Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36)

Meaning of regulatory body

• 11.1 (1) In this section, regulatory body means a person or body that has powers, duties or functions relating to the enforcement or administration of an Act of Parliament or of the legislature of a province and includes a person or body that is prescribed to be a regulatory body for the purpose of this Act.

• Marginal note:Regulatory bodies — order under section 11.02

  (2) Subject to subsection (3), no order made under section 11.02 affects a regulatory body’s investigation in respect of the debtor company or an action, suit or proceeding that is taken in respect of the company by or before the regulatory body, other than the enforcement of a payment ordered by the regulatory body or the court.

• Marginal note:Exception

  (3) On application by the company and on notice to the regulatory body and to the persons who are likely to be affected by the order, the court may order that subsection (2) not apply in respect of one or more of the actions, suits or proceedings taken by or before the regulatory body if in the court’s opinion

  • (a) a viable compromise or arrangement could not be made in respect of the company if that subsection were to apply; and

  • (b) it is not contrary to the public interest that the regulatory body be affected by the order made under section 11.02.

• Marginal note:Declaration — enforcement of a payment

  (4) If there is a dispute as to whether a regulatory body is seeking to enforce its rights as a creditor, the court may, on application by the company and on notice to the regulatory body, make an order declaring both that the regulatory body is seeking to enforce its rights as a creditor and that the enforcement of those rights is stayed.

11.11 [Repealed, 2005, c. 47, s. 128]

Marginal note:Interim financing

• 11.2 (1) On application by a debtor company and on notice to the secured creditors who are likely to be affected by the security or charge, a court may make an order declaring that all or part of the company’s property is subject to a security or charge — in an amount that the court considers appropriate — in favour of a person specified in the order who agrees to lend to the company an amount approved by the court as being required by the company, having regard to its cash-flow statement. The security or charge may not secure an obligation that exists before the order is made.

• Marginal note:Priority — secured creditors

  (2) The court may order that the security or charge rank in priority over the claim of any secured creditor of the company.

• Marginal note:Priority — other orders

  (3) The court may order that the security or charge rank in priority over any security or charge arising from a previous order made under subsection (1) only with the consent of the person in whose favour the previous order was made.

• Marginal note:Factors to be considered

  (4) In deciding whether to make an order, the court is to consider, among other things,

  • (a) the period during which the company is expected to be subject to proceedings under this Act;

  • (b) how the company’s business and financial affairs are to be managed during the proceedings;

  • (c) whether the company’s management has the confidence of its major creditors;

  • (d) whether the loan would enhance the prospects of a viable compromise or arrangement being made in respect of the company;

  • (e) the nature and value of the company’s property;

  • (f) whether any creditor would be materially prejudiced as a result of the security or charge; and

  • (g) the monitor’s report referred to in paragraph 23(1)(b), if any.

• Marginal note:Additional factor — initial application

  (5) When an application is made under subsection (1) at the same time as an initial application referred to in subsection 11.02(1) or during the period referred to in an order made under that subsection, no order shall be made under subsection (1) unless the court is also satisfied that the terms of the loan are limited to what is reasonably necessary for the continued operations of the debtor company in the ordinary course of business during that period.

Marginal note:Assignment of agreements

• 11.3 (1) On application by a debtor company and on notice to every party to an agreement and the monitor, the court may make an order assigning the rights and obligations of the company under the agreement to any person who is specified by the court and agrees to the assignment.

• Marginal note:Exceptions

  (2) Subsection (1) does not apply in respect of rights and obligations that are not assignable by reason of their nature or that arise under

  • (a) an agreement entered into on or after the day on which proceedings commence under this Act;

  • (b) an eligible financial contract; or

  • (c) a collective agreement.

• Marginal note:Factors to be considered

  (3) In deciding whether to make the order, the court is to consider, among other things,

  • (a) whether the monitor approved the proposed assignment;

  • (b) whether the person to whom the rights and obligations are to be assigned would be able to perform the obligations; and

  • (c) whether it would be appropriate to assign the rights and obligations to that person.

• Marginal note:Restriction

  (4) The court may not make the order unless it is satisfied that all monetary defaults in relation to the agreement — other than those arising by reason only of the company’s insolvency, the commencement of proceedings under this Act or the company’s failure to perform a non-monetary obligation — will be remedied on or before the day fixed by the court.

• Marginal note:Copy of order

  (5) The applicant is to send a copy of the order to every party to the agreement.

11.31 [Repealed, 2005, c. 47, s. 128]

Marginal note:Critical supplier

• 11.4 (1) On application by a debtor company and on notice to the secured creditors who are likely to be affected by the security or charge, the court may make an order declaring a person to be a critical supplier to the company if the court is satisfied that the person is a supplier of goods or services to the company and that the goods or services that are supplied are critical to the company’s continued operation.

• Marginal note:Obligation to supply

  (2) If the court declares a person to be a critical supplier, the court may make an order requiring the person to supply any goods or services specified by the court to the company on any terms and conditions that are consistent with the supply relationship or that the court considers appropriate.

• Marginal note:Security or charge in favour of critical supplier

  (3) If the court makes an order under subsection (2), the court shall, in the order, declare that all or part of the property of the company is subject to a security or charge in favour of the person declared to be a critical supplier, in an amount equal to the value of the goods or services supplied under the terms of the order.

• Marginal note:Priority

  (4) The court may order that the security or charge rank in priority over the claim of any secured creditor of the company.

Marginal note:Removal of directors

• 11.5 (1) The court may, on the application of any person interested in the matter, make an order removing from office any director of a debtor company in respect of which an order has been made under this Act if the court is satisfied that the director is unreasonably impairing or is likely to unreasonably impair the possibility of a viable compromise or arrangement being made in respect of the company or is acting or is likely to act inappropriately as a director in the circumstances.

• Marginal note:Filling vacancy

  (2) The court may, by order, fill any vacancy created under subsection (1).

Marginal note:Security or charge relating to director’s indemnification

• 11.51 (1) On application by a debtor company and on notice to the secured creditors who are likely to be affected by the security or charge, the court may make an order declaring that all or part of the property of the company is subject to a security or charge — in an amount that the court considers appropriate — in favour of any director or officer of the company to indemnify the director or officer against obligations and liabilities that they may incur as a director or officer of the company after the commencement of proceedings under this Act.

• Marginal note:Priority

  (2) The court may order that the security or charge rank in priority over the claim of any secured creditor of the company.

• Marginal note:Restriction — indemnification insurance

  (3) The court may not make the order if in its opinion the company could obtain adequate indemnification insurance for the director or officer at a reasonable cost.

• Marginal note:Negligence, misconduct or fault

  (4) The court shall make an order declaring that the security or charge does not apply in respect of a specific obligation or liability incurred by a director or officer if in its opinion the obligation or liability was incurred as a result of the director’s or officer’s gross negligence or wilful misconduct or, in Quebec, the director’s or officer’s gross or intentional fault.

Marginal note:Court may order security or charge to cover certain costs

• 11.52 (1) On notice to the secured creditors who are likely to be affected by the security or charge, the court may make an order declaring that all or part of the property of a debtor company is subject to a security or charge — in an amount that the court considers appropriate — in respect of the fees and expenses of

  • (a) the monitor, including the fees and expenses of any financial, legal or other experts engaged by the monitor in the performance of the monitor’s duties;

  • (b) any financial, legal or other experts engaged by the company for the purpose of proceedings under this Act; and

  • (c) any financial, legal or other experts engaged by any other interested person if the court is satisfied that the security or charge is necessary for their effective participation in proceedings under this Act.

• Marginal note:Priority

  (2) The court may order that the security or charge rank in priority over the claim of any secured creditor of the company.

Marginal note:Bankruptcy and Insolvency Act matters

11.6 Notwithstanding the Bankruptcy and Insolvency Act,

• (a) proceedings commenced under Part III of the Bankruptcy and Insolvency Act may be taken up and continued under this Act only if a proposal within the meaning of the Bankruptcy and Insolvency Act has not been filed under that Part; and

• (b) an application under this Act by a bankrupt may only be made with the consent of inspectors referred to in section 116 of the Bankruptcy and Insolvency Act but no application may be made under this Act by a bankrupt whose bankruptcy has resulted from

  • (i) the operation of subsection 50.4(8) of the Bankruptcy and Insolvency Act, or

  • (ii) the refusal or deemed refusal by the creditors or the court, or the annulment, of a proposal under the Bankruptcy and Insolvency Act.

Marginal note:Court to appoint monitor

• 11.7 (1) When an order is made on the initial application in respect of a debtor company, the court shall at the same time appoint a person to monitor the business and financial affairs of the company. The person so appointed must be a trustee, within the meaning of subsection 2(1) of the Bankruptcy and Insolvency Act.

• Marginal note:Restrictions on who may be monitor

  (2) Except with the permission of the court and on any conditions that the court may impose, no trustee may be appointed as monitor in relation to a company

  • (a) if the trustee is or, at any time during the two preceding years, was

    • (i) a director, an officer or an employee of the company,

    • (ii) related to the company or to any director or officer of the company, or

    • (iii) the auditor, accountant or legal counsel, or a partner or an employee of the auditor, accountant or legal counsel, of the company; or

  • (b) if the trustee is

    • (i) the trustee under a trust indenture issued by the company or any person related to the company, or the holder of a power of attorney under an act constituting a hypothec within the meaning of the Civil Code of Quebec that is granted by the company or any person related to the company, or

    • (ii) related to the trustee, or the holder of a power of attorney, referred to in subparagraph (i).

• Marginal note:Court may replace monitor

  (3) On application by a creditor of the company, the court may, if it considers it appropriate in the circumstances, replace the monitor by appointing another trustee, within the meaning of subsection 2(1) of the Bankruptcy and Insolvency Act, to monitor the business and financial affairs of the company.

Marginal note:No personal liability in respect of matters before appointment

• 11.8 (1) Despite anything in federal or provincial law, if a monitor, in that position, carries on the business of a debtor company or continues the employment of a debtor company’s employees, the monitor is not by reason of that fact personally liable in respect of a liability, including one as a successor employer,

  • (a) that is in respect of the employees or former employees of the company or a predecessor of the company or in respect of a pension plan for the benefit of those employees; and

  • (b) that exists before the monitor is appointed or that is calculated by reference to a period before the appointment.

• Marginal note:Status of liability

  (2) A liability referred to in subsection (1) shall not rank as costs of administration.

• Marginal note:Liability of other successor employers

  (2.1) Subsection (1) does not affect the liability of a successor employer other than the monitor.

• Marginal note:Liability in respect of environmental matters

  (3) Notwithstanding anything in any federal or provincial law, a monitor is not personally liable in that position for any environmental condition that arose or environmental damage that occurred

  • (a) before the monitor’s appointment; or

  • (b) after the monitor’s appointment unless it is established that the condition arose or the damage occurred as a result of the monitor’s gross negligence or wilful misconduct.

• Marginal note:Reports, etc., still required

  (4) Nothing in subsection (3) exempts a monitor from any duty to report or make disclosure imposed by a law referred to in that subsection.

• Marginal note:Non-liability re certain orders

  (5) Notwithstanding anything in any federal or provincial law but subject to subsection (3), where an order is made which has the effect of requiring a monitor to remedy any environmental condition or environmental damage affecting property involved in a proceeding under this Act, the monitor is not personally liable for failure to comply with the order, and is not personally liable for any costs that are or would be incurred by any person in carrying out the terms of the order,

  • (a) if, within such time as is specified in the order, within ten days after the order is made if no time is so specified, within ten days after the appointment of the monitor, if the order is in effect when the monitor is appointed or during the period of the stay referred to in paragraph (b), the monitor

    • (i) complies with the order, or

    • (ii) on notice to the person who issued the order, abandons, disposes of or otherwise releases any interest in any real property affected by the condition or damage;

  • (b) during the period of a stay of the order granted, on application made within the time specified in the order referred to in paragraph (a) or within ten days after the order is made or within ten days after the appointment of the monitor, if the order is in effect when the monitor is appointed, by

    • (i) the court or body having jurisdiction under the law pursuant to which the order was made to enable the monitor to contest the order, or

    • (ii) the court having jurisdiction under this Act for the purposes of assessing the economic viability of complying with the order; or

  • (c) if the monitor had, before the order was made, abandoned or renounced any interest in any real property affected by the condition or damage.

• Marginal note:Stay may be granted

  (6) The court may grant a stay of the order referred to in subsection (5) on such notice and for such period as the court deems necessary for the purpose of enabling the monitor to assess the economic viability of complying with the order.

• Marginal note:Costs for remedying not costs of administration

  (7) Where the monitor has abandoned or renounced any interest in real property affected by the environmental condition or environmental damage, claims for costs of remedying the condition or damage shall not rank as costs of administration.

• Marginal note:Priority of claims

  (8) Any claim by Her Majesty in right of Canada or a province against a debtor company in respect of which proceedings have been commenced under this Act for costs of remedying any environmental condition or environmental damage affecting real property of the company is secured by a charge on the real property and on any other real property of the company that is contiguous thereto and that is related to the activity that caused the environmental condition or environmental damage, and the charge

  • (a) is enforceable in accordance with the law of the jurisdiction in which the real property is located, in the same way as a mortgage, hypothec or other security on real property; and

  • (b) ranks above any other claim, right or charge against the property, notwithstanding any other provision of this Act or anything in any other federal or provincial law.

• Marginal note:Claim for clean-up costs

  (9) A claim against a debtor company for costs of remedying any environmental condition or environmental damage affecting real property of the company shall be a claim under this Act, whether the condition arose or the damage occurred before or after the date on which proceedings under this Act were commenced.