The following is a list of frequently asked questions and answers. The answers are based on a general set of circumstances and are for illustrative purposes only. If you are in any doubt as to the action you should take, you should consult your own professional advisors.
Q: Who is the Licensed Insolvency Trustee?
A: The Licensed Insolvency Trustee (“Trustee”) is an independent third party (usually a firm of accountants) appointed by the Official Receiver (a representative of the Office of the Superintendent of Bankruptcy) or the Court. The Trustee is licensed by the Office of Superintendent of Bankruptcy.
Q: What is the role of the Licensed Insolvency Trustee?
A: The Trustee’s primary role is to take possession of and secure all the assets owned by the Bankrupt and realize upon (i.e. sell) the assets for the benefits of the creditors. The Trustee is also responsible for notifying creditors of the Bankruptcy and any meetings of creditors, reporting to the Court and the Official Receiver, processing and assessing proofs of claim, distributing proceeds of sale and where necessary investigating and reporting on the Bankrupt’s affairs.
Q: Will creditors get paid for amounts owing by the Bankrupt prior to the Bankruptcy?
A: It depends on the proceeds realized from the sale of the assets. After selling the assets, the Trustee will need to consider the claims of secured lenders, prior ranking claims, deemed trusts, statutory liens, and the costs of administrating the Bankruptcy prior to repaying other creditors. Accordingly, an unsecured creditor will only be paid if there are any proceeds remaining.
Q: How do I ensure that I am on the creditor’s list and will receive notice of the Bankruptcy and the meeting of creditors?
A: The Trustee will send all known creditors a notice of the Bankruptcy and a list of the Bankrupt’s creditors. A copy of this notice is also available on this website. Check the list to ensure that your name is on the list and that your address is correct. If you are a creditor and are not on the list, contact the Trustee and provide the relevant details.
Q: When will creditors get paid?
A: Trustees will generally make payments to creditors after selling the Bankrupt’s assets and considering whether there may be surplus funds, after taking into account the current and anticipated expenses of administering the Bankruptcy, deemed trusts, statutory liens, and prior ranking claims.
In order to be eligible for a payment from the Bankruptcy proceeding, a creditor must file a proof of claim form documenting the amount owing to the creditor by the Bankrupt. The creditor must also provide documentary evidence of the outstanding debt such as a copy of an invoice or contract or a statement of account summarizing the debt outstanding. Unless requested, it is not necessary to provide copies of all unpaid invoices. Instructions are generally provided with the proof of claim form.
The proof of claim form and supporting documents are reviewed by the Trustee. Any discrepancies between the Bankrupt’s records and the amount claimed by the creditor are investigated by the trustee. Disputed claims are resolved in accordance with the framework set out in the BIA.
Q: As a supplier, can I repossess my goods/inventory after a customer has made an assignment in Bankruptcy?
A: Section 81.1 of the BIA gives unpaid suppliers a right to repossess goods that have been delivered to a debtor who is bankrupt. However, the right to repossess goods/inventory is subject to the following:
Q: I have consignment goods on the company's premises, how do I get these goods back?
A: You will need to submit to the Trustee a completed property proof of claim form (Form 74) detailing the particulars of the property, as well as evidence of a consignment agreement and evidence that the consignment goods belong to you.
Q: As an employee, am I entitled to a priority claim for my unpaid wages? What are my rights?
A: An employee is entitled to a priority claim for unpaid wages and vacation pay, which remain outstanding six months prior to the initial bankruptcy event or the date of receivership. The amount of the priority is limited to $2,000 per employee with an additional $1,000 for disbursements made by a travelling salesperson. The priority claim for unpaid wages does not include termination and severance pay.
The priority amount is paid out of the proceeds from the realization of assets after taking into account deemed trusts, statutory liens, and the rights of unpaid suppliers under section 81.1 of the BIA. The priority claim for employees will rank ahead of secured creditors only to the extent of realization from current assets (cash, inventory and accounts receivables).
Q: What is the Wage Earner Protection Program (“WEPP”)?
A: WEPP is a program delivered by Service Canada, which reimburses eligible employees for unpaid wages, vacation pay, severance and termination pay that are owed after an employer becomes Bankrupt or is subject to a Receivership under the Bankruptcy and Insolvency Act.
The maximum payment for an eligible employee is equivalent to four weeks of insurable Employment Insurance earnings less amounts prescribed by regulations. Payments under WEPP will be made directly by Service Canada and not by the Receiver or Licensed Insolvency Trustee. If a payment is made to an employee by Service Canada, then Service Canada will be entitled to any dividend payments made by the Receiver or Licensed Insolvency Trustee to the employee, up to the amount paid by Service Canada.
Further information on WEPP can be obtained through contacting the following:
Q: Will there be a meeting of creditors?
A: Yes. The Licensed Insolvency Trustee will call the first meeting of creditors within 21 days of the date of Bankruptcy by sending out a notice to all known creditors. You may also check the relevant PwC website for a copy of the notices that have been mailed to creditors.
As a creditor, you will be given the opportunity to file a proof of claim with the Licensed Insolvency Trustee prior to the meeting. A proof of claim must be filed prior to the meeting in order for you to be eligible to vote at the meeting.
Q. I'm a shareholder - will my investment be returned?
A: As a shareholder, you may have an “equity claim” against the (Bankrupt/Debtor), however, an equity claim is subordinate to all other creditor claims and will not be paid until all other creditors have been paid in full.
Q: I am interested in purchasing the company's assets, who should I contact?
A: You should contact either the Receiver and/or the Licensed Insolvency Trustee who has been appointed to determine who has the right to realize upon the assets. Information on the Sales Process may also be available on the PwC website.
Q: How long does the process normally take?
A: It depends on the facts and circumstances of each estate. It can be a multi-year process.