CANADA Law and Practice Contributed by: Scott Hyman, Anthony Spadaro and David Wilson, Davies Ward Phillips & Vineberg LLP
conveyance, notice or knowledge of the intent to defeat, hinder, delay or defraud creditors. Unlike the fraudulent preference provisions of the BIA, there is no requirement under the FCA that the transferor be insolvent or that the transferee be a creditor. In attacking a transaction that was made for good consideration, the party must prove that the intent to defeat, hinder, delay or defraud the creditors of the transferor was shared by both parties to the transaction. The Assignment and Preferences Act (Ontario) (APA) This Ontario statute stipulates that, among oth- er things, every conveyance (which can include the granting of security) or payment of goods is void as against the creditor or creditors injured, delayed or prejudiced if made by a person when it is insolvent or unable to pay its debts in full or when the person knows that it is on the eve of insolvency and has the intent to defeat, hinder, delay or prejudice creditors, or has the intent to give such creditor an unjust preference over other creditors or over any one or more of them. If such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, and if the debtor makes an assignment for the benefit of the creditors within 60 days of the transaction, it shall be presumed, in the absence of evidence to the contrary, to have been made with the intent to defeat, hin - der, delay or prejudice creditors and to be an unjust preference within the meaning of the APA, whether it be made voluntarily or under pressure. These provisions do not apply to any sale or pay- ment made in good faith in the ordinary course of trade or calling to an innocent purchaser or person, nor to any payment of money to a credi- tor, nor to any conveyance, assignment, transfer or delivery of any goods or property of any kind
that is made in good faith in consideration of a present actual payment in money, or by way of security for a present actual advance of money, or that is made in consideration of a present actual sale or delivery of goods or other prop- erty where the money paid or the goods or other property sold or delivered bear a fair and reason- able relative value to the consideration therefor. 5.7 General Principles of Enforcement Credit agreements and indentures will give the lenders or bondholders, as applicable, the ability to accelerate the indebtedness and commence enforcement actions following the occurrence and during the continuance of an event of default. The ability to actually enforce may be constrained by an intercreditor agreement (see 4. Intercreditor Agreements ). In addition, when a borrower becomes subject to an insolvency proceeding under Canadian law, a stay is pro- vided by statute or relevant court order that pro- hibits pre-petition creditors from enforcing any security interests or collecting on pre-petition claims. There is no stay against secured credi- tor enforcement in a bankruptcy. Canadian law requires that demand be made providing reasonable notice for repayment prior to being able to enforce one’s security. What constitutes reasonable notice in any particular case depends on the specific facts. At a mini- mum, a statutory ten-day notice of intention to enforce a security interest is required.
6. Guarantees 6.1 Types of Guarantees
In the context of a debtor-creditor relationship such as a loan, a guarantee functions as a form of credit support to ensure the payment and per- formance of a borrower’s obligations to its lend-
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