A Global Guide
Chapter 31: NATIONAL REPORT FOR CANADA
This chapter considers the treatment of executory contracts upon the default of a debtor company under the law of Canada and the main factors behind the most recent reforms in the area. Canada possesses a bifurcated commercial insolvency system. Insolvent corporations with over $5 million in debt may file for protection under the Companies’ Creditors Arrangement Act (CCAA). In addition, Part III of the Bankruptcy and Insolvency Act (BIA) permits insolvent debtors to reorganize themselves by making a proposal to their creditors. Despite some asymmetries between CCAA restructurings and BIA commercial proposals, notably with respect to the valuation of landlords’ claims when leases are disclaimed, the two procedures pursue the same underlying goals with respect to the disclaimer and assignment of executory contracts. Namely, both procedures aim to preserve value and enhance the chances of a successful reorganization by prohibiting ipso facto clauses and permitting debtors to disclaim and assign contracts while treating counterparties fairly and equitably. In these regards, the existing statutory framework is unremarkable insofar as it largely codifies longstanding practices in Canadian restructuring law.
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