Order Fixing November 1, 2019 as the Day on which Certain Provisions of the two Acts Come into Force: SI/2019-90

Canada Gazette, Part II, Volume 153, Number 18

Registration

SI/2019-90 September 4, 2019

BUDGET IMPLEMENTATION ACT, 2018, NO. 2

BUDGET IMPLEMENTATION ACT, 2019, NO. 1

Order Fixing November 1, 2019 as the Day on which Certain Provisions of the two Acts Come into Force

P.C. 2019-1226 August 17, 2019

Her Excellency the Governor General in Council, on the recommendation of the Minister of Industry,

• (a) pursuant to section 272 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, fixes November 1, 2019 as the day on which Subdivision E of Division 7 of Part 4 of that Act comes into force; and
• (b) pursuant to subsection 152(1) of the Budget Implementation Act, 2019, No. 1, chapter 29 of the Statutes of Canada, 2019, fixes November 1, 2019 as the day on which sections 133 to 140 of that Act come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

To bring into force on November 1, 2019, by Order in Council certain amendments to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA), pursuant to section 272 of the Budget Implementation Act, 2018, No. 2, and section 152 of the Budget Implementation Act, 2019, No. 1.

Objective

The amendments in Budget Implementation Act, 2018, No. 2 are intended to protect intellectual property (IP) user rights in cases where the IP licensor becomes insolvent.

The BIA and CCAA amendments in Budget Implementation Act, 2019, No. 1 are intended to enhance retirement security by making the insolvency process fairer, more transparent and more accessible, particularly for stakeholders such as pensioners and workers.

Background

Budget Implementation Act, 2018, No. 2, and Budget Implementation Act, 2019, No. 1 each proposed amendments to the BIA and the CCAA, Canada’s main insolvency statutes. The BIA governs liquidations and restructurings for individuals and businesses, and the CCAA covers large corporate restructurings.

First, the BIA and CCAA amendments to protect IP user rights in insolvency were part of the Innovation and Skills Plan set out in Budget 2018 (Budget Implementation Act, 2018, No. 2 received royal assent on December 13, 2018). The Intellectual Property Strategy aspect of the Plan amended IP laws to clarify acceptable practices and prevent misuse of IP rights. Currently, in BIA and CCAA restructuring, IP licensees in good standing can continue to use the IP if the debtor disclaims the licence. The amendments extend this right to liquidation proceedings (bankruptcies and receiverships) and asset sales. The following specific amendments achieve the objective of protecting IP user rights in cases where the IP licensor becomes insolvent:

• Section 266 provides that an IP user in good standing can continue to use the IP if that IP is sold in a BIA restructuring;
• Section 267 provides than an IP user in good standing can continue to use the IP if that IP is disclaimed or sold in a BIA liquidation;
• Section 268 provides that an IP user in good standing can continue to use the IP if that IP is disclaimed or sold in a receivership; and
• Section 269 provides that an IP user in good standing can continue to use the IP if that IP is sold in a CCAA restructuring.

Second, in February 2018, the Government committed to explore ways to enhance retirement security for Canadians, responding to concerns about the security of workplace pensions in insolvency. The Government fulfilled this commitment by taking a whole-of-government, evidence-based and balanced approach to enhancing retirement security, ultimately amending the BIA and CCAA, as well as the Canada Business Corporations Act (CBCA) and federal pension legislation, in Budget Implementation Act, 2019, No. 1, which received royal assent on June 21, 2019. The following specific amendments achieve the objective of enhancing retirement security by making the insolvency process fairer, more transparent and more accessible:

• Section 133 requires that parties in BIA proceedings act in good faith;
• Section 134 exempts assets held in Registered Disability Savings Plans (RDSPs) from creditor claims in BIA bankruptcies of the RSDP holder;
• Section 135 imposes potential directors’ liability for executive compensation payments in BIA and CCAA insolvencies;
• Section 136 limits a CCAA initial order to measures necessary to carry on business until another court hearing is held;
• Section 137 limits the duration of a CCAA initial order to no more than 10 days;
• Section 138 limits interim financing terms and conditions in an initial order to those necessary to carry on business for that period;
• Section 139 provides for court-ordered disclosure of a party’s actual economic interest in a debtor company in a CCAA proceeding; and
• Section 140 requires that parties in a CCAA proceeding act in good faith.

Implications

The insolvency law amendments to protect IP user rights will preserve those rights in the event that the IP licensor becomes insolvent, thus supporting innovation and growth by ensuring that the IP users’ business operations are not suddenly impacted by an inability to use the IP for which they have usage rights (e.g. a licence). The insolvency law amendments to enhance retirement security will enhance the transparency, fairness and accessibility of insolvency proceedings for pensioners and workers, with a view to ensuring that their rights are better protected in future insolvency court processes.

There are no additional financial resources necessary to bring the IP and retirement security amendments into force. No changes to administrative systems (e.g. by the Office of the Superintendent of Bankruptcy or the courts) or new forms are required before the amendments come into force on November 1, 2019.

Consultation

Canadians in general and specific stakeholders were consulted on both sets of insolvency amendments described above.

The IP-related amendments were included in a discussion paper that provided the framework for the 2014 statutory review of the BIA and CCAA. Online public consultations were held from May to July 2014, and interested stakeholders were given the opportunity to provide written submissions and meet with officials.

The 2014 statutory review also sought feedback from Canadians and targeted stakeholders on other insolvency amendments, including the good faith requirement, limited initial orders, disclosure of economic interests, and the RDSP exemption. The Government consulted further on these potential insolvency amendments, as well as potential corporate governance and pension regulation amendments, through consultations on ways to enhance retirement security between November 22, 2018, and February 6, 2019. An online public consultation process was undertaken to obtain the views of Canadians based on a discussion paper. Over 4 400 online submissions were received. The Government also held round-table meetings with stakeholder groups and received formal written submissions from many of these groups, including pensioner and labour representatives; businesses; lenders; and insolvency, corporate governance and pension experts.

Contact

Mark Schaan
Director General
Marketplace Framework Policy Branch
Telephone: 343‑291‑3700
Email: mark.schaan@canada.ca,