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Legal Guide

The primary federal legislation governing corporate insolvency in Canada is the Bankruptcy and Insolvency Act (“BIA”) and the Companies’ Creditors Arrangements Act (“CCAA”). Because Canada is a federation though, both federal and provincial statutes may be relevant to corporate insolvencies in Canada.

Under the Constitution Act, provincial governments have jurisdiction over property and civil rights within a province. As such, they have enacted statutes dealing with fraudulent conveyances and preferences, and the perfection of security interests in property. All of these statutes impact upon bankruptcy and insolvency in Canada, which is federally regulated.

Notwithstanding this jurisdiction, provincial statutes often complement federal insolvency legislation. For instance, corporate statutes of the provinces provide for the dissolution or winding up of the affairs of companies having provincial objects, as well as the distribution of corporate assets. Yet, these provisions are not available to corporations in circumstances of insolvency. If a corporation is insolvent, the proper mechanism for the distribution of its assets is through federal insolvency legislation. Whenever there is conflict between federal and provincial enactments, federal legislation will be paramount.

There are three main types of insolvency proceedings in Canada: proceedings under the CCAA; the appointment of a receiver under provincial law and/or under the BIA; and proceedings under the BIA.

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