a good working relationship. It’s crucial for the trustee to be properly prepared with all relevant information. This meeting allows creditors, who have suffered a financial loss, to be informed of their rights and options to mitigate this loss.
What are the responsibilities of the trustee regarding the first meeting of creditors?
It is the duty of the trustee to send a notice of the first meeting of creditors within five days after their appointment. This notice must be sent to every known creditor, the Superintendent, and the bankrupt individual.
When must the first meeting of creditors be held and can this be extended?
The first meeting of creditors must be held within 21 days following the trustee’s appointment. The Official Receiver can extend this period by 10 days. For special circumstances, the period can be extended up to 30 days if it won’t be detrimental to the creditors and is in the interest of the estate’s administration. Longer extensions require court approval.
What is the purpose of the first meeting of creditors?
The purpose of the first meeting of creditors is to:
- Consider the affairs of the bankrupt individual,
- Affirm the appointment of the trustee or substitute another in their place,
- Appoint inspectors, and
- Give directions to the trustee regarding the administration of the estate as the creditors see fit
What are the guidelines for choosing the location for the first meeting of creditors?
The first meeting of creditors is typically held at the office of the Official Receiver, nearest to the bankrupt individual. However, the Official Receiver can authorize another location. The chosen facility must be large enough to accommodate the meeting. To estimate the size needed, several factors should be considered:
- The number of creditors listed by the debtor in the Statement of Affairs.
- The number of claims filed prior to the meeting.
- The number of claims filed appointing a proxy other than the trustee.
- The complexity of the administration.
- The number and nature of contentious issues that have arisen.
- The anticipated distribution to creditors, if available.
What are the requirements for publishing the notice of the first meeting of creditors in a local newspaper?
The trustee is required to publish a notice of the first meeting of creditors in a local newspaper. This is done to notify creditors who may not have received a notice of the bankruptcy and to inform the general public.
The notice must be published as soon as possible and no later than five days before the first meeting of creditors. Exceptions are made for estates under summary administration, and in special circumstances, with prior court approval.
However, if a principal creditor wasn’t notified, the court might not excuse the irregularity. The Superintendent of Bankruptcy issued Directive 23 to establish standards for the type of newspaper to be used.
What are the procedures at the first meeting of creditors?
The procedures at the first meeting of creditors are as follows:
- Ensure creditors attending the meeting have filed a provable claim and are entitled to vote.
- Table essential documents like proofs of claim, the assignment, the Statement of Affairs, etc.
- Appoint a secretary to take minutes of the meeting.
- Start the meeting with a presentation by the trustee about the administration of the bankrupt’s estate.
- Allow creditors to ask the trustee questions about the administration.
- Allow creditors to ask the bankrupt questions regarding their affairs and transactions before bankruptcy.
- Call for a resolution affirming the appointment of the trustee or the appointment of a new trustee.
- Call for a resolution for the appointment of inspectors.
- Allow creditors to give instructions to the trustee by resolution. All these are conducted under the guidance of the Official Receiver or trustee acting as the chair of the meeting.
When are subsequent meetings of creditors held?
Subsequent meetings of creditors can be called at any time by the trustee, but they are required in the following situations:
- When directed by the court.
- When requested in writing by a majority of the inspectors.
- When requested in writing by 25% in number of the creditors holding 25% in value of the proved claims.
If the trustee is unavailable or neglects to call a meeting, a meeting can be convened by a majority of the inspectors. These meetings can be called by sending a notice of the time and place not less than five days before the meeting to each creditor at the address given in the creditor’s proof of claim. Notices of subsequent meetings need only be given to those creditors who have proved their claims.
What is the role of the chair in meetings of creditors?
The chair of the meeting of creditors holds several key responsibilities:
- The first meeting of creditors is chaired by the Official Receiver or their nominee, often the trustee. For all subsequent meetings, the trustee is usually the chair unless someone else is appointed by resolution at the meeting.
- The chair is responsible for resolving any questions or disputes arising at the meeting. Creditors have the right to appeal these decisions to the court.
- In situations that cannot be immediately resolved, the chair can adjourn the meeting with the consent of those present.
- In the event of a tie vote by creditors, including proxy holders, the chair can cast the deciding vote.
Subsequent meetings of creditors are rare. Regular meetings of inspectors are held instead when ongoing creditor involvement is needed.
What constitutes a quorum for a creditors’ meeting under the BIA?
A quorum exists for a creditors’ meeting when at least one creditor, entitled to vote, is present at the meeting. This attendance can be in person, through electronic or digital means, or by proxy.
If the meeting is held electronically, the creditor will be considered in attendance if the chair is satisfied that the person or a proxyholder is present. In certain situations, a proxy alone can constitute a quorum.
When no quorum exists at the first meeting of creditors, the appointment of the trustee is deemed affirmed. The chair has the option of adjourning the meeting.
In summary administration estates, a meeting is held only at the request of the creditors. If no quorum is achieved, the trustee continues the administration of the estate as per their appointment under BIA s. 14.06.
For adjourned meetings, all proofs of claim filed with the trustee before the time of the first meeting are considered for establishing the quorum and determining voting rights. If no quorum is established at the adjourned meeting, the trustee will continue the administration of the estate without inspectors.
Who is entitled to vote as a creditor at any meeting of creditors?
A person who has filed a claim provable in the bankruptcy before the time appointed for the meeting is entitled to vote as a creditor. (BIA s. 108)
Who has the power to admit or reject a proof of claim for the purpose of voting at a meeting?
The chair of any meeting has the power to admit or reject a proof of claim for the purpose of voting. (BIA s. 109)
If a claim is rejected by the chair for the purpose of voting, what recourse does the claimant have?
The claimant has the right to appeal to the court if their claim is rejected by the chair. (BIA s. 109)
How are creditors with unliquidated claims treated in terms of voting?
A creditor with an unliquidated claim is not entitled to vote until the claim is determined to be a provable claim and valued by the trustee. (BIA s. 110)
How is the vote of a creditor not dealing at arm’s length with the bankrupt treated?
The “non-arm’s length” creditor can vote, but the vote is recorded and not counted if it affects the result. The court may decide to count this vote if an application is made within 10 days, and the court deems it appropriate. (BIA s. 111)
Can a person vote on a portion of a claim acquired after bankruptcy?
No person is entitled to vote on a claim acquired after the bankruptcy unless the entire claim is acquired. (BIA s. 112)
How should a creditor holding a promissory note or bill of exchange adjust their claim for the purpose of voting?
The creditor must estimate the liability value of every other non-bankrupt person liable for payment before the debtor. This estimated value is treated as security and must be deducted from his claim for voting purposes. (BIA s. 113)
On what portion of the debt is a secured creditor entitled to vote?
A secured creditor is entitled to vote only on the unsecured portion of his debt and must value his security to vote. (BIA s. 121)
Is the completion of the proof of claim form by an authorized representative sufficient for him to vote at the first meeting of creditors?
No, to be entitled to vote, one must be a creditor or hold a properly executed proxy. (BIA s. 135)
What matters can creditors vote on during the meeting?
During the meeting, creditors can vote on any matter that requires the decision of the creditors. (BIA s. 109)
How is most voting typically done?
Most voting is done by ordinary resolution requiring a majority of votes. Votes are calculated by counting one vote for each dollar of every claim of the creditor. (BIA s. 115)
How would a creditor with a valid proven claim of $8,000 compare in voting power to three different creditors whose claims total $7,000?
A creditor with a claim of $8,000 would be able to out-vote the three different creditors whose individual claims collectively total $7,000. (BIA s. 115)
Define a special resolution and explain its significance.
A special resolution is defined as a majority in number and ¾ in value of the creditors with proven claims present, personally or by proxy, at a meeting of creditors and voting on the resolution. It’s significant because some decisions, like substituting the trustee named in the bankruptcy order, require a special resolution to pass. (BIA s. 116)
In the given example, can the three creditors pass a vote by special resolution without the 4th creditor?
No, they could not pass any vote by special resolution without the support of the 4th creditor. (BIA s. 116)
When might voting be required concerning the appointment or affirmation of a trustee?
Voting may be required when a creditor objects to the affirmation of the appointment of the trustee named in the bankruptcy order or appointed by the Official Receiver and proposes that the trustee be substituted. To replace the trustee, a special resolution is required. If not successful, an ordinary resolution affirming the trustee’s appointment is needed. (BIA s. 14)
How is the appointment of inspectors determined?
The BIA provides for the appointment of up to five inspectors, unless creditors agree not to appoint any. An ordinary resolution is required to decide on the appointment and number of inspectors. (BIA s. 115)
How is a dispute resolved when there’s an objection to the nomination of an inspector due to personal ties with the bankrupt?
The matter is put to a vote by ordinary resolution of the meeting. (BIA s. 115)
In the context of a proposal, within how many days must a meeting of creditors be held after the filing of the proposal?
In the context of a proposal, a meeting of creditors must be held within 21 days after the filing of the proposal. (BIA s. 50)
How much advance notice must be given for the meeting of creditors in the context of a proposal?
A notice must be sent in the prescribed manner at least 10 days before the meeting. (BIA s. 50.4)
What discretion is NOT provided to the Official Receiver concerning the meeting of creditors in a proposal context?
There is no discretion built into the BIA for the Official Receiver to extend the deadline to hold the meeting of creditors. Any extension required must be requested from the court. (BIA s. 50.4)
What decision threshold is required for accepting a proposal?
The decision to accept a proposal requires a positive vote of a majority in number and 2/3 in value of all classes of unsecured creditors. (BIA s. 54, 56)
When is a meeting of creditors held in the context of a consumer proposal?
A meeting of creditors in the context of a consumer proposal is held only if directed by the Official Receiver or requested by creditors holding at least 25% in value of proven claims. (BIA s. 66.15, 66.16)
In the absence of a quorum or requirement for a meeting in the context of a consumer proposal, how is the proposal treated?
If there’s no requirement for a meeting of creditors, or if a required meeting has no quorum, the consumer proposal will be deemed to be accepted by the creditors. (BIA s. 66.18)
In terms of acceptance, how does the decision-making for a consumer proposal differ from a standard proposal?
The decision to accept a consumer proposal requires an ordinary resolution of the creditors, unlike the standard proposal which requires a majority in number and 2/3 in value of all classes of unsecured creditors. (BIA s. 66.18, 66.19)
How can meetings of creditors in the context of a proposal and a consumer proposal be utilized beyond voting on the proposal?
They can be adjourned to further investigate the affairs of the insolvent person and can be used as a forum to appoint inspectors or members of a creditors’ committee. (BIA s. 57, 61, 66.21)
At the first meeting of creditors, which three main tasks are undertaken to exercise administrative control?
At the first meeting of creditors, the following actions are taken:
Affirming the appointment of the trustee.
Appointing a board of inspectors.
Giving direction to the trustee with respect to the administration of the assets of the estate.
What is the primary role of the inspectors as described in the Feldman Case?
Inspectors are the primary governing authority in the practical administration of the estate of the bankrupt. They are practical men named by the creditors. Unless they are shown to be acting fraudulently or not for the good benefit of the estate, the administration of the affairs of the estate is to be governed according to their direction.
According to J. A. Masten in the Feldman Case, who should be the primary governing authority in the administration of the estate of the bankrupt?
The primary governing authority should be the inspectors, and not the court.
When can the court intervene in the decisions of the inspectors as inferred from the Feldman Case?
The court can intervene if it’s shown that the inspectors are acting fraudulently or not for the good benefit of the estate.
In which situations is the court the primary governing authority in the administration of the bankrupt’s estate?
The court is not the primary governing authority in the practical administration of the bankrupt’s estate; the inspectors are, unless they act in a manner that is fraudulent or not in the estate’s best interest.
How many inspectors can creditors appoint according to the BIA?
Creditors can appoint a maximum of five inspectors.
What is the primary restriction on eligibility for being appointed as an inspector?
Anyone who is a party to any contested action or proceeding by or against the estate is not eligible to be appointed or act as an inspector.
Into how many main areas can the duties and responsibilities of inspectors be divided? Name them.
The duties and responsibilities of inspectors can be divided into three main areas:
Action
Authorization
Supervision
Can a corporation or partnership be appointed as inspectors?
No, it is not proper to appoint either a corporation or a partnership as inspectors. An inspector acts in a personal capacity and cannot delegate responsibilities to another party.
Who has the power to decide a matter when the meeting of inspectors cannot arrive at a majority decision, provided the matter doesn’t concern the trustee’s personal conduct?
The trustee has the power to decide the matter.
If the inspectors cannot reach a majority decision and there are absent inspectors, what is the next step?
The opinion of any absent inspectors must be sought to resolve the difference.
When there is a conflict between the directions given by the creditors and the inspectors, whose directions will prevail?
The directions of the creditors will prevail.
According to the BIA, can creditors pass a resolution instructing the trustee and the inspectors to employ a particular firm or person as a solicitor?
No, since the employment of a solicitor is not a matter in the administration or distribution of the property of the bankrupt, creditors cannot instruct the trustee and the inspectors to employ a specific solicitor.
When creditors resolve to instruct the trustee to accept a tender for assets, are further instructions from the inspectors necessary?
No, the trustee must follow the directions of the creditors, and further instructions from the inspectors are unnecessary.
If someone challenges the decisions and actions of the inspectors, what recourse is available?
The trustee or other interested person has the right to apply to the court for a review of the matter.
What are inspectors prohibited from doing unless they have prior approval from the court?
Inspectors are barred from purchasing or acquiring, for themselves or for another person, any of the property of the estate without prior approval from the court.
If an inspector wishes to participate in a public tender of the assets of a company, what action should they take?
An inspector should seek prior approval from the court before participating in a public tender of the assets of a company.
If an inspector disapproves the trustee’s Final Statement of Receipts and Disbursements, what should they do?
The inspector should notify the trustee in writing, indicating the reasons for his disapproval of the statement.
Who can apply to the court if they are aggrieved by an act or decision of the trustee?
The bankrupt, a creditor, or any other person aggrieved by the act or decision.
What can a creditor do if a trustee refuses or neglects to take a proceeding that, in the creditor’s opinion, would benefit the estate?
The creditor can apply to the court for an order authorizing him to take the proceeding in his own name and at his own expense and risk.
Under BIA s. 10, 37 and 38, if the court authorizes a creditor to initiate a proceeding against the trustee’s wishes, what will the trustee be directed to do?
The trustee will be directed to assign and transfer all his right, title, and interest in the proceeding to the creditor.
If a creditor believes a particular proceeding would benefit the estate and the trustee refuses to take that proceeding, what must the creditor do before taking action in their own name?
The creditor is required to notify and invite other creditors to participate in the contemplated proceeding.
Under which directive is the trustee’s remuneration primarily regulated?
Directive 27R.
How is the trustee’s remuneration usually determined as per the BIA?
The trustee is entitled to be paid remuneration equal to 7½% of the net receipts in the estate.
What can the trustee do if they believe the circumstances warrant greater remuneration than the 7½% of the net receipts?
The trustee can ask the creditors or apply to the court for approval of a greater amount.
How can the trustee obtain an advance towards their remuneration?
The inspectors can authorize the trustee to draw funds from his trust account as an advance or the trustee could request advances from the court through an interim taxation of the trustee’s accounts.
What responsibility does the trustee have concerning the funds in the estate when drawing advances for remuneration?
The trustee must ensure that sufficient funds remain in the estate to complete the administration.
How is the trustee’s remuneration determined in summary administration estates?
The trustee’s remuneration in summary administration estates is subject to the prescribed tariff.
On what basis is the trustee’s remuneration usually calculated in an ordinary administration?
It is calculated based on the total hours of service provided multiplied by an hourly rate appropriate to the skill and experience of the individuals involved.
What triggers the preparation of a Final Statement of Receipts and Disbursements and a Dividend Sheet by the trustee or related parties?
The preparation is triggered when the trustee, administrator, interim receiver, or receiver/receiver-manager has realized all the property of the debtor and has settled the claims of all creditors.
In the case of an individual bankrupt, what additional information should the Final Statement of Receipts and Disbursements report?
The trustee should report on the status of the bankrupt’s application for discharge.
To whom should the Final Statement of Receipts and Disbursements be submitted for approval when inspectors are appointed?
Ordinary Administration Estates
The statement should be submitted to the inspectors for their approval.
Ordinary Administration Estates
After inspectors approve the Final Statement of Receipts and Disbursements, to whom is the statement sent for comments?
Ordinary Administration Estates
It is sent to the Superintendent for his comments.
Ordinary Administration Estates
What does the trustee do with the Superintendent’s comments on the statement?
Ordinary Administration Estates
The trustee places the comments before the registrar at the taxation of the trustee’s accounts.
Ordinary Administration Estates
What must a trustee do upon receiving the Letter of Comment from the Office of the Superintendent of Bankruptcy?
Ordinary Administration Estates
The trustee must apply to the taxing officer within 30 days for a taxation hearing date.
Ordinary Administration Estates
Whose role is supervisory when reviewing the Final Statement of Receipts and Disbursements and the Dividend Sheet?
Ordinary Administration Estates
The Office of the Superintendent of Bankruptcy.
Ordinary Administration Estates
After the court taxes the trustee’s Final Statement of Receipts and Disbursements, what three items must the trustee send to the Office of the Superintendent of Bankruptcy, the registrar, and every creditor who has proved a claim?
Ordinary Administration Estates
- A copy of the Final Statement of Receipts and Disbursement taxed by the court.
- A copy of the Dividend Sheet.
- The notice of his intention to pay the final dividend and apply for his discharge.
Ordinary Administration Estates
How long must the trustee wait before applying to the court for his discharge after payment of the final dividend?
Ordinary Administration Estates
At least 30 days.
Ordinary Administration Estates
In which scenario could a discharge hearing proceed without the trustee attending?
Ordinary Administration Estates
If no objection is received and no particular problem has surfaced.
Ordinary Administration Estates
What is the duration within which any interested party can object to the trustee’s statement after the mailing of the notice?
Ordinary Administration Estates
Within 15 days.
Ordinary Administration Estates
If an objection to the trustee’s statement is filed, what impact does it have on the distribution of the final dividend?
The distribution of the final dividend should be delayed pending the court ruling on the objection.
What are the consequences of discharging the trustee?
The discharge releases any security provided to the Official Receiver, terminates the stay of proceedings, and discharges the trustee of any liability concerning his conduct as the trustee of the estate under administration, subject to BIA s. 41.
Cite the case where the British Columbia Supreme Court found that a creditor was entitled to object even if he couldn’t obtain a financial benefit from the amendment of the accounts.
In Re: Ballad Cartage Ltd.
These questions cover the various aspects of the appointments and processes under the BIA, ensuring that the test taker comprehends the details and can apply them in practice
When is the trustee required to make interim distributions to creditors in ordinary administration estates?
Ordinary Administration Estates
The trustee is required to make interim distributions to creditors when instructed by the inspectors and when the funds in the estate exceed the estimated costs to finalize the administration of the estate.
Ordinary Administration Estates
When is the payment of ordinary unsecured claims usually made?
Ordinary Administration Estates
Payment of the ordinary unsecured claims is not usually made until all the claims have been settled and the assets of the bankrupt realized.
Ordinary Administration Estates
What is the primary directive that provides details about the rate of levy in ordinary administration estates?
Ordinary Administration Estates
Directive 10R.
Ordinary Administration Estates
How is the rate of levy payable to the Superintendent of Bankruptcy in an ordinary administration estate calculated across the following thresholds: up to $1 million, between $1 million and $2 million, and any amount above $2 million?
Ordinary Administration Estates
The rate is 5% for the amount up to $1 million, 1¼% for the excess between $1 million and $2 million, and ¼% for any amount above $2 million.
Ordinary Administration Estates
For an estate with a total amount of $1.5 million, how much levy is payable to the Superintendent of Bankruptcy?
Ordinary Administration Estates
The levy would be: (5% of $1 million) + (1¼% of $500,000) = $50,000 + $6,250 = $56,250.
Ordinary Administration Estates
What does the trustee prepare and send to the Official Receiver in the context of summary administration estates?
The trustee prepares and sends the Final Statement of Receipts and Disbursements and the Dividend Sheet to the Official Receiver.
What is the role of the Superintendent when reviewing the documents prepared by the trustee for a summary administration estate?
The Superintendent examines the documentation and issues a Letter of Comment, stating whether or not the trustee’s accounts must be taxed by the registrar.
If no taxation is required by the Superintendent, what does the trustee send to the creditors?
Summary Administration
The trustee sends a notice along with the Final Statement of Receipts and Disbursements and the Dividend Sheet. This notice informs creditors about their right to object and the procedure if no objections are made.
Within how many days can a creditor file an objection to the trustee’s accounts or discharge?
Summary Administration
A creditor can file an objection within 30 days of the date of the notice sent by the trustee.
Summary Administration
What steps does the trustee undertake once they conclude their role in the absence of objections?
Summary Administration
The trustee withdraws their fees, pays the dividends, remits unclaimed dividends and the levy to the Superintendent, closes the bank account, and sends a Certificate of Compliance to the Superintendent.
Summary Administration
If the Superintendent requires taxation, what steps does the trustee take?
Summary Administration
The trustee notifies the creditors of the hearing and provides them with the Final Statement of Receipts and Disbursements and the Dividend Sheet.
Summary Administration
In the event of an objection by a creditor, what procedure does the trustee follow?
Summary Administration
The trustee arranges for a hearing date and notifies the objecting creditors. At the hearing, the registrar considers the comments of the Superintendent and the representations of the objecting creditors to tax the trustee’s accounts.
Summary Administration
What happens once the accounts have been taxed in case of objections?
Summary Administration
The trustee proceeds with the final steps of their administration, which include paying dividends, withdrawing their fees, and closing the file.
Summary Administration
How is the levy calculated for an estate under summary administration when the amount available for distribution to creditors is less than $200?
The levy is calculated as 100% of the amount available for distribution to creditors.
What is the levy amount for an estate under summary administration when the amount available for distribution to creditors exceeds $200?
The levy amount is $200.
What is the interest rate paid on all proven claims when there is a surplus of funds?
The interest rate is 5% per annum.
From which date to which date is the interest calculated on the proven claims?
The interest is calculated from the date of bankruptcy to the date of payment of the claims in full.
Who is entitled to any surplus funds after all proven claims are paid in full, with interest, and the costs of the bankruptcy proceedings are covered?
The bankrupt is entitled to any remaining surplus funds.
In accordance with BIA s. 40, what action is the trustee required to take if they are unable to dispose of property or if the property is of little or no value?
Under BIA s. 40, the trustee is required to return the property to the bankrupt.
Per BIA s. 40, when inspectors are appointed concerning unrealized assets, what is the required procedure?
When inspectors are appointed, as stated in BIA s. 40, their authorization is necessary to return the property. They must ensure that the property is genuinely of little or no value or is otherwise unrealizable.
According to BIA s. 40, how can the court intervene if the trustee cannot return unrealized property to the bankrupt?
Under BIA s. 40, if the trustee cannot return the property to the bankrupt, the court has the power to make any order it deems necessary to address the situation with the property.
As per BIA s. 40, does the provision concerning the return of unrealized assets allow for a blanket return of property that isn’t clearly defined?
No, according to BIA s. 40, the provision doesn’t contemplate a “blanket” return of property that isn’t clearly defined. Instead, it’s limited to the return of property disclosed in the Statement of Affairs or otherwise disclosed to the trustee before their application for discharge.
What is the trustee required to do with undistributed funds prior to their discharge, as per BIA s. 154?
As per BIA s. 154, before his discharge, the trustee is required to remit any undistributed funds to the Superintendent of Bankruptcy.
According to BIA s. 154 and Directive 18, what can cause undistributed funds to arise?
Undistributed funds can arise from additional proceeds received that were not anticipated on the Final Statement of Receipts and Disbursements, or from additional interest earned between the preparation of the final statement and the date of payment of a dividend.
What are the guidelines, based on Directive 18, for determining immaterial payments regarding the number of creditors and the amount available for distribution?
Based on Directive 18, the guidelines are:
One creditor: distribute if the amount exceeds $5.
Two to five creditors: distribute if the amount exceeds $50.
Five or more creditors: distribute if the average dividend will exceed $10.
According to Directive 18, what is the expectation of the Superintendent regarding trustees and dividend distribution to creditors?
Per Directive 18, the Superintendent expects trustees to make an effort to ensure that creditors receive their share of a dividend distribution. This includes giving creditors ample time to cash their dividend cheques before the trustee’s discharge and making a reasonable effort to trace certain creditors.
In the context of unclaimed dividends as per Directive 18, which types of creditors should trustees make a special effort to trace?
Trustees should make a reasonable effort to trace creditors who are financial institutions or nationally known businesses.
If a particular creditor who has filed a claim cannot be found, what should be done with their unclaimed dividends according to Directive 18?
The unclaimed dividends for creditors who cannot be found should be remitted to the Superintendent of Bankruptcy, along with a list of the names, last known addresses, and the amount payable to each of these creditors.
How does the Superintendent of Bankruptcy handle unclaimed dividends once they have been remitted by the trustee as stated in Directive 18?
The Superintendent will forward the dividends directly to the creditors upon request.
Under which section and rule of the BIA does the discharge of the trustee fall?
The discharge of the trustee is under BIA s. 41 and BIA Rule 55.
When must a trustee apply to the court for a discharge?
The trustee must apply to the court for a discharge when he has completed the duties required of him with respect to the administration of the property of the bankrupt.
When is an estate considered to be fully administered?
An estate is considered to be fully administered when the trustee’s accounts have been approved by the inspectors, taxed by the court, all objections and related matters have been settled or disposed of, and all dividends have been paid.
What does the discharge of the trustee release him from?
The discharge of the trustee releases him from all liability:
in respect of any act done or default made by him in the administration of the property of the bankrupt; and
in relation to his conduct as trustee.
Under which circumstances can a trustee’s discharge be revoked?
The discharge can be revoked by the court on proof that it was obtained by fraud or by suppression or concealment of any material fact.
What remains true regarding a trustee even after discharge?
Even after discharge, the trustee remains the trustee of the estate for the performance of any duties incidental to the full administration of the estate. If there are unrevealed or undistributed assets, the court can appoint a trustee to complete the estate’s administration.
If a trustee is appointed or re-appointed under BIA s. 41 after discharge to perform specific duties, what is the trustee’s obligation to the Superintendent of Bankruptcy?
A trustee appointed (or re-appointed) pursuant to BIA s. 41 must notify the Superintendent of Bankruptcy, in writing, of the appointment within 10 days of the making of the Order.
Does the BIA make a value judgment based on whether a transaction is arm’s length or not?
No, the BIA does not make a value judgment on the commercial merit of the transaction. An arm’s length transaction could be unfavorable for the debtor, and a non-arm’s length transaction could be at fair market value.
Under s. 4 of the BIA, which relationships are considered to automatically deem all transactions between the parties as non-arm’s length?
Transactions between the insolvent person (or bankrupt) and persons that are related to the insolvent person (or bankrupt) as defined in s. 4 of the BIA are deemed to be non-arm’s length.
