Amendments to the CCAA and BIA in Force November 1, 2019

Blake, Cassels & Graydon LLP

On November 1, 2019, certain amendments to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA) will come into force and have potentially far-reaching implications on the way in which restructuring and liquidation proceedings under those statutes are conducted.

As described in further detail below, the amendments:

  • Implement a duty to act in good faith on interested parties in a proceeding, codifying and amplifying the scope of a common law duty among contractual counterparties set out in the Supreme Court of Canada’s decision in Bhasin v. Hrynew.
  • Restrict the length, scope and substance of CCAA initial orders, which will, in effect, require come-back hearings to occur within 10 days of the commencement of a proceeding and limit initial orders to “ordinary course” relief.
  • Permit CCAA courts to require parties to proceedings to disclose any economic interest in the debtor companies, exposing parties to potential disclosure obligations not present in foreign insolvency proceedings.
  • Extend “lookback” periods for directors and officers liability insurance on directors and officers of insolvent corporations.
  • Bolster the rights of an intellectual property licensee in the event of the insolvency of a licensor, even if the intellectual property is sold.


Section 152 of the Budget Implementation Act, 2019, No. 1 (Bill C-97) provides that both the CCAA and BIA are amended to impose an express duty of good faith on any interested person in any proceedings under each Act. The amendments also grant the court certain powers to make any order it considers appropriate in the circumstances if an interested person fails to act in good faith.

This express duty of good faith is in addition to the existing limited good faith provisions already contained in the BIA and CCAA, though the term “good faith” has not been defined in the amendments.


Bill C-97 reduces the maximum stay period imposed by an initial order under the CCAA from 30 days to 10 days, and provides that an order granted in respect of an initial application under the CCAA is limited to relief that is reasonably necessary for the continued operations of the debtor company in the ordinary course of business during that period.

Where interim financing is sought under an initial order, the amendments restrict the court’s discretion to approve the loan to circumstances and terms that are reasonably necessary for the continued operations of the debtor company in the ordinary course of business during that period. Judicial consideration of this requirement by the Supreme Court of British Columbia in Miniso International Hong Kong Limited v. Migu Investments Inc., albeit prior to its coming into force, indicates that this requirement is consistent with the current approach by Canadian courts to interim financing granted at the outset of proceedings.


The amendments in Bill C-97 provide for court-ordered disclosure of an interested party’s actual economic interest in a debtor company in a CCAA proceeding. In deciding whether to make an order, the court is required to consider whether the monitor approved the proposed disclosure, whether the disclosed information would enhance the company’s prospects of a viable compromise or arrangement, and whether any interested person would be materially prejudiced by the disclosure.

Economic interest under this section includes a claim, eligible financial contract or similar instrument, the consideration paid for any right or interest, or any other prescribed right or interest.


Bill C-97 imposes potential directors’ liability for executive compensation payments made prior to the commencement of BIA or CCAA insolvencies. The amendments also broaden the inquiry under section 101 of the BIA to capture termination pay, severance pay or incentive benefits, or other benefits paid to a director, an officer or any person who manages or supervises the management of business and affairs of the corporation.

The period subject to inquiry has been lengthened to include payments made in the year prior to the date of the initial bankruptcy event, and such payments will be examined for the purposes of determining whether the payments:

  1. Occurred at a time when the corporation was insolvent or rendered the corporation insolvent;
  2. Were conspicuously over the fair market value of the consideration received by the corporation;
  3. Were made outside the ordinary course of business.

The onus of proof is on the director to disprove the foregoing criteria, or that the director had reasonable grounds to believe the payment did not meet any of the foregoing criteria.

The amendments require that the court, in reviewing such payments, consider whether the directors acted as prudent and diligent persons would have acted in the same circumstances. Directors may exonerate themselves from liability where the director protested the payment of termination pay, severance pay, or incentive benefits or other benefits.


Section 272 of the Budget Implementation Act, 2019, No. 2 (Bill C-86) amends the BIA and CCAA to clarify and expand the rights of intellectual property licensees where the licensor becomes insolvent. The amendments allow intellectual property users in good standing to continue using their intellectual property where such property is disclaimed or disposed of in an insolvency proceeding under the CCAA or the BIA. Specifically, intellectual property users in good standing:

  • Can continue to use the intellectual property where that intellectual property is sold in a BIA or CCAA restructuring; and
  • Can continue to use the intellectual property if that intellectual property is disclaimed or sold in a BIA liquidation or receivership.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blake, Cassels & Graydon LLP | Attorney Advertising

Written by:

Blake, Cassels & Graydon LLP

Blake, Cassels & Graydon LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.