CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG
• an administration charge securing the fees and disbursements of the debtor’s and court officer’s legal and financial advisers; • an interim financing charge securing debtor-in- possession financing; • a directors’ and officers’ charge securing the indemnity provided by the debtor to its directors and officers for liabilities that they might incur in their capacity as directors and officers during the course of the proceedings. This applies in CCAA and proposal proceedings only; and • a critical supplier charge – in both CCAA and proposal proceedings, the court has the author - ity to order a critical supplier to continue to supply following the commencement of the proceed - ings, provided that the court also issues an order securing the post-filing payment obligations to that supplier. The BIA also contains statutory provisions granting priority charges against current assets protecting employees’ claims for unpaid wages and vacation pay for the six-month period preceding the com - mencement of the proceedings, up to CAD2,000 per employee. A priority charge against all assets of the debtor protects certain prescribed unremitted pension contributions. The CCAA contains analogous protec - tions for these claims and provides that a court may not approve a CCAA plan unless it is satisfied that an employer’s unremitted source deductions that were outstanding at the commencement of the proceed - ings will be paid during the six-month period following implementation of the CCAA plan. 2.3 Secured Creditors Liens/Security In the common law provinces of Canada, security over personal property (both tangible and intangible) is usually taken under a general security agreement granting a security interest in all property, undertak - ings and assets of a debtor. To be enforceable against third parties, a security interest in the debtor’s per - sonal property must be both attached and perfected. Perfection of a security interest can be achieved in several different ways. Most commonly, perfection of a security interest is achieved by registration under the personal property security act of the relevant jurisdic - tion in the applicable electronic registration system.
Alternatively, perfection can be achieved by posses - sion of the secured asset by the secured party, or control over the secured asset by the secured party. Real property can be charged by way of a mortgage registered on title. In addition, a lender may wish to take specific types of security against specialised personal property such as shares pursuant to a supplementary share pledge. Debenture security may also be taken over real and personal property. Banks licensed in Canada can take specialised types of security under the Bank Act. In Quebec, the only civil law jurisdiction in Canada, security is obtained by way of hypothecs that can charge both movable and immovable property. Rights and Remedies Outside of an insolvency process, secured creditors may exercise their contractual rights and avail them - selves of the sale and foreclosure regimes prescribed by real and personal property legislation of the Civil Code of Quebec. These regimes prescribe statutory notice periods. Where a creditor is seeking to enforce on all or sub - stantially all a debtor’s property, it is also required under Section 244 of the BIA to provide ten days’ notice of its intention to enforce its security (a “244 Notice”). 2.4 Unsecured Creditors Unsecured creditors have the right to commence an action to recover their debt and apply to the court for an order adjudging the debtor bankrupt. These rem - edies are stayed when insolvency proceedings begin. Unsecured creditors can prove their claim in a pro - ceeding and receive a dividend based on the pro rata value of their claims relative to the claims of all other unsecured creditors. Pre-judgment attachment is available to creditors in appropriate circumstances under laws of general application and those specific to restructuring and insolvency.
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