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Vol. 142, No. 23 — June 7, 2008
Rules Amending the Bankruptcy and Insolvency General Rules
Statutory authority
Bankruptcy and Insolvency Act
Sponsoring department
Department of Industry
REGULATORY IMPACT
ANALYSIS STATEMENT
(This statement is not part of the Rules.)
Issue and objectives
Stakeholders have requested that two provisions of the recently amended Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) be brought into force as soon as possible, thus requiring amendments to the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368). The first set of amendments strengthens the protection afforded to employees if an employer becomes bankrupt or is placed in receivership. These amendments elevate the priority of payment of wages and unremitted pension contributions to employees in the order which creditors receive payment. These amendments ensure the Wage Earner Protection Program Act (S.C. 2005, c. 47, s. 1) will operate as envisaged. The second set of amendments aims to further protect an individual’s registered retirement saving plan (RRSP) by including deferred profit sharing plans within the RRSP provision. This would prevent the seizure of funds derived from such plans in the case of an individual being declared bankrupt.
These amendments stem from extensive consultations with stakeholders that have shown that broad support exists for such reforms to ensure that Canada’s insolvency system should respond better to the needs of business, consumers and investors regarding insolvency procedures. In June 2005, as a result of these consultations, the Government of Canada introduced a comprehensive insolvency reform package in the House of Commons to modernize the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) and the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36), and to create the legislative framework for the Wage Earner Protection Program (WEPP).
Description and rationale
The bankruptcy and insolvency legislative reform package was tabled in the House of Commons on June 3, 2005, as Bill C-55. The Bill received Royal Assent on November 25, 2005, thereby becoming chapter 47 of the Statutes of Canada, 2005 (Chapter 47). Canada’s new government signalled the need for certain technical amendments to be made to Chapter 47 before it could be brought into force. Those technical amendments were contained in Bill C-62, an Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act, the Wage Earner Protection Program Act and Chapter 47 of the Statutes of Canada, 2005 (Bill C-62).
On June 12, 2007, Bill C-62 was introduced in the House of Commons and passed all three readings in the House of Commons on June 13 and 14, 2007, receiving first reading in the Senate on June 14, 2007. However, Parliament was prorogued in September 2007 and this bill died on the order paper. The amendments were reintroduced in the new session of Parliament as Bill C-12 on Thursday, October 25, 2007, on a motion that was approved by all parties. The Bill passed all three readings in the House of Commons on October 29, 2007, and received Royal Assent on December 14, 2007, thereby becoming chapter 36 of the Statutes of Canada, 2007 (Chapter 36).
The proposed amendments to the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) will enable
(a) Provisions that will support the super-priorities for the payment of wages and unremitted pension contributions in a bankruptcy or receivership:
The new Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) provisions will support the super-priorities for the payment of wages and unremitted pension contributions in a bankruptcy or receivership situation. This requires the addition of one new Rule to the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) that clarifies what is a prescribed pension plan. Specifically, it clarifies that a pension plan regulated under any Act of Parliament or the legislature of a province or territory shall be considered as prescribed under the provision. This new Rule would also coincide with the coming into force of the Wage Earner Protection Program Act (S.C. 2005, c. 47, s. 1) in order to ensure this Act operates in the way it was intended. Employees and their representatives want the benefit and protection afforded in this amendment in the event an employer becomes bankrupt or is placed in receivership.
(b) Provisions that will protect deferred profit sharing plans against seizure in a bankruptcy:
This provision will introduce strengthened protection against seizure of RRSPs if an individual is declared bankrupt. It requires a new Rule clarifying that deferred profit sharing plans are to be included in the RRSP provisions that protect such retirement savings vehicles from seizure. This provision is subject to a possible claw back of contributions made in the 12 months prior to the bankruptcy. In the event that an RRSP is fully protected under provincial law, that legislation would prevail. Stakeholders, including consumer groups, desire that these legislative and regulatory amendments be brought into force as soon as possible.
The proposed amendments do not add any new burden on Government. The existing mechanisms for compliance and enforcement under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) are sufficient. The proposed changes to the Rules are considered to have a low impact on creditors.
Consultation
The proposed amendments to the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 386) stem from the adoption of Chapter 47 and Chapter 36, for which extensive consultations were already held. In 2001 and 2002, a comprehensive review of the consumer provisions of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) was carried out by the Personal Insolvency Task Force, a committee struck by the Superintendent of Bankruptcy, which comprised academics, practitioners and Industry Canada staff. Public consultations were also held in 2002 by Industry Canada’s Corporate and Insolvency Law Policy Directorate to examine areas of possible legislative reform. The Senate Committee on Banking, Trade and Commerce published its report on the review of the insolvency legislation in the fall of 2003 after conducting comprehensive hearings on the reform of the legislation earlier that year.
Further consultations will be held during prepublication of the Rules in the Canada Gazette, Part I.
Sheila Robin, MBA
Acting National Manager
Regulatory Affairs and Parliamentary Review
Office of the Superintendent of Bankruptcy
Industry Canada
Heritage Place
155 Queen Street, 4th Floor
Ottawa, Ontario
K1A 0H5
Telephone: 613-948-5006
Fax: 613-948-4080
Email: robin.sheila@ic.gc.ca
Notice is hereby given that the Governor in Council, pursuant to subsection 209(1) of the Bankruptcy and Insolvency Act (see footnote a), proposes to make the annexed Rules Amending the Bankruptcy and Insolvency General Rules.
Interested persons may make representations concerning the proposed Rules within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Sheila Robin, Acting National Manager, Regulatory Affairs, Industry Canada, 155 Queen Street, Ottawa, Ontario K1A 0H5 (tel.: 613-948-5006; fax: 613-948-4080; email: robin.sheila@ic. gc.ca).
Ottawa, May 29, 2008
MARY PICHETTE
Assistant Clerk of the Privy Council
RULES AMENDING THE BANKRUPTCY AND
INSOLVENCY GENERAL RULES
AMENDMENT
1. The Bankruptcy and Insolvency General Rules (see footnote 1) are amended by adding the following after section 59:
PRESCRIBED PENSION PLANS FOR OPERATION
OF SUBSECTION 60(1.5) AND
SECTIONS 81.5 AND 81.6 OF THE ACT
59.1 A pension plan regulated by an Act of Parliament or of the legislature of a province is prescribed for the purposes of subsection 60(1.5) and sections 81.5 and 81.6 of the Act.
PRESCRIBED PLAN FOR OPERATION OF
PARAGRAPH 67(1)(b.3) OF THE ACT
59.2 A deferred profit sharing plan, as defined in subsection 147(1) of the Income Tax Act, is prescribed for the purpose of paragraph 67(1)(b.3) of the Act.
COMING INTO FORCE
2. These Rules come into force on the day on which they are registered.
[23-1-o]
Footnote a
R.S., c. B-3; S.C. 1992, c. 27, s. 2
Footnote 1
C.R.C., c. 368; SOR/98-240
NOTICE:
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