The various insolvency regimes will be discussed in depth in later chapters of this book. It is useful at the outset to outline the salient characteristics of the different regimes in order to identify their objectives and to highlight the means through which they attempt to achieve these objectives. There are nine32 different insolvency regimes in Canada, namely:
· restructuring under the CCAA;
· restructuring under the BIA;
· consumer proposals;
· orderly payment of debts (OPD);
· mediation under the FDMA;
· liquidation or restructuring under the WURA; and
· railway insolvency
This book is primarily concerned with insolvency regimes of general application rather than those that pertain to particular regions or special types of debtors. For this reason, its focus will be primarily upon the first five of these insolvency regimes.
Bankruptcy law is the oldest insolvency regime. In Canada, it applies to both natural persons and artificial entities such as corporations. Bankruptcy proceedings may be initiated either by the debtor (voluntary bankruptcy) or by the creditors (involuntary bankruptcy). Bankruptcy utilizes a liquidation approach to the debtor’s insolvency. Upon the occurrence of bankruptcy, the assets of the debtor vest in a trustee in bankruptcy. The trustee then sells or otherwise disposes of the assets and distributes their proceeds among the creditors who prove their claims in the bankruptcy. This distribution is made according to a specified scheme of distribution. In the case of a natural person, bankruptcy law also pursues a policy of debtor rehabilitation by the discharge of most pre-bankruptcy claims in order to give the debtor a fresh start. The statutory framework governing bankruptcy is set out in the BIA.
The Companies’ Creditors Arrangement Act is one of two commercial restructuring regimes that are of general application. A reorganization or restructuring regime (the terms are used interchangeably) usually does not involve a liquidation of the debtor’s assets. It is premised on the idea that the business may be more valuable as a going concern and that all parties may benefit if a forced liquidation can be avoided. An insolvent debtor initiates the proceedings...