CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG
6. Cross-Border Issues in Insolvency 6.1 Sources of International Insolvency Law Both the CCAA and BIA contain provisions allow - ing for recognition of and co-ordination with foreign proceedings as either a foreign main proceeding or a foreign non-main proceeding. 6.2 Jurisdiction A foreign proceeding will be recognised as a foreign main proceeding in Canada where the debtor’s cen - tre of main interest (COMI) is located in the foreign jurisdiction. A court will determine a debtor’s COMI by looking to, among other things, the location of the debtor’s management and headquarters, and the location that significant creditors recognise as being the centre of the debtor’s operations. The definition of a “foreign non-main proceeding” in Canada is derived from the UNCITRAL Model Law on Cross-Border Insolvency 1997 and refers to any for - eign proceeding other than a foreign main proceeding. 6.3 Applicable Law Whether the proceeding is determined to be a foreign main or non-main proceeding by a Canadian court has important implications for the treatment of that pro - ceeding and the debtor in Canada. If the proceeding is determined by the Canadian court to be a foreign main proceeding, the debtor is entitled to certain automatic relief by the Canadian court. The recognition provisions of the BIA and CCAA are largely modelled on the UNCITRAL Model Law on Cross-Border Insolvency 1997. Canada passed leg - islation adopting the treaty in 2005. 6.4 Recognition and Enforceability Canadian courts may recognise foreign judgments. In recognising a foreign judgment, Canadian courts will consider: • whether the judgment was granted by a court of “competent jurisdiction”; • whether it is final and conclusive; and • whether it is sufficiently clear and specific.
to enforce on their security, provided they do so in a commercially reasonable manner. Trustees in bank - ruptcy retain the right to require that a secured creditor prove its claim before releasing or redeeming any col - lateral pledged in favour of such secured party. As noted, creditors of the bankrupt may nominate and appoint inspectors to represent their various interests. Inspectors may instruct the bankruptcy trustee to act in a manner that protects the interests of creditors. Unsecured creditors receive a distribution at the end of a bankruptcy proceeding on a pro rata basis in accordance with their proven claims. Such distribu - tions are only made after all secured creditors have realised on their security, and all priority and preferred creditors have been paid. To the extent secured credi - tors suffer a shortfall after realising on their security, such secured creditors may submit a proof of claim for the difference as an ordinary unsecured creditor. Receivership A critical feature of court-appointed receivership pro - ceedings is the stay of proceedings arising from the terms of the receiver appointment order. The stay of proceedings restricts all creditors from exercising any rights or remedies against the debtor without prior leave of the court. The stay of proceedings accord - ingly operates to bring all creditors under a single pro - ceeding. Although arbitration is generally possible, a court may override arbitration provisions where arbi - tration would undermine the efficiency of the single proceeding model, and may find arbitration agree - ments inoperative if enforcing them would disrupt the orderly conduct of the proceeding, cause prejudice, or delay resolution. Like in CCAA proceedings and BIA proposal pro - ceedings, the terms of a receiver appointment order typically contain exceptions as to the application of the stay of proceedings. In this regard, the stay of proceedings typically does not apply to eligible finan - cial contracts, the filing of registrations to perfect or preserve a security interest, the registration of a claim for a lien, or certain enumerated governmental pro - ceedings.
106 CHAMBERS.COM
Powered by FlippingBook