May 8, 2020
Notices of Intention and Division I Proposals - Holding Proposals
As Licensed Insolvency Trustees (LIT) are aware, ss. 50.4 (8) and (9) of the Bankruptcy and Insolvency Act (BIA) provides time limits for extensions of a Notice of Intention before a Division I proposal must be filed and ss. 50.4(10) expressly provides that these timelines cannot be extended by the court. In certain cases, a proposal can be made within the prescribed timelines and debtors are encouraged to make every effort to fulfil these requirements if possible.
However, some debtors may require additional time to make a proposal about which they can feel confident given the current economic uncertainty due to COVID-19. In these circumstances, it is possible to file a “holding proposal”, which would essentially consist of a proposal setting out the debtor’s intention to file a proposal. The process would include the LIT filing the holding proposal, followed by scheduling the First Meeting of Creditors pursuant to s. 51 of the BIA. Note that the Omnibus Orders (rendered in every province and territory in late April 2020) provide a blanket authorization to LITs to postpone the meetings for all existing proceedings under Division I of Part III of the BIA, including those filed during the Suspension Period (as defined in the Omnibus Orders). An “Amended Proposal” could then be filed before the meeting is called, after the Suspension Period ends, and the vote pursuant to ss. 54(1) can occur. The safeguard measure for the creditors, which effectively exists as soon as any proceeding is filed under Division I of Part III of the BIA, is that creditors may apply to the Court to have the proceedings terminated and have the debtor be deemed to have made an assignment into bankruptcy under ss. 50(12) or ss. 50.4(11) of the BIA.
Swearing of Documents
Please be advised that the March 13 Guidance to LITs has been amended to ensure it reflects the amended March 25 message regarding the swearing of documents. The amended section 4, Signatures and Oaths, of the March 13 Guidance now reads as follows:
Signatures and Oaths: LITs are encouraged to exchange documents that require signature via email, or other electronic means, and provide debtors the necessary support to explain the documents via videoconference or over the phone or as otherwise required. LITs should obtain the original signed copies to add to their records as soon as practical. LITs should explore legal methods for the witnessing of signatures and swearing of oaths. Verification of identity remains a crucial step.
Any questions should be sent via email to ic.osbregulatoryaffairs-affairesreglementairesbsf.ic@canada.ca.