The primary federal legislation governing corporate insolvency in Canada is the Bankruptcy and Insolvency Act (BIA), and the Companies’ Creditors Arrangements Act (CCAA). As Canada is a federation, both federal and provincial statutes may be relevant to corporate insolvencies.
Under the Constitution Act, provincial governments have jurisdiction over property and civil rights. As such, they have enacted statutes to deal with fraudulent conveyances and preferences, and the perfection of security interests in property. All of these statutes affect 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.