Unpaid Suppliers

Demand for Repossession of Goods (Unpaid Suppliers)

The Bankruptcy and Insolvency Act (the Act) contains specific provisions concerning suppliers that are not paid for goods sold and delivered to a purchaser for the purchaser's business. Under the Act, where the purchaser is bankrupt or is in receivership, a supplier can, subject to certain conditions, repossess the goods at its own expense.

The supplier must first, within a period of 30 days after the delivery of the goods, present a written demand for repossession to the trustee using Form 75 containing the details of the transaction.

At the time when the demand is presented, the following conditions must also be met: 

• the goods are in the possession of the purchaser or the trustee;
• they have not been resold or been subject to any agreement for sale at arm's length;
• they are identifiable;
• they are in the same state as they were on delivery; and
• there is a balance owing after the demand is presented.

the sale price has partly been paid, the supplier can repossess a portion of the goods proportional to the unpaid amount or repossess all of the goods and reimburse an amount equal to the partial payment previously made. A supplier who exercises its right to repossess is no longer entitled to be paid for the goods in question.

Once a supplier receives a written notice recognizing its right to repossess goods, he must exercise that right within 10 days. The 10-day period may be extended by mutual agreement.

Sometimes goods are supplied to a purchaser who subsequently files a notice of intention or a proposal. When this happens, the supplier's right to repossess goods is suspended. However, should the purchaser then become bankrupt or go into receivership, the supplier's right is revived. The period between the filing of the notice of intention or proposal and the date the bankruptcy (or receivership) is filed do not count towards the 30 day limitation for filing the repossession demand.

To find out more about the rights of unpaid suppliers, do not hesitate to contact a representative of your local Office of the Superintendent of Bankruptcy.