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Lecture 9

ADMS 2610 Lecture 9: B.Law10th ppt notes Ch30
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Department
Administrative Studies
Course
ADMS 2610
Professor
Rudi Lof
Semester
Winter

Description
 Insolvency vs. Bankruptcy  Legislation ➢ Purpose and Intent ➢ Application ➢ Acts of Bankruptcy ➢ Bankruptcy Proceedings ➢ Assignment vs. Petition ➢ Discharge ➢ Bankruptcy Offences  Introduction  Bankruptcy  Purpose ○ divide assets of bankrupt debtor in a fair manner to creditors ○ rehabilitation of the debtor (ability to start again) ○ helps to a degree protect unsecured creditors  secured creditors usually realize their security  Historical Background  Distinguish between honest and unfortunate debtor and the debtor who is fraudulent or deceptive  Bankruptcy (“bankarupta” Italian for broken bench) ○ creditor would literally break the workers bench  Canada ○ Act amended several times, the last being 1992  Insolvency vs. Bankruptcy  Insolvency ➢ The inability of a person to pay their debts as they fall due  Bankruptcy ➢ A condition that arises when a person commits an act of bankruptcy under the Act: ▪ debtor has debts in excess of $1000; and ▪ debtor has committed an act of Bankruptcy; and ▪ a creditor has filed a petition in bankruptcy against the debtor; or ▪ debtor has voluntarily assigned self into bankruptcy  Insolvency vs. Bankruptcy  Characteristics ➢ Insolvency and bankruptcy have legal and financial definitions ➢ Legally - insolvency represents a financial condition that precedes bankruptcy ▪ only one of 10 possible conditions that can trigger bankruptcy but most common  Bankruptcy Legislation  Purpose and Intent  Legislation is multi-purpose ○ provide honest unfortunate debtors with a release from their debts ○ eliminate certain preferences ○ provide predictable and fair distribution of assets of debtor to creditors ○ uncover and punish debtors who attempt to defraud creditors  Federal Act ○ focus of Act is now on debtor not creditor ○ promote survival of debtor vs. procedure for dissolution and distribution of debtor’s assets  Application  Superintendent of Bankruptcy  Administers the Act  Appoints and supervises trustees  Investigative powers  Court  Exists in each province for bankruptcy matters  Supplementary Acts  Provincial Acts  CCAA (Companies’ Creditors Arrangement Act) ○ applies only to corporations with outstanding issues of bonds, debentures ○ apply to court for time for reorganization  Application  Exemptions ➢ Certain persons not subject to the Act ➢ Farmers, fishers, wage earners or commission salespersons whose income is less than $2,500 per annum ➢ Chartered banks, trust or loan companies, insurance companies, railway companies  Acts of Bankruptcy ➢ Defines acts of bankruptcy ➢ Assignment of property to creditors ➢ Fraudulent conveyance ➢ Fraudulent preference ➢ Departing Canada to avoid creditors ➢ Allows assets to be executed against ➢ Admits to creditors of insolvency ➢ Remove property to defeat or defraud creditors ➢ Notice to creditors of intent to suspend payments of debts ➢ Defaults under a proposal under the Act ➢ Cease to meet liabilities as they generally become due  Bankruptcy Proceedings  Act  Distinguishes between consumer and commercial bankruptcies  Some differences in procedure exist  Options (for a debtor)  Proposal  Voluntary Assignment  Petition  Proposal  Proposal  A plan prepared by a commercial debtor to restructure the affairs of the business to enable the business to continue  30 days after notice to provide proposal to creditors  Must be approved
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