Rules Amending the Bankruptcy and Insolvency General Rules

Jean Edmonds Tower South
8th Floor
365 Laurier Avenue West
Ottawa, Ontario
K1A OC8

Date:  : October 24, 2005

To:  : All OSB employees, trustees and registrars

From:   Superintendent of Bankruptcy

Subject:   Rules Amending the Bankruptcy and Insolvency General Rules

The Office of the Superintendent of Bankruptcy would like to inform you that the Rules Amending the Bankruptcy and Insolvency General Rules were registered by the Clerk of the Privy Council on August 31, 2005 (SOR/2005-284); published in the Canada Gazette, Part II on September 21, 2005 (Vol. 139, No. 19) and, tabled in Parliament on October 21, 2005. Please note that these Regulations came into force on the day on which they were registered. A copy of these Rules is attached for your reference (Annex I).

You may also consult the OSB's Web site at: http://osb-bsf.ic.gc.ca or the Canada Gazette's Web site at:  http://canadagazette.gc.ca to view the amended Regulations.

The Bankruptcy and Insolvency General Rules were amended in accordance with the recommendations of the Joint Standing Committee for the Scrutiny of Regulations. The amendments involved adding, changing, or removing terms to the Bankruptcy and Insolvency General Rules to make them easier for readers to understand.

Moreover, the amendments corrected errors in translation and unclear terms as recommended by the Joint Standing Committee for the Scrutiny of Regulations.

Finally, the amendments make it easier for readers to understand the Bankruptcy and Insolvency General Rules by employing clear terms and expressions. They do not impose any new restrictions or obligations.

For additional information on this matter, please do not hesitate to contact Josée Pilotte, Policy Analyst, by phone at (613) 948-5007, by fax at (613)948-4080 or by e-mail at pilotte.josee@ic.gc.ca

Annex 1

Vol. 139, No. 19 — September 21, 2005
Registration
SOR/2005-284 August 31, 2005

Bankruptcy and Insolvency Act

Rules Amending the Bankruptcy and Insolvency General Rules (Miscellaneous Program)

P.C. 2005-1561 August 31, 2005

Her Excellency the Governor General in Council, on the recommendation of the Minister of Industry, pursuant to subsection 209(1) of the Bankruptcy and Insolvency Act (see footnote a) , hereby makes the annexed Rules Amending the Bankruptcy and Insolvency General Rules (Miscellaneous Program).

Rules Amending the Bankruptcy and Insolvency General Rules (Miscellaneous Program)

Amendments

1. The portion of subsection 5(1) of the Bankruptcy and Insolvency General Rules (see footnote 1) before paragraph (a) is replaced by the following: 

   5. (1) Subject to subsection (2), a notice or other document that is received by a Division Office outside of its business hours is deemed to have been received

2. The portion of section 13 of the Rules before paragraph (a) is replaced by the following: 

   13. Subject to any order of the court given in exigent circumstances, a party who makes a motion must, at least one day before the day set for the hearing of the motion, file with the court

3. Section 29 of the Rules and the heading before it are repealed.

4. Section 45 of the Rules is replaced by the following: 

   45. Trustees shall not sign any document, including a letter, report, statement, representation or financial statement that they know, or reasonably ought to know, is false or misleading, and shall not associate themselves with such a document in any way, including by adding a disclaimer of responsibility after their signature.

5. Subsection 58(5) of the Rules is replaced by the following: 

   (5) The taxing officer shall determine the disbursements for which the trustee is entitled to be repaid in accordance with this section.

6. Subparagraph 61(2)(e)(i) of the French version of the Rules is replaced by the following: 

   (i) pour autant qu'il sache, le bordereau de dividende soumis au tribunal donne une liste véridique et fidèle des réclamations des créanciers ayant droit à une partie de l'actif,

7. Subsection 104(5) of the French version of the Rules is replaced by the following: 

   (5) Si, dans le délai prévu au paragraphe (4), le contributaire ne verse pas le montant exigé ou n'envoie pas d'avis de contestation, le syndic peut intenter une action ex parte en recouvrement du montant.

8. Section 115 of the Rules is replaced by the following: 

   115. Examinations, other than those pursuant to section 159 or 161 of the Act, shall be held before a registrar, before a person who is qualified to hold examinations for discovery or examinations of judgment debtors or before any other person that the court may on ex parte application order, and shall be conducted in accordance with the rules of court in civil cases.

9. Section 124 of the Rules is replaced by the following: 

   124. The notice of intention to enforce a security pursuant to subsection 244(1) of the Act shall be in prescribed form and shall be served, or sent by registered mail or courier, or, if agreed to by the parties, by electronic transmission.

Coming into Force

10. These Rules come into force on the day on which they are registered.

Regulatory Impact Analysis Statement

(This statement is not part of the Rules.)

Description

In general, the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) describe the administrative requirements concerning the notices and reports that must be issued pursuant to the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3). These Rules specify, for example, the information that is to be disclosed or the forms to be used when preparing the notices and reports. More specifically, the rules also specify to whom and in what manner these notices and reports are to be sent.

Subsection 209(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) gives the Governor in Council the power to make, alter or revoke the General Rules for carrying into effect the object of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3).

The Rules Amending the Bankruptcy and Insolvency Rules (SOR/98-240) came into force on April 30, 1998. The Standing Joint Committee for the Scrutiny of Regulations then reviewed these new rules. As a result of this review, the Committee recommended that the Department of Industry make certain amendments to the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368).

The Standing Joint Committee for the Scrutiny of Regulations is empowered under the Statutory Instruments Act (R.S.C. 1985, c. S-22) to review and scrutinize government regulations and statutory instruments. The Committee reviews and scrutinizes regulations and statutory instruments on the basis of legality and procedural aspects. When the Committee finds a regulation that does not comply with its requirements, it contacts the government body responsible for the instrument, which then takes appropriate remedial action.

Purpose of the amendments

The amendments recommended by the Standing Joint Committee for the Scrutiny of Regulations aim to achieve two basic objectives: 

1. Adding, changing or removing terms

   Certain expressions were felt to be unhelpful for understanding the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368). For example, several paragraphs of the Rules begin with the expression, "Subject to the Act". It is not necessary to include this expression, since the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) are issued under the authority of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3). The rules therefore eliminate this type of expression.

   Furthermore, because of several mistranslations and the use of unclear or inappropriate terms, it was felt necessary to change or add certain expressions to make the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) easier to understand. For example, in subsection 104(4) of the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), the English term, "contributory" has been translated into French by the term, "contribuable", which is a mistake. To be correct, the English term "contributory" should have been translated into French as "contributaire". The rules correct these sorts of mistakes.

2. Amending section 124 of the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368)

   Subsection 244(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) states that a secured creditor who intends to enforce a security on the property of an insolvent person shall send notice of that intention "in the prescribed form and manner".

   Section 124 of the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) states that the notice of intention must be "sent in the manner provided for in the security agreement or, in the absence of any provision in the security agreement, must be served, or sent by registered mail or courier". The Standing Joint Committee for the Scrutiny of Regulations feels that "the manner provided for in the security agreement" cannot be considered a "prescribed manner" and that, consequently, this portion of section 124 of the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) is invalid.

   The Rules rectify this situation by specifically stipulating the means by which a notice of intention, under subsection 244(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3), can be sent. Specifically, such a notice can be served, sent by registered mail or courier, or, if agreed by the parties, by electronic transmission.

Alternatives

To bring the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) in line with the recommendations of the Standing Joint Committee for the Scrutiny of Regulations, amending rules need to be enacted.

Not complying with what is recommended by the Standing Joint Committee for the Scrutiny of Regulations contravenes the Statutory Instruments Act (R.S.C. 1985, c. S-22) and can entail the revocation, in whole or in part, of the statutory instrument.

Moreover, the amendments contained in the new rules would make it easier for readers to understand the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), since the amendments are designed to ensure the use of appropriate terms and expressions. As a result, the rules would also ensure the quality, validity and legality of the statutory instrument.

In particular, the amendment to section 124 of the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), whose purpose is to specifically provide for the means of transmission by which a secured creditor can notify an insolvent debtor of his intention to enforce a security, ensures greater clarity and avoids ambiguity.

The option of electronically mailing the notice provided for in subsection 244(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) is an innovation. This addition to section 124 of the Bankruptcy and Insolvency Rules (C.R.C., 1978, c. 368) encourages the use of new technology. There is a growing trend toward the use of electronic means for all kinds of transactions and the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) need to adapt to the realities of the Canadian marketplace. This is an economical means of transmission that does not entail additional costs for the parties to a security agreement. On the contrary, electronic transmission has proven to be a more economical means of giving notice than traditional methods, such as registered mail, courier or delivery by a process server.

The parties to a security agreement must mutually agree to use electronic mail to transmit the notice provided for in subsection 244(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3). Creditors or debtors who do not have access to the equipment or material required to send or receive electronically the notice provided for in subsection 244(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3), can therefore choose another means of transmission, such as registered mail, courier or delivery by a process server.

Benefits and Costs

The amendments contained in the rules would make it easier for readers to understand the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), since the amendments are designed to ensure the use of appropriate terms and expressions. As a result, the amendments will bring the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) in line with the recommendations of the Standing Joint Committee for the Scrutiny of Regulations, and thereby, ensure the quality, validity, and legality of these Rules.

Adoption of the rules will not have any impact on the private sector since the amendments to the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) are not significant and do not affect the existing insolvency system. Furthermore, the Rules do not alter the rights and obligations contained in the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) and in the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), nor does it impose any new restrictions.

The option of electronically mailing the notice provided for in subsection 244(1) of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) encourages the use of new technology. There is a growing trend towards the use of electronic means for all kinds of transactions and the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368) need to adapt to the realities of the Canadian marketplace. This is an economical means of transmission that does not entail additional costs for the parties to a security agreement.

Consultation

The proposed amendments stem from the adoption, in 1998, of the Rules Amending the Bankruptcy and Insolvency Rules (SOR/98-240), for which consultations were held. The proposed rules do not alter the rights and obligations contained in the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) and the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368). The proposed amendments involve minor changes that do not impose any new restrictions. For these reasons, it is not necessary to hold new consultations.

Compliance and Enforcement

It is not necessary to provide for a mechanism of compliance and enforcement, because the amendments do not entail any alteration to the rights and obligations contained in the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) and the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), nor do they impose any new restrictions. In reality, the Rules basically consist of making corrections regarding the use of appropriate terms, so as to improve the quality and clarity of the Bankruptcy and Insolvency General Rules (C.R.C., 1978, c. 368), thereby making them easier for readers to understand.

Contact

Josée Pilotte
Office of the Superintendent of Bankruptcy
Industry Canada
Jean Edmonds Tower South, 8th floor
365 Laurier Avenue West
Ottawa, Ontario
K1A 0C8
Telephone: (613) 948-5007
Fax: (613) 948-4080
E-mail: pilotte.josee@ic.gc.ca

Footnote a
S.C. 1992, c. 27, s. 2

Footnote 1
C.R.C., c. 368; SOR/98-240