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Modernizing bankruptcy and insolvency directives and regulations

CBA Section recommends a series of measures to encourage the use of technology and improve the process of bankruptcy.

Technology and bankrupcty

The Insolvency Law Section of the Canadian Bar Association believes the directives and regulations under the Bankruptcy and Insolvency Act, or BIA, as well as the Companies’ Creditors Arrangement Act need to be updated to encourage the use of technology and facilitate the process of bankruptcy.

First off, the CBA Section says in its submission to the Office of the Superintendent of Bankruptcy Canada, the language of regulations and directives should be gender neutral. “To this end, the regulations and directives should be reviewed in their entirety to use gender-neutral words. For example, the opening paragraph in Part III of the Schedule to the Bankruptcy and Insolvency General Rules states ‘[t]he trustee shall, in other than summary administrations, be entitled to be paid his disbursements.’ The word ‘his’ should be replaced by the gender-neutral term ‘their.’”

The Section’s other comments aim to encourage the use of technology to improve efficiency, facilitate the insolvency process, increase accessibility and reduce delays.

Under the current rules, if a notice or a document is received by the Division Office outside of its business hours it is deemed filed the next business day. As the Section notes, most filings are done electronically by trustees, who keep records of the date and time of receipt. “The presence of a person in the office at the time of filing during ‘business hours’ is irrelevant,” it says. But having a document deemed filed the next day could be very consequential. “For example, the filing of a proposal outside of business hours on the last available day to file the proposal could result in a deemed bankruptcy. If the notice or document is time stamped on the correct day, regardless of time, that should be sufficient.”

When a notice or other documents are required to be served on a party represented by counsel, service by email should be allowed. Otherwise, notices or documents should be served in accordance with the applicable service rules of the Canadian jurisdiction of the party being served.

As well, the rules should specifically add electronic transmission to the list of methods by which a trustee can serve a notice of disallowance or notice of valuation on a creditor, in addition to registered mail and courier.

Record-keeping, harmonization

The Section recommends updating the rules on record-keeping requirements to allow electronic storage of records.

In order to harmonize service practices with general litigation in various provinces, the Section suggests “the filing of documentation with the Court and the times for filing be in accordance with the applicable service rules of the Canadian jurisdiction of the Court where the materials are filed.” Changes to sections 1, 5, 6 and 13 of the BIA General Rules “would harmonize the service practices with general litigation in various provinces and would recognize the practice of service by email on represented parties and electronic filing with the Superintendent.”

In addition, removing the requirement for leave of the Court to proceed with an examination on affidavit would also harmonize BIA practice with general litigation.

Improving accessibility, reducing delays

The Section has recommendations to improve efficiency and reduce delays. First, the threshold for bills requiring taxation should be increased to $7,500 from $2,500. Second, “taxation should proceed without requiring the professional’s appearance – the appearance only required if the bill of costs is contested or on request of the taxing officer.”

Removing the requirement of a seal of the Court for bankruptcy applications would increase accessibility to the insolvency system, the submission says, since this seal “is administratively difficult to obtain in certain jurisdictions and underscores the archaic nature of the process.”

Finally, the rules and directives should make it clear that virtual meetings of creditors are allowed. And to simplify the proofs of claim filings, communications of the proofs should be provided electronically and the requirement for witness signatures should be removed.