Canada’s Bankruptcy and Insolvency Act consists of a set of Canadian laws that govern bankruptcies, receiverships and consumer and commercial proposals applicable in Canada. The Bankruptcy and Insolvency Act (or BIA) also governs the Office of the Superintendent of Bankruptcy which is a federal agency that is responsible for making sure that all bankruptcies will be administrated legally and fair.
The purpose of the Bankruptcy and Insolvency Act
As described by the Supreme Court of Canada, the Bankruptcy and Insolvency Act does not consist of a single statute within the Canadian legal framework. There are many insolvencies statutes as enacted by the Parliament, with the most important one being the Bankruptcy and Insolvency Act. This act ensures that each and every person, be it natural or legal, that owes 1000 dollars or more has facilitated aid with reorganization and liquidation.
The BIA consists of a set of laws and mechanisms that allows all debtors which are insolvent to issue and present proposals to their respective creditors. By doing so, they can arrive at a solution adjust their debts through various means. The Bankruptcy and Insolvency Act also ensure that, in the case an agreement between the insolvent debtor and the creditor fails, the former also has a bridge which enables him to file for bankruptcy, a proceeding which will have his assets liquidated so as the proceedings will be paid to the creditor.
Who does the Bankruptcy and Insolvency Act apply to?
The Bankruptcy and Insolvency Act applies to each and every person who either lives or carries business on the territory of Canada. Not only natural and legal persons are included in BIA, but also many types of non-corporate associations or partnerships, corporations, cooperative organizations or associations or even the successors of a partnership. Also, executors or liquidators of the succession of the entities mentioned above are included in the Bankruptcy and Insolvency Act. However, partners within a partnership only if that particular partnership is located in a jurisdiction of the common law. For example, the Civil Code of Quebec defines the property of a partnership as being a patrimony that is not dependent on its partners.
The Bankruptcy and Insolvency Act does not apply to banks, loan or trust companies, and neither does it apply to insurance companies or railways. These insolvent financial institutions are subject to another act which is called the Winding-up and Restructuring Act, while the Canadian railways are governed by the Canada Transportation Act.
The Bankruptcy and Insolvency Act governs all bankruptcy proceedings which are voluntarily invoked by persons, whether they are legal or natural, which are insolvent. The bankruptcy proceedings can also be invoked by the creditors of debtors who owe at least 1000 dollars and who have filed for bankruptcy. A proposal within the Act that has failed will also have the Bankruptcy and Insolvency Act to govern the bankruptcy proceedings. Besides insolvency and bankruptcy, the Bankruptcy and Insolvency Act also governs receivership proceedings where the receivers are appointed by secure creditors if there is a general security agreement.