C. Farm Debt Mediation

AuthorRoderick J. Wood
ProfessionFaculty of Law. University of Alberta
Pages528-532

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The purpose of the Farm Debt Mediation Act95is to provide for mediation between an insolvent farmer and the creditors of the farmer in an attempt to permit them to reach a mutually acceptable arrangement. If requested by the farmer, a stay of proceedings can be imposed on the creditors. In the four-year period from 2000 to 2004, there were 1,973 mediations, of which 1,590 (80 percent) resulted in an arrangement.96

A farmer is not prevented from attempting to reach an arrangement with creditors by using the commercial proposal provisions of the BIA. One of the advantages of the FDMA is that financial review and mediation services are provided free of charge by the federal government. One potential disadvantage to the FDMA provisions is that a dissenting creditor cannot be bound by an arrangement even if the majority of creditors consent to it.

1) Eligibility

In order to make an application for a financial review and mediation, the debtor must fall within the definition of a farmer and must be insolvent. The FDMA uses a definition of insolvency that is substantially the same as that contained in the BIA.97A farmer is defined as any individual, corporation, cooperative, partnership, or other association of persons that is engaged in farming for commercial purposes.98The "commercial purposes" requirement means that that the enterprise must be intended to make a profit.99This was intended to exclude hobby farmers or others who own or reside on rural land that they use for purposes other than farming.100The FDMA definition of "farming" covers the production of field-grown crops, cultivated and uncultivated, and horticultural crops, the raising of livestock, poultry, and fur-bearing animals,

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and the production of eggs, milk, honey, maple syrup, tobacco, fibre, wood from woodlots, and fodder crops.101

2) Application for Financial Review and Mediation

The FDMA provides two different ways of proceeding. A farmer may apply simply for a financial review and mediation. Alternatively, a farmer may apply for a financial review and mediation together with a stay of proceedings.102The farmer may amend the application and choose the other alternative at any time before termination of the mediation.103The application must contain the names and addresses of all the farmer’s creditors.

Administrators are federal civil servants.104They will review the application and determine if the applicant is eligible to apply under the FDMA.105The administrator must issue a thirty-day stay of proceedings and notify all the creditors of the application if the farmer requested a stay. If the farmer did not request a stay, only the secured creditors are notified of the application.106The administrator will then engage private-sector financial consultants and mediators to conduct the financial review and mediation. The federal government, through Agriculture and Agri-Food Canada, pays the consultants, and neither the farmer nor the creditors are charged for these services.107The financial review must include the preparation of an inventory of all the assets of the farmer and financial statements, and may include a financial recovery plan. Once a report is prepared, a mediator is appointed and the relevant creditors are notified. The role of the mediator is to assist the farmer and the creditors to arrive at a mutually acceptable arrangement, not to provide advice to the farmer.108

3) Stay of Proceedings

The issuance of a stay of proceedings by an administrator prevents any creditor from enforcing any remedy against a farmer or commencing or continuing any judicial or extra-judicial action or proceeding for the

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recovery of the debt, the realization of security, or the taking of any property of the farmer.109The purpose of the stay is to provide "a short standstill period within which the farmer has an opportunity to demonstrate long-term viability to creditors."110The initial stay of proceedings is for a thirty-day period, and it may be extended for a maximum of three further periods of thirty days each if the administrator considers it essential to the formulation of an arrangement.111

The administrator must also appoint a person as guardian of the farmer’s assets when a stay of proceedings is issued.112The farmer or any other qualified person can be appointed guardian. The guardian must prepare an inventory of all the assets of the farmer, verify periodically the presence and condition of those assets, and advise the administrator of any act or omission that would jeopardize those assets.113The...

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