B. Canadian Insolvency Proceedings Involving a Foreign Element

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 551-554

Contenidos

• 1) Jurisdiction under Canadian Bankruptcy and Insolvency Legislation.
• 2) Discretion to Abstain from Exercise of Jurisdiction.
• 3) Choice of Law Issues.

Page 551

1) Jurisdiction under Canadian Bankruptcy and Insolvency Legislation

Canadian bankruptcy and insolvency legislation is universalist in its application. Bankruptcy proceedings that are commenced in Canada are not limited to the property that is located in Canada but extend to property located in other jurisdictions as well.¹⁵Of course, it often will be necessary to seek recognition of the Canadian bankruptcy order in a court outside Canada in order to enforce it. In respect of an involuntary bankruptcy, it is not necessary that the debtor be located in Canada. It is sufficient that the debtor carry on business in Canada, even if Canada is not the chief place of business. In respect of a voluntary bankruptcy, the debtor does not need to be located in Canada at all. It is sufficient that the bankrupt merely has property located in Canada.¹⁶

There is no restriction placed on the ability of foreign creditors to apply for a bankruptcy order or to prove their claims in the Canadian bankruptcy proceedings, even if the debts or other claims were entered into outside Canada and governed by foreign law.¹⁷Furthermore, many of the acts of bankruptcy expressly extend to conduct that occurs outside Canada. The most commonly used act of bankruptcy is the failure to meet obligations when they become due. This has been interpreted to apply where there is a failure to pay foreign creditors, even though the claims of creditors in Canada are kept in good standing.¹⁸The jurisdiction of Canadian courts in respect of restructuring proceedings is also very wide. The CCAA applies to any company that is in-

Page 552

corporated in Canada and to any company that is incorporated outside Canada if it carries on business in Canada.¹⁹Restructuring proceedings under the BIA have an even greater potential application, since the proceedings can be commenced by a debtor who does not reside or carry on business in Canada but who has property located there.²⁰There is no limitation in the Canadian insolvency statutes that prevents foreign creditors from participating in the Canadian restructuring proceedings or that otherwise discriminates against such creditors.

2) Discretion to Abstain from Exercise of Jurisdiction

A court that hears an application for a bankruptcy order in respect of an involuntary bankruptcy is given the discretion to refuse the order if it is of the view that there is sufficient cause to do so.²¹A court that hears an application under the CCAA may also refuse to make an order if it thinks that it is appropriate to do so.²²A voluntary bankruptcy is commenced without the need for a court order, but a court may subsequently annul the bankruptcy proceedings.²³It is possible that a Canadian court may exercise its discretion and refuse an order where there is little connection to Canada and foreign insolvency proceedings have been brought in another country.²⁴In doing so, it would very likely apply a forum non conveniens analysis.²⁵This does not mean that a Canadian court will decline jurisdiction whenever foreign insolvency proceedings have been commenced. There is long-standing authority that Canadian insolvency proceedings may be brought concurrently.²⁶

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