A monitor under CCAA proceedings and a trustee under BIA restructuring proceedings fulfil a similar though not identical role. They are both officers of the court and their primary obligation is to ensure that accurate and timely information is provided to the creditors and to the court. The CCAA and the BIA contain provisions that set out eligibility requirements and define the scope of their duties. The CCAA originally did not provide for the appointment of a monitor. Monitors were appointed by
courts through the exercise of their inherent or equitable jurisdiction. In 1997 the practice was codified in the CCAA, and the appointment of a monitor was made a mandatory feature of a CCAA restructuring.
The CCAA did not originally impose any qualification requirements on the appointment of a monitor. The BIA contained stricter requirements; the trustee had to be a person qualified to act as a trustee under the BIA.24The 2005/2007 amendments have now imposed a similar qualification requirement on a monitor under the CCAA25The appointment process differs in that a monitor is always appointed by court order whereas a trustee is not.
A person who acted as the debtor’s auditor during the past two years may be appointed as monitor only if permitted by the court.26The appointment of an auditor as monitor often involves a trade-off between fairness and efficiency. The auditor is generally the accounting professional who is most knowledgeable about the business affairs of the company and best able to assemble the financial information required in connection with the commencement of restructuring proceedings.27The appointment of the auditor as monitor also helps in reducing costs. This is particularly important where the debtor is a small- or medium-sized firm that is less able to bear the considerable administrative costs of restructuring proceedings. Yet the appointment of the auditor as monitor is not without its problems. It may create a perception that the auditor will not be able to act in an independent role but will be biased in favour of the wishes of the debtor corporation.28It may also not be feasible in larger corporations because of the restrictions placed on the activities of auditors by the Sarbanes-Oxley Act of 200229in the United States.
The primary duty of the monitor and the primary duty of the trustee are expressed in somewhat different terms. The monitor is under a statutory obligation to monitor the business and financial affairs of the
company.30The trustee is under a statutory obligation to make an appraisal and investigation of the affairs and property of the debtor so as to enable the trustee to estimate with reasonable accuracy the financial situation of the debtor and the cause of the debtor’s financial difficulties or insolvency and report the result to the creditors.31The monitor and the trustee are given a right of access to and examination of the debtor’s property, including premises, books, records, and other financial documents, for the purpose of monitoring the debtor’s business and financial affairs.32In carrying out their duties, a monitor and a trustee must act honestly and in good faith and must comply with the code of ethics that governs the conduct of trustees.33The BIA restructuring proceedings were originally conceived as having much less court involvement than the CCAA. The 2005/2007 amendments give the bankruptcy court a much wider ability to make the kinds of orders that were typically made in CCAA proceedings. Given these changes, it is likely that the trustee’s financial investigation into the debtor’s affairs will also be regarded as essential in assisting the court in making such orders.
A key feature in both restructuring regimes is that the names and addresses of creditors are made publicly available. This gives the creditors the opportunity to communicate with one another in order to share information and develop a common strategy in negotiations where possible. It also creates the potential for an outside party to offer to purchase the claims of the creditors.
The 2005/2007 amendments to the CCAA set out a detailed enumeration of the duties and functions of a monitor. The monitor is under a statutory obligation to:34· publish a notice in one or more newspapers, send a copy of the order to every known creditor who has a claim of more than $1,000, and make a list of their names and addresses publicly available within five days of the making of the order, unless otherwise ordered by the court;
· review the company’s cash-flow statement as to its reasonableness and file a report with the court;