Law Times

Law Times • march 23, 2009 Bankruptcy amendments 'long overdue' for implementation FOCUS BY GLENN KAUTH Law Times bankruptcy legislation, yet law- yers working in corporate re- structuring and insolvency are still waiting for the amendments to come into force. "The amendments are long I t's been more than three years since Parliament first passed changes to federal overdue to be implemented," says Alex MacFarlane, a partner prac- tising in corporate restructuring and insolvency at Fraser Milner Casgrain LLP in Toronto. The continued wait for the changes to take effect, particu- larly as the country's economic troubles send more companies to the brink of insolvency, is creat- ing confusion, MacFarlane notes. The government was due to implement them last year, but the fall election got in the way. Politi- cians have changed insolvency laws twice, in fact. The first time was in 2005, when the previous Liberal government unveiled sweeping re- forms to both the Bankruptcy and Insolvency Act and the Compa- nies' Creditors Arrangement Act as well as introduced the Wage Earner Protection Program Act. But while the law, Bill C-55, made its way through Parliament, a Senate com- mittee got a compromise that the changes wouldn't come into force until it could review them. Governments then changed in the 2006 election, after which the new House of Com- mons passed Bill C-62, which amended the original Liberal one. But in September 2007, the government prorogued Par- liament, meaning the reform package died on the order paper without Senate approval. So, federal politicians took another stab later that year with Bill C-12. It made its way through the legislative process, but even now only certain provisions have come into force. The most significant change to take effect so far was the Wage Earner Protection Program, which provides government relief to workers of bankrupt companies seeking back pay. Deborah Grieve, a partner with Blaney McMurtry Barristers and Solicitors LLP in Toronto, says she's not surprised that such a "motherhood and apple pie issue" took priority, but she nonetheless wonders why other important amendments have yet to come into force. Besides the Wage Earner Pro- employee and employer contri- butions to pension plans. It ranks below the rights of unpaid suppli- ers to repossess goods, the claims of farmers, fishermen, and aqua- culturalists, and trusts for source deductions and wage claims. Student loans — The waiting period for a student loan to be discharged will decrease to seven years from 10. People claiming hardship can request discharge with five years instead of 10. RRSP exemptions — Money in RRSPs can't be seized in bank- ruptcy, with a possible exception for contributions made in the 12 months before filing. Income tax refunds — In- come tax refunds for both the pre- and post-bankruptcy period now form part of the estate. But the list of amendments awaiting implementation is much longer. They include: Collective agreements — Col- ees, interim receivers, receiv- ers, and monitors who carry on the debtor's business will not be personally liable for claims such as those related to their possible status as a successor employer. Regulatory body stay — A stay of proceedings granted to lective agreements between an employer and a union will re- main in force unless both sides negotiate any changes. But busi- nesses could, under the amend- ments, ask the court to serve a notice to bargain on the union. If the court-ordered bargaining fails, the court has no authority to revise the collective agreement. Liability of trustees — Trust- would not affect the right of regulators to investigate or prosecute a company for alleged violations unless it is trying to enforce a debt owing to it. Disclaimer of agree- ments — A company in trouble can apply to dis- claim agreements, subject to the other party's right to oppose the move. For agreements dealing with intellectual property, the disclaimer doesn't affect the other party's right to use it. A debtor can't dis- claim agreements related to cer- tain financial contracts, collec- tive agreements, financing deals if it is the borrower, and prop- erty leases where it is the lessor. Directors — A court can a company sions now deal with the insol- vency of an income trust. Besides amendments business targeting vency, the legislation will also alter rules for con- sumer bankruptcies. They include changes to deal with people with high in- come tax debt and surplus income. They will also allow second-time bank- rupts to get an automatic discharge after 36 months. Debtors making a con- sumer proposal will now have to attend counselling sessions. Otherwise, they won't be eligible for an automatic discharge. The long list of changes insol- Deborah Grieve wonders why important amendments have yet to come into force. priority charge against the com- pany's assets in order to indem- nify directors against liabilities resulting from the proceedings. Critical suppliers — A court remove a director if it believes he or she might negatively affect the company's ability to restructure. The court can also designate a can order a supplier to continue its relationship with a troubled company. A so-called critical supplier will get security over the debtor's property. Income trusts — New provi- PAGE 11 to the provisions on disclaiming contracts. What the government is plan- ning to do, however, isn't clear. A spokesperson for Industry Minis- ter Tony Clement referred ques- tions to Industry Canada, which did not provide Law Times with answers about the amendments by deadline. LT leaves people like Grieve hop- ing the government will en- act them soon. "This is wel- come, and I look forward to them passing the legislation," she says, referring specifically Canadian Patent Act Annotated, Second Edition Robert H. Barrigar, Q.C. Your one-stop source, bringing together commentary and current case law interpreting patent legislation. Looseleaf & binder • $227 • Releases invoiced separately (1-2/yr) P/C 0406030000 • ISBN 0-88804-168-3 Canadian Patent Reporter Edited by Marcus Gallie, Ridout & Maybee LLP Fourth Series (Volumes 1 to 65): Edited by Glen Bloom, Osler, Hoskin & Harcourt LLP First, Second and Third Series: Edited by Gowling, Strathy & Henderson Founding Editor: Gordon F. Henderson, C.C., Q.C., LL.D. Canada's leading intellectual property law report since 1942. 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• Cover
• Competition Act
• Dead Time
• Focus On Corporate Restructuring & Insolvency