Insolvency Resources

Important Links

Office of the Superintendent of Bankruptcy

Office of the Superintendent of Bankruptcy Home Page
Do you need a debt consultant to file a consumer proposal or a bankruptcy?

Canadian Association of Insolvency and Restructuring Professionals (CAIRP)

Canadian Association of Insolvency and Restructuring Professionals (CAIRP) Home Page
What is a Chartered Insolvency and Restructuring Professional?

Government of Canada

Government of Canada Wage Earner Protection Program

Insolvency and Restructuring Federal Legislation

Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3)
Wage Earner Protection Program Act (S.C. 2005, c. 47, s. 1)
Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36)

Frequently Asked Questions

What is a Licensed Insolvency Trustee?

  • A Licensed Insolvency Trustee (“Trustee”) is a person who holds a trustee licence issued by the Office of the Superintendent of Bankruptcy, which is a special operating agency of Industry Canada that regulates bankruptcy and insolvency in Canada. A Licensed Insolvency Trustee is an officer of the Court.

    A Trustee can act in many formal capacities for a company and can be known as a Trustee, Administrator, Monitor, Receiver or Liquidator.

    We used to be called Trustees in Bankruptcy until 2016, but that title did not truly reflect what we do, and many people assumed we only acted in a bankruptcy. In years gone by, sadly, that title did fit better and companies were sometimes encouraged to enter into a bankruptcy before other options were explored. Times have now changed and since the 1980s, the effect of challenging qualification examinations with a concentration on ethical issues, should result in appropriate alternatives being considered. In addition, the availability of knowledge from the internet has meant that directors are better informed about their company’s options, and they are prepared to sensibly question a Trustee’s conclusions.

    It is important to realize that a Licensed Insolvency Trustee is not someone who just grabs and sells assets, or collects accounts receivable and distributes funds to people who are owed money, it is someone who brings to bear both accounting and legal knowledge. Both skills are vital as we chase down the various routes to obtain information, interpret it, protect employees, save businesses, and gain a recovery for creditors.

    A Licensed Insolvency Trustee does not act for a single party, it does not act for the company, a person, a bank, creditors or anyone else; it acts for the benefit of all.

How do you get a License?

  • The Trustee designation is created and governed by the Bankruptcy and Insolvency Act, a federal Act, but our licenses are issued provincially. A license is only issued after a candidate has studied for several years and passed exacting written and oral examinations. Most, but not all, Canadian Licensed Insolvency Trustees are also qualified accountants.

    A candidate signs up for several years of study, usually whilst already working in the profession. There is an examination program run by the Canadian Association of Insolvency and Restructuring Professionals (“CAIRP”). CAIRP signed a memorandum of understanding with the Superintendent of Bankruptcy so that CAIRP can set the qualifying examinations, and the Superintendent acts as a regulatory body. Interestingly, there are certain professions that prohibit you from being a Trustee in Canada, for example, you cannot be a lawyer or a bailiff.

    The examinations culminate in a written examination that covers all aspects required to evaluate and deal with an insolvency. Thereafter, a joint oral board is convened and usually 4 people cross-examine the potential Trustee. The panel is often a lawyer, 2 members of the Superintendent of Bankruptcy and a current Trustee with at least 5 years experience in public practice. You spend about 90 minutes being grilled on ethical quandaries, corporate and personal insolvency, informal restructuring, legal issues, accounting issues, HR issues, more ethical quandaries and anything else they can think of. At the end of it, the 4 people vote as to whether you are knowledgeable enough to be a Trustee, and then background checks are made.

    The background checks are very important because if a bankruptcy occurs, corporate or personal, the assets of the bankrupt vest automatically in the Trustee. Thus, the assets can only be dealt with by the Trustee, and we need to be sure that a Trustee can be trusted with the assets.

    When you face financial troubles, you need someone skilled and knowledgeable to give, and apply advice, on how to deal with stressed situations and who has the force of law behind them.

Can you sell some of my company assets in an auction for me?

  • We do not hold auctions, value assets or sell things on Kijiji. We may employ people to do those things, but we do not do them ourselves.

Don’t debt counsellors and credit counsellors, or other such advisors, do what you do?

  • No.

    You may have seen the deluge of advertisements on the subway, in the free newspapers and heard them on the radio for debt consultants or credit counsellors. In order to make your informed choice of advisor, please refer to what the Office of the Superintendent of Bankruptcy says about them, but please note they cannot file any formal protective insolvency mechanisms, nor be formally appointed under the insolvency regime.

How long will the proposal or bankruptcy last?

  • There is no set time, but if your company has to file a formal insolvency process then you should be prepared for a Proposal to last 2 – 5 years, and a Bankruptcy 2 years. However, in a Proposal, it is likely that you will continue to run the company as long as the company complies with the terms of the Proposal, e.g. make a monthly payment. The Trustee will not interfere with management. In a Bankruptcy, directors often have little to do shortly after a meeting of creditors occurs. The meeting is usually held within 21 days of filing for bankruptcy.

How much will a company bankruptcy or proposal cost me?

  • It may cost you absolutely nothing if the company has assets, because a Trustee is paid from their realizations, according to a ranking set out in the Bankruptcy and Insolvency Act. The Trustee would effectively be paid by the company. However, if there are no assets, then a Trustee will probably ask you for another source of payment.

    There is no single cost for a formal corporate insolvency or restructuring process, because the cost depends on the time spent by the professionals (or rarely, on the amount of realizations). The cost varies greatly between firms, and is not always dependent upon the experience of the Trustee or other professionals working on the matter.

    As a very rough guide, not including tax, you may be quoted anything from $7,500 to $25,000 plus disbursements for a simple bankruptcy, and a lot more for a large complex one. For a proposal, it could be $15,000 to $50,000 plus disbursements, and a lot more for a large complex matter. For a CCAA plan, the costs will almost certainly run into hundreds of thousands of dollars.

Why should I trust you with my business?

  • Channeling The X-Files, I often tell people to trust no one. Sometimes you have no choice though, and you just have to find an advisor who is proven, knowledgeable, with a good reputation and that you are comfortable with.

    Baigel Corp.’s principal, Michael Baigel, is personally involved in all stages of strategy and the performance of any restructuring or insolvency process. You get expert technical restructuring and insolvency knowledge, with experience assisting thousands of small businesses over three decades. You get independent, battle-tested, straight-forward advice, that is efficiently implemented.

    We want you or your existing advisors, be they accountants, book-keepers or lawyers, to perform a lot of the work at the outset of a restructuring that Trustees usually seek to do often do themselves. This enables you and your advisors to be engaged in any decision, and keeps Trustee costs down. We do not do any accounting, auditing or tax work ourselves. We want to apply our skills where you need them, and provide value when you need it most.

What is a Small Business?

  • There are lots of definitions of small businesses. For instance, Industry Canada's defines a small business as a firm that has less than 100 employees, and 98% of businesses in Canada have fewer than 100 employees. However, for the European Union, a small business has less than 50 employees and revenue below €10 Million. In the USA a small manufacturing business has less than 500 employees and annual revenue below $7.5 Million for a non-manufacturing business. Then, some economists have broken up the definition further, and defined a micro business as having less than 10 employees. Baigel Corp. takes a simpler approach. If you know the name of everyone in the business, then it is a small business.

Directors' Liabilities

Companies are usually limited liability corporations, which should mean that debts of the company stick with it and that directors (or shareholders) are not responsible for company debts. However, Canadian federal and provincial law have various statutes that impose liabilities on directors in the event of an insolvency, in large part to protect the government and environment.

Baigel Corp. ensures that directors are aware of the liabilities that may possibly affect them, and if necessary, will put a plan together that deals with both the debts of the company and directors.

Summary of Common Statutes with provisions regarding Directors’ Liability in Bankruptcy and Receivership proceedings

Statute Director's Liability Bankruptcy Receivership
Excise Tax Act HST + interest and penalties Yes Yes
Income Tax Act, Canadian Pension Plan, Employment Insurance Act Source Deductions + interest and penalties Yes Yes
Canada Business Corporation Act (“CBCA”), Ontario Business Corporation Act (“OBCA”), Employment Standards Act (Ontario) (mitigated by WEPPA) Wages (6 mths) and Vacation Pay (12 mths) Note: CBCA and OBCA have several other offences Yes Yes
Bankruptcy and Insolvency Act Bankruptcy offence and payment of dividend/share purchase or redemption Yes No
Canadian Environmental Protection Act Causing, permitting, assisting an offense under the Act Yes Yes
Winding Up and Restructuring Act Payment of dividend/share purchase or redemption No No
Pension Benefits Act (Ontario) Causing, permitting, assisting an offence under the Act Yes Yes
Construction Lien Act   Yes Yes
Workplace Safety and Insurance Act   No No

Federal Legislation

Income Tax Act (ITA) & Excise Tax Act (ETA)

 provide that the director of a corporation is not liable unless:

• The debt has been certified;
• A seizure was attempted and returned unsatisfied;
• The corporation has commenced dissolution proceedings and a claim has been proven by CRA within six months; or
• The corporation has gone bankrupt and the claim has been proved within six months

There also exists a two year limitation period for liability under the ITA and ETA after a director resigns.

Canada Pension Plan and Employment Insurance Act

• Corporation fails to deduct or remit contributions as required by the CPP or fails to deduct or remit employment insurance premiums – directors of the corporation are liable together with the corporation to pay the crown the requisite amounts together with all interest and penalties

Bankruptcy and Insolvency Act

• The duties of a bankrupt are detailed in the BIA s. 158. BIA s.159 provides that an officer of a bankrupt corporation must perform the duties of the bankrupt:
• Payment of a dividend or redemption or purchase for cancellation of shares by the corporation within 12 months prior to bankruptcy, if the corporation was insolvent at such time or such payment, redemption or purchase rendered the corporation insolvent – directors are jointly and severally liable for the amount of the dividend or purchase price, plus interest.

Provincial Legislation

Employment Standards Act (Ontario), Employment Standards Act, 2000 (Ontario)

• Failing to pay employee wages or vacation pay - liable for 6 months of wages and 12 months of vacation pay (joint and severally liable).

Construction Lien Act

• s.13 - Every director, officer or person having effective control of the corporation who assents to or acquiesces in conduct that one knows or reasonably ought to know amounts to be breach of trust is liable for the breach of trust
• Directors and officers are also liable for misdirection of trust funds. Parts of amounts received or accounts receivable with respect to an improvement and amounts received from the sale of premise being improved must be held as trust funds for the benefit of a contractor, subcontractors, or others who have supplied services or materials to the improvement. Misdirection of those trust funds is also a breach of trust.

Ontario Business Corporation Act

• Failing to pay employee wages or vacation pay – liable for 6 months of wages and 12 months of vacation pay (joint and severally liable); and,
• When the corporation is or would become insolvent, voting for or consenting to a resolution authorizing: purchase of corporation’s own shares; the payment of a dividend; granting of financial assistance – liable to repay the corporation any amount so distributed or paid and not otherwise recovered by the corporation (joint and severally liable)

Are you in need of a Licensed Insolvency Trustee?

Please contact our office