B. Railway Companies

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 543-544

Page 543

The Canada Transportation Act⁷¹(CTA) contains a brief set of provisions that establishes the only insolvency regime that can be employed in respect of insolvent railway companies. (The BIA, the CCAA, and the WURA exclude railway companies from their application.⁷²) The CTA provisions provide a skeletal set of rules for the restructuring of a railway company but provide no mechanism for its liquidation. This may reflect the fact that restructuring rather than liquidation is the only feasible manner of dealing with insolvent railway companies on account of the very specific types of assets they hold and the difficulty in reallocating them to any other use.

The proceedings are commenced when the directors of an insolvent railway company prepare and file a scheme of arrangement between the company and its creditors in the Federal Court.⁷³Once it is filed, the court may restrain any action against the company.⁷⁴The stay of proceedings cannot prevent a secured creditor from taking possession of the rolling stock unless, within sixty days from the filing of the scheme of arrangement, the railway company agrees to perform all its obligations under the security agreement and cures any default.⁷⁵The scheme must be assented to by the shareholders and by claimants holding three-quarters of the value of (a) mortgages, hypothecs, bonds, and debenture stock of the company; (b) any rent charge, or other payment, charged on the receipts of or payable by the company in consideration of the purchase of the railway of another company; and (c) each class of preferred share.⁷⁶The assent of a class is not needed if the class is not prejudicially affected by the scheme.⁷⁷The Federal Court may confirm the scheme if it has been properly assented to and if no sufficient objection to the scheme has been established.⁷⁸Once confirmed and registered in the Federal Court, it becomes binding on the company and all persons.⁷⁹

Page 544

FURTHER READINGS

CARFAGNINI, J.A., "Proceedings under the Winding-Up Act (Canada)" (1988) 66 C.B.R. (N.S.) 77

INSOLVENCY institute of CANADA, "The Winding-Up and Restructuring Act: Recommendations for Reform" (14 June 2000)

JOLIN, B., & S. GAUDET, "When a Railway Company Is Not Really a Railway Company" (2002) 19 Nat’l Insolv. Rev. 57

TELFER. t., & B. Welling, "The Winding-Up and Restructuring Act: Realigning Insolvency’s Orphan to the Modern Law Reform Process" (2008) 24 B.F.L.R. 233

WOOD, r.J., "Assessing Institutional Abuse...