NextLevelStuff Flashcards

Question

Q10 Consumer question Mr. Man has a house he bought for $15K 15 years ago, it's worth 110K and he owes $15K. For options, what are your recommendations? He hasn't filed anything yet. Tell me the informal options. CRA is the deciding creditor.

Answer 1

-Re-mortgage the house -sell the house to pay off the debts or fund a CP to pay off creditors. -we would need to offer them a better distribution than a bankruptcy or at least same amount as bankruptcy but faster. -if net proceeds from house sale are sufficient to pay off creditors then CP wouldn't be needed. -CRA (deciding creditor) does not compromise its debt easily.

Answer 2

-child support is non-dischargeable -arrears for last 12m are preferred claim in the bankruptcy, & any court ordered lump sum or agreement made before DOB. -no stay for ongoing obligations, his wages could still be garnished if there's a MEP order (hard to do if he's self-employed)

Answer 3

-we could consider audio systems and guitars as part of "tools of trade" -> if he's using them to earn income -they get a 10K exemption per AB Civil Enforcement Act -we need to have equipment appraised to determine if value is correct. -assets in excess of 10K are not exempt (redeem or Trustee can realize on them)

Answer 4

-inheritance will be considered an after-acquired property if she dies while he is in bankruptcy. -disclose expectation of inheritance on SOA -Trustee must exercise its right to possession of the inheritance (take active steps to claim it (for example, notify the executor, demand payment, or apply to court), until it does so the bankrupt may dispose of it (Doing so would likely be a breach of the bankrupt’s duties)

Answer 5

S.101 of BIA * Reviewable transactions now include a wide range of payments made within *1* year of the initial bankruptcy event or insolvency filing. * This includes dividends, severance pay, termination pay, and other payments made to directors, officers, and certain managers of the debtor. * Trustee applies to court and court grants judgement against director * court factors: * 1. if transaction occured at a time when corporation was insolvent or whether tranasction rendered the corporation insolvent. * *2. court can also give judgement against SH related to director

Answer 6

If tuv for non arms length lets you attack upto 5 years then you can use this to attack upto 6 years. Also known as Fraudulent conveyancing act.

Answer 7

-Violation of directive 4 -report matter to OR; Trustee has violated directive 4 by delegating the task of chairing the fmoc to his assistant -ONLY OR or OR'S NOMINEE CAN CHAIR FMOC -Nominee can be Trustee -Nominee can be delegate of Trustee for CP

Answer 8

Remind her of CAIRP RPC, Trustees are expected to provide professional courtesy to other professionals (both inside and outside the profession) Report them to Cairp as they’ve violated the Cairp RPC. Offer to pay reasonable rent Adjourn meeting with creditor agreement for 10-15 mins to try to find alternative boardroom

Answer 9

“Juicing the trades” = squeezing suppliers for inventory on credit when the debtor knows insolvency is imminent and payment isn’t coming. Repercussions for debtor: -misrepresentation/fraud (report on 170) -supplier opposing discharge -director liability: authorizing purchases knowing insolvency was imminent/fiduciary duty breach -supplier could sue director personally

Answer 10

There would be a recommendation for specific gambling counselling. Should gambling have been a contributing factor for his bankruptcy, he may have committed an offence (s.173). Trustee will disclose this on s170 report and oppose to discharge. It may be that he is submitted for examination under oath.

Answer 11

He will need to make a voluntary fee arrangement but fees are usually less than minimum payments he now makes on his credit cards. Should have surplus income over the course of the bankruptcy, the BAP agreement would be void and he will have to pay in accordance with “surplus income guidelines” and his bankruptcy term may be extended.

Answer 12

-Return books and records to directors or other interested parties -if you have a waiver from the directors, destroy the books and records -send out 30 day notice advising director of corp or bankrupt to take back any books and records or trustee will dispose of them -Trustee to retain records for at least 4 years per Cairp standards of practice. -trustee to retain records for 6 years from date of last fiscal year end to comply with ITA requirements -retention period should be extended where investigation or litigation. BIA does not provide guidance to Receivers on this matter. Receiver is not obligated to store records unless indemnified for storage costs and retrieval costs (get a retainer). Usually secured creditor pays but if they indicate they don’t want to then Receiver also isn’t required to. But remember 4 years for Cairp standards of practice and 6 years from last year end for ITA.

Answer 13

-debts exceed $5M -proposal has not been filed -period in which to file proposal has not been terminated (30 days; extensions of 45 days not exceeding 6m)

Answer 14

Investigative arms of a regulatory body can’t be stayed. Enforcement of fines can be stayed. Apply to court to stay any charges - demonstrate that a viable proposal is not possible without a stay. Contact the minister and let them know the company is insolvent and may be restructuring. Should it file a bankruptcy, the company will cease operations which will render the issue dead. Stayed but non dischargeable, interest continues to accrue. *

Answer 15

If she converts the policy while insolvent or in contemplation of bankruptcy, that can be seen as: -Defeating or delaying creditors -A reviewable transaction or even an offence under the BIA Especially if: -The policy already has a large CSV -The conversion happens right before filing CSV is exempt if beneficiary is parent, spouse, child or grandchild (lineal family class even though spouse isn't lineal). If the beneficiary is not a protected class, then the CSV is non-exempt and realizable by the Trustee. Once converted, the CSV disappears and it becomes an income stream Converting to annuity can trigger: -Attack s.95 (transfers at undervalue) -Offence allegation if intent is clear enough; report on s170 report -Opposition of discharge I would also assess whether an alternative insolvency proceeding, such as a consumer proposal, may allow for retention of the policy while still treating creditors fairly.

Answer 16

-per BIA definition of related, he’s not a related party to me so no true conflict -there would be a perceived conflict of interest -my independence could be questioned by stakeholders -should I accept this as a formal engagement, I’d need to disclose the conflict at the time of filing (EIS) and at the FMOC -I would disclose the conflict in the interest of transparency and to uphold public confidence in the system -I would let my neighbor know about my role in a formal engagement; court officer: working for the general benefit of the creditors; not working for him.

Answer 17

-I cannot advise how to structure the transaction that would prefer him and the other directors over the interests of the creditors as this is the specific function of a lawyer -However, I can provide information about the consequences of any action that he might take in an attempt to reduce his liability like paying off the director’s liability which would constitute to a preference under s.95 of the BIA. -I could also assist in the filing of a proposal or a CCAA plan that attempts to carve out his personal liabilities and limit directors exposure – clause for the compromise of personal liabilities; directors’ charge.

Answer 18

-Individuals cannot seek initial orders for a CCAA, it can only be for corporations -debt load has to be atleast $5M -we need director’s resolution authorizing the filing of the application and admission of insolvency -Trustee consent to Act -weekly cash flow stmt (13 weeks) needs to be submitted -initial order will only provide 10 day stay -generally a comeback hearing schedule at the end of 10 days where further relief measures can be sought -stay is not automatic like in a NOI -initial stay is subject to court approval -if he’s doesn’t have a corporation then he’s not eligible for an initial order under the CCAA, but he can file an NOI to a Div I under the BIA or a bankruptcy if his business is no longer viable

Answer 19

-to prevent CRA enforcement or to stay the CRA -they could RTP the receivables or put a lien on the buildings -pre-filing wages need to be paid immediately upon court approval -post-filing wages need to be current as at court approval -source deductions (DT) to be paid within 6 months of court approval unless CRA consents to an extension

Answer 20

-Mr. Scott should retain legal counsel to assist him -Within 15 days of Notice of Disclaimer, he can appeal to court to dispute it -if Mr. Scott does not contest then lease is considered disclaimed -court consideration 1: whether significant hardship is being faced by the lessor -court consideration 2: debtor must prove that this increases likelihood of a viable proposal -the leasee’s prospective proposal must explain how the landlord’s unsecured claim will be handled [preferred claims are only for assets realized on premises/ for a proposal, usually no assets realized on premises therefore just a unsecured claim] -whether it’ll be for actual losses OR lesser of: -1 year rent after lease ends + 15% of remaining rent -3 years rent (notwithstanding lease ending) -no accelerated rent in a proposal -If proposal is rejected, then landlord can file a preferred claim for 3 months rent arrears (upto NRV of assets on the premises) and 3 months accelerated rent (if lease provides for it) -basically, landlord to file a preferred claim if proposal rejected. Otherwise, the proposal will state how landlord's unsecured claim will be handled, i.e actual losses or 1st year rent+15% or 3 years rent.

Answer 21

-If Mr. Scott files a personal insolvency, then this would be a TUV to a non-arms length party. -TUV is disposition of property for no consideration or consideration conspicuously less than FMV -If the transfer occurs within 12 months prior to his personal insolvency, then no intent (to defeat, defraud, delay) nor insolvency test would need to be met. -Trustee could apply to court for a judgement against the wife, or could apply to court to reverse the transfer or s.38 action to creditors -he must disclose this on his SOA -an offense would have been committed; report on s170 and oppose discharge. CRA could use ITA 160 as GST and source deductions is a Director’s Liability: -when a person transfers an asset to a non-arms length party at a time when they owe tax debt -CRA can raise an assessment against the wife for the lesser of tax debt or FMV of house and RRSPs. -Trustee should alert Mr. Scott of an assessment under ITA 160 -this provision is mostly for shareholders, but CRA can go after directors if they’re also shareholders. -ITA 160 not subject to a time limit.

Answer 22

-duty to report supersedes duty to confidentiality -report to OSB and Court that debtor intends to transfer assets and not let new Trustee know -the bankruptcy analyst at the OSB could follow up with the actual trustee to follow up to ensure debtor made full disclosure -deal with competitor Trustee with professional courtesy and advise him of the issue and that you’ve let OSB+court know. -review SOA later on when proposal is filed and let them know if transactions was not disclosed -if not, an offense (a. material omission and b. TUV) would have been committed; actual Trustee to report on s170 and oppose discharge. -if this is not a personal insolvency, then no offense has been committed but then let Scott know that CRA could use ITA 160.

Answer 23

Lazy People Love Emails Ignoring Instructions (from) Clueless PC Users Mainly. -change the LOCKS and notify the alarm/security company; have them list you as primary contact; maintain control of keys; only issue keys to authorized personnel. Post a notice of the appointment. -Identify PROPERTY goods (inform third party of appointment), 30 day supplier goods and segregate them from rest. -Notify LANDLORD of appointment, make arrangement for payment of occupation rent. *(extra)- meet with Management: announce appointment, explain impact, advise management of their duties, responsibilities and roles; discuss retention of employees; generally take control of operations. -Advise store's EMPLOYEES that bankruptcy has terminated their employment, make arrangements to retain any employees necessary to assist in Trustee's administration with a new contract. Need to file WEPPA; must register. In bky, employees auto terminated but in Receivership you have to terminate them. -Take detailed INVENTORY of store's assets, books and records. Whoever is in control of accounting, have them provide usernames and passwords. Export data if subscriptions will expire. * Obtain list and take possession of portable electronic devices -Determine if insurance is adequate (what does it cover and what are the deductible limits). Arrange continuation of INSURANCE coverage in Trustee's name, name Trustee as loss payee, or arrange new insurance. Determine if premiums are up to date. -Secure all CASH on premises, including customer cheques not yet deposited and deposit into separate estate trust account; Determine where company's bank accounts are; send notice of your appt, requesting them to wire funds to Trustee and for accounts to be closed. -Sell or dispose of PERISHABLE property (conservative measures before FMOC). -Ensure UTILITIES are not cut off if possible; contact by telephone, advise of appt, provide current meter reading, establish new account, follow up in writing to confirm all details. -Determine about incoming MAIL and consider redirection of mail. *(extra)-Notify customers with outstanding A/R via letter.

Answer 24

RECEIVERSHIP: -initiated by secured creditor -realize on secured assets for secured creditors -mgmt loses control only over secured assets -Receiver can decide if they want to continue to operate or shut down the business (see terms of court order to see if we have authority to operate, or apply to court if there’s a benefit in operating in order to get authority to operate) -no OSB levy -GST is DT BANKRUPTCY: -initiated by debtor -realize on all assets for all creditors -mgmt loses overall control of company -GST priority inverted -OSB levy

Answer 25

A Receiver’s Certificate secures the receiver’s costs (fees). Paid after from realizations. Certificate = “Cover my Costs” A Receiver’s Borrowing Charge secures new money advanced to fund the receivership. Lent by the bank usually. Priority. Used to run the business. Borrowing = “Bank Bucks to keep lights on”

Answer 26

GST refund cheques belong to the bankrupt, not the trustee by default. Rule 59. The trustee cannot automatically use GST refunds to pay costs or apply them against conditional orders. The only time the trustee can ask to use GST refunds is after: -all estate assets have been realized, and -all costs of administration have already been paid. -Even then, the trustee must ask the bankrupt for permission to use any remaining GST refund money for another purpose. -Until that permission is given, the bankrupt has the right to keep any remaining GST refund funds. Having the bankrupt sign an assignment of the GST refund is not in accordance with BIA general rules. *The GST refunds can only be used to pay the cost of estate administration, including the trustee’s fees, after the proceeds from all other estate assets have been applied first. *taking an exempt asset away from the bankrupt, whereas the trustee should know and make it clear to bankrupts that the funds are theirs to deal with is an ethical issue. Trustee has an obligation to obligations to fully inform debtors of their rights and responsibilities. **debtors should be advised, during the assessment stage, of their rights to the GST refunds, subject only to that portion of the refunds required to pay the cost of administration, which would include our fees, and that any other amount received over that will be returned to them

Answer 27

First of all, do a CONFLICT check. SIRRCL. Do I have the SKILLSET, resources to take on this engagement? Bank should provide INDEMNIFICATION for fees. Role is consultant (working for the bank) but we still need permissions from Hotel so that we may enter their premises and review their books and records to perform the engagement. Get an acknowledgement from the hotel in the engagement letter. This is to ensure access and limit liability (trespass). Engagement letter: SIFRT SOURCE AND SCOPE -identify who engagement is from (bank) -scope of services (reporting to bank) INVOLVEMENT -not managing or interfering with mgmt -indemnity from bank for acts properly undertaken within the engagement (e.g you suffer loss/costs then bank will cover) FEES -basis of calculation of remuneration -responsibility for fees RESPONSIBILITIES AND REPORTING -reporting expection, timeframe, frequency TERMINATION and ACKNOWLEDGEMENTS -acknowledgement from hotel to minimize trespass risk -provisions regarding termination/notice period by either party Hotel/debtor gets redacted report, certain info is intentionally blacked out due to confidentiality. Get an independent legal opinion on the validity and enforceability of the bank's security. Review financial statements of the Hotel, CF, historicals - determine if the business is viable. Are they in breach of any covenants with the bank? Review the personal guarantees, to what extent and are they enforceable/properly executed? A one-time settlement funded by relatives of the directors is acceptable where it represents new third-party funds, does not impair the bank’s priority (relatives don't issue it as a secured debt; offered more like a gift), and provides certainty of recovery compared to enforcement.

Answer 28

-Payment remaining in court will vest with the Trustee -Amount with creditor's solicitor is recoverable if solicitor acting independently. If they're an agent of the creditor then we can contest matter with court, court can determine. -Amount with creditor is not recoverable since execution is complete.

Answer 29

1. inform employer of the filing and Stay of proceedings 2. inform court, solicitor and creditor of stay of proceedings 3. take necessary steps to recover funds remaining in court 4. issue letter to creditor's solicitor demanding the return of funds

Answer 30

This is very early in the bankruptcy, and the only asset is a lawsuit. At this stage, I do not yet know whether the lawsuit has merit or what it is truly worth. As Trustee, I cannot sell assets before the First Meeting of Creditors unless the asset is perishable or rapidly depreciating, which a lawsuit is not. What I would do about the offer: Pause and gather information Ask the purchaser who they are and why they want to buy the lawsuit. Determine whether they are connected to the lawsuit (for example, the defendant trying to eliminate the claim). Ask how they arrived at the $1 million offer. Explain my legal constraints Advise the purchaser that I cannot accept the offer immediately due to the requirements of the BIA. Explain that any sale must be approved by the creditors (and inspectors, if any). Address the 10-day deadline Request an extension of the offer deadline. Explain that I need time to: hold the First Meeting of Creditors, and obtain direction on whether to sell. Move up the First Meeting of Creditors Schedule the FMOC as soon as possible. Present the offer to the creditors. Seek direction on: whether to sell the litigation, and whether to obtain a legal opinion on the strength and value of the claim. Proceed based on creditor direction If creditors support the sale, proceed with approvals (including inspectors and possibly court approval). If creditors prefer to pursue the claim, retain counsel and continue the litigation. Key Principle Throughout, I would act transparently and in the best interests of the creditors, ensuring confidence in the insolvency process. $1M offers certainty and avoids litigation risk, while pursuing the claim offers upside ($6M) but exposes the estate to delay, cost, and the risk of no recovery.

Answer 31

While the comments were made informally, they raise serious professional and ethical concerns. Once I learn my firm is considering acquiring his firm, I have a conflict of interest and material information relevant to the transaction. I would remove myself from the acquisition process, disclose the conflict internally to firm leadership, and ensure the information is handled through appropriate governance channels. Friendship and informal confidentiality cannot override my professional obligations or the integrity of the insolvency system. Consider each stakeholder: 1. OSB: -report to them -duty to report supersedes confidentiality -need to uphold good reputation of the association and serve public interest -uphold public confidence in the system 2. Firm Partners: -there's a conflict of interest -refrain from gossiping; disclose conflict through proper channel (governance) -disclose only conflict, not details -conflict: “I received informal information from a friend at the target firm that could create a conflict of interest. I should be excluded from all acquisition-related discussions.” -governance team can do further investigations and legal team to determine next steps on the transaction -remove yourself from acquisition discussions -talk to safety net like your lawyer on what to do -ask your lawyer if you'll be sued if the acquisition falls through because you told info gathered 'not in professional capacity' -the other firm could claim your disclosure caused financial loss; and that you provided unverified/defamatory remarks 3. Friend -don't tell him about potential acquisition -ask him what he's doing to fix the problems -is he part of the problem? -these facts will change how you ultimately act

Answer 32

The Receiver has no right to occupy the premises. Upon bankruptcy occurring (provided the lease has not been previously terminated), the Trustee is given the right pursuant to the AB Civil Enforcement Act to occupy the premises for up to 3 months/90 days. The Trustee may decide to enter into an arrangement whereby he allows the Receiver to occupy the premises pending a sale of the assets. The Trustee would be the party primarily liable for occupation rent and damage to the premises. Consequently, the Trustee must ensure that be is appropriately indemnified for occupancy charges and damages to the premises. A private receiver will have to pay ongoing rent while in occupation of the premises and will probably have to pay rent arrears unless he/she can negotiate another arrangement with the landlord.

Answer 33

I’ll need to conduct a conflict check to verify my independence with the Bank and with Corp. X. Let the Bank know that there’s a criteria to meet in order to appoint a Receiver: -Has an actual default occurred -Has the NOITES been issued and have the 10 days lapsed or did court waive timing requirement -Is security valid and enforceable – we need an independent legal opinion -Is a private appt appropriate for this kind of company? i.e is Corp X in my locality or is it international I would inquire if the bank provided the company with an appropriate opportunity to remedy any potential defaults before considering the Appointment i.e i) forbearance or ii) giving them a chance to find an alternate lender. Advise the bank that a better first step would be to engage us for a LOOK SEE and appt as Monitor. We would need an engagement letter that outlines scope, source, indemnity, reporting requirements, fees, termination/acknowledgments (SIFRT). If there’s a rumour that the company is insolvent then there’s a risk that they will file an NOI or proposal or CCAA (if debts exceed $5M) or assign themselves into Bankruptcy. If there is a concern that the company will dispose of assets, then consider an Interim Receiver Appt. In a court appt Receiver, I wouldn’t be working for the bank (like in a Private Receivership), it’d be for all secured creditors. The bank is pressuring me, but I will still need to take my time to evaluate the potential engagement. My role as a trustee is to maintain the integrity of the insolvency system; to be free of any influence that will impact my judgement and objectivity.

Answer 34

-I have an Associate Responsibility to my staff; I need to ensure they’re following the RPC Rules. Our employees are held to the same standard and code of ethics as we are. -Parents’ neighbors not related but there’s a perceived conflict -Look at internal training so my staff knows that we need to be independent; review ethics with staff; update procedure manual -administrator should’ve let me know about the family connection at the initial file review -administrator should have excused herself from the engagement and should’ve handed it to another administrator -I have a duty to uphold public confidence in the insolvency system -I have a duty to maintain integrity of the insolvency system; I cannot let any influence impair my professional judgement and objectivity -I would take the administrator off this file due to the conflict; implement safeguards so she doesn’t have access to file

Answer 35

This could be a TUV. Gave money to wife to renovate her house for no consideration. If within 12 months of filing then no need to prove insolvency nor intent. Wife is a related party per BIA. If within 5 years of filing then prove intent or insolvency. -see if wife will repay the amount back to the estate -or get a judgement against the wife for $45K -or section 38 the action to creditors -I would note s.173 fact (s.158 TUV) on s.170 report -I would oppose discharge -And recommend conditional discharge (for debtor to pay $45K)

Answer 36

-there’s an error in delaying the dividend to the creditor but we need to treat all creditors equally and can’t add a $50 bonus for our mistake -contact the creditor and explain that we must cancel the cheque and reissue the dividend without the extra $50 -we may need to file an amended dividend report -Review internal controls as 14 months is a long time -why wasn’t this caught on the bank reconciliations -bank reconciliation must be completed within 45 days of bank statement date -Trustee must advise OSB in writing of any outstanding errors that have not been corrected within 75 days of statement date -General account needs to reimburse the estate account and then the dividend can be reissued -The $50 is not estate funds and should not be added to the dividend so funds came out of estate account into general account and then he reversed it (after 14 months) so funds went back to estate account and out of general account plus extra $50 bonus? What should have happened for a correct reversal? -estate account was deprived of funds for 14 months, that's a compliance issue -the reversal must be clearly documented, attach bank records -reissue dividend from ESTATE account, not extra $50 -amend dividend report

Answer 37

-estate account was deprived of funds for 14 months, that's a compliance issue -the reversal must be clearly documented, attach bank records -reissue dividend from ESTATE account, not extra $50 -amend dividend report

Answer 38

*Aunt is not related per BIA definition But there’s a perceived conflict of interest *Even if I take on the engagement, I need to disclose perceived conflict at time of filing and at FMOC *I can be substituted out at the FMOC If aunt files proposal, mom is related party so she can’t vote FOR proposal, only against or abstain *Tell mom that you’d be an officer of the court, looking after interests of all creditors not just her *She would not get any info that hasn’t been provided to the other creditors as that would violate code of ethics *I have a duty to confidentiality unless required by law *Tell mom that you must be free of any influence, interest or relationship that impairs your professional judgement and objectivity *I would not take on the file as my independence would be questioned

Answer 39

-Discuss all available options per Assessment Directive. -do nothing; interest accrues and creditors can take action like seize bank account if they get a judgement; unlikely to garnish social assistance -negotiate directly with creditors as debt is minimal and small # of creditors; interest freeze or settle for a lesser amount -file bankruptcy through BAP; there’s a fee agreement, generally less than LIT office; they may use GST refunds to pay fees -9 months discharge in bankruptcy given no priors -proposal; if third party like family can assist -OPD (money mentors) -Young person, low debt load and is creditor proof so informal options may work better.

Answer 40

-this is misappropriation of trust funds -repayment does not negate the breach -take immediate protective actions: remove them from trust role secure trust account and review signing and cheque controls do a full review to check for any other irregularities -you cannot grant leniency for trust account violation -report to CAIRP since he's a CQP candidate -report matter to OSB and what is being done to resolve it -strengthen internal controls around cheque approval process -you have associative responsibility (CAIRP RPC) to your staff; a member who is associated with non-members in a professional practice shall be resposible to the Association for any failures of such associates to abide by the RPC.

Answer 41

-one of the possession taking initiatives of Receivership is to let employees know of appt, issue terminations, and retain the ones necessary to complete the Receivership (new employment contract) -CBA will cease to exist if the business is no longer a going concern -hold meeting with union, let them know about your appt and that you’re still contemplating running the business or shutting it down; give them timelines as to when decision will be made -If they have a CBA in place then you can apply to court to bargain if you’re operating the business -review CBA to determine how its terms will impact the Receivership -if you’re not operating the business then just let union know that soon the business will no longer be operational; employees will be terminated and CBA will cease to exist.

Answer 42

-conflict check; verify independence -review financial statements to see if company is viable -there’s been growth so that indicates viability -If bank issues NOITES, enforces on security or appoints Receiver then company will no longer be a going concern -Does Ms. Davis want to operate? If she does then she can file an NOI for the time being to stay the bank; -Project 1 and 2 can be disclaimed; send 30 day notice via registered mail; 15 days for other party to appeal to court; court factors: does disclaimer increase likelihood of a successful restructuring. -GST is only DT in a Receivership; bankruptcy inverts priority to unsecured. Unsecured in a proposal. -Source Deductions DT, rank ahead of bank. -going concern company worth more than idle company; would be good to finish project 3. -do cost benefit analysis to see if it’s worth it to dispute the project 4 deficiency claims. See if you can register a Builders’ Lien. Check with legal counsel. -Check how much of the AR is collectable, appraisal on equipment/tools. -put a clause in the proposal to compromise the PG; if bank accepts and proposal is court approved then bank is bound. -Div I cheaper than CCAA Director’s Liability: GST and source are DL; gst can be compromised in a proposal; RP cannot. Unpaid wages is also a DL. Informal -could also do a forbearance agreement with bank; to preserve relationship.

Answer 43

During NOI bank is stayed. Bank can apply to court to lift the stay. Once proposal is filed, and bank rejects it then they’re not bound by it and then they can enforce, no requirement for s.244 NOITES. source deductions would rank ahead of bank as they're deemed trust. Wages are super priority upto $2K (accrued in last 6 months) and they'd also rank ahead of bank. Bank can request updates/information from LIT

Answer 44

-ask for details of insurance policy and claim -there is an ability to offer lump sum payments to creditors to have them onside of the proposal

Answer 45

* Company appears to not be viable as she ceased operations over a year ago so no div I or CCAA discussion. * I would inquire about any assets the company owns; to determine if estate can fund the bankrutpcy * Costs minimum of $15K to put a company into bankruptcy; does the business have that to fund the bankruptcy? Perhaps in assets? * What did she do with the assets? Who, when, what and for how much was sold? to assess improper transactions like TUV and Preference * Ask for most recent financial statements * CRA has 2 year limitation period from resigning as director to assess director personally for GST or source deductions debt. * Can’t dissolve a company that has outstanding debts.

Answer 46

-Individuals cannot seek initial orders for a CCAA, it can only be for corporations -debt load has to be atleast $5M -we need director’s resolution authorizing the filing of the application and admission of insolvency -Trustee consent to Act -weekly cash flow stmt (13 weeks) needs to be submitted -initial order will only provide 10 day stay -generally a comeback hearing schedule at the end of 10 days where further relief measures can be sought -stay is not automatic like in a NOI -initial stay is subject to court approval -if he’s doesn’t have a corporation then he’s not eligible for an initial order under the CCAA, but he can file an NOI to a Div I under the BIA or a bankruptcy if his business is no longer viable

Answer 47

-to prevent CRA enforcement or to stay the CRA -they could RTP the receivables or put a lien on the buildings -pre-filing wages need to be paid immediately upon court approval -post-filing wages need to be current as at court approval -source deductions (DT) to be paid within 6 months of court approval unless CRA consents to an extension

Answer 48

-Mr. Scott should retain legal counsel to assist him -Within 15 days of Notice of Disclaimer, he can appeal to court to dispute it -if Mr. Scott does not contest then lease is considered disclaimed -court consideration 1: whether significant hardship is being faced by the lessor -court consideration 2: debtor must prove that this increases likelihood of a viable proposal -the leasee’s prospective proposal must explain how the landlord’s unsecured claim will be handled -whether it’ll be for actual losses OR lesser of: -1 year rent after lease ends + 15% of remaining rent -3 years rent (notwithstanding lease ending) -no accelerated rent in a proposal -If proposal is rejected, then landlord can file a preferred claim for 3 months rent arrears (upto NRV of assets on the premises) and 3 months accelerated rent (if lease provides for it) -basically, landlord to file a preferred claim if proposal rejected. Otherwise, the proposal will state how landlord's unsecured claim will be handled, i.e actual losses or 1st year rent+15% or 3 years rent.

Answer 49

-If Mr. Scott files a personal insolvency, then this would be a TUV to a non-arms length party. -TUV is disposition of property for no consideration or consideration conspicuously less than FMV -If the transfer occurs within 12 months prior to his personal insolvency, then no intent (to defeat, defraud, delay) nor insolvency test would need to be met. -Trustee could apply to court for a judgement against the wife, or could apply to court to reverse the transfer or s.38 action to creditors -he must disclose this on his SOA -an offense would have been committed; report on s170 and oppose discharge. CRA could use ITA 160 as GST and source deductions is a Director’s Liability: -when a person transfers an asset to a non-arms length party at a time when they owe tax debt -CRA can raise an assessment against the wife for the lesser of tax debt or FMV of house and RRSPs. -Trustee should alert Mr. Scott of an assessment under ITA 160 -this provision is mostly for shareholders, but CRA can go after directors if they’re also shareholders. -ITA 160 not subject to a time limit.

Answer 50

-duty to report supersedes duty to confidentiality -report to OSB and Court that debtor intends to transfer assets and not let new Trustee know -the bankruptcy analyst at the OSB could follow up with the actual trustee to follow up to ensure debtor made full disclosure -deal with competitor Trustee with professional courtesy and advise him of the issue and that you’ve let OSB+court know. -review SOA later on when proposal is filed and let them know if transactions was not disclosed -if not, an offense (a. material omission and b. TUV) would have been committed; actual Trustee to report on s170 and oppose discharge. -if this is not a personal insolvency, then no offense has been committed but then let Scott know that CRA could use ITA 160.

Answer 51

-per BIA definition of related, he’s not a related party to me so no true conflict -there would be a perceived conflict of interest -my independence could be questioned by stakeholders -should I accept this as a formal engagement, I’d need to disclose the conflict at the time of filing (EIS) and at the FMOC -I would disclose the conflict in the interest of transparency and to uphold public confidence in the system -I would let my neighbor know about my role in a formal engagement; court officer: working for the general benefit of the creditors; not working for him.

Answer 52

-I cannot advise how to structure the transaction that would prefer him and the other directors over the interests of the creditors as this is the specific function of a lawyer -However, I can provide information about the consequences of any action that he might take in an attempt to reduce his liability like paying off the director’s liability which would constitute to a preference under s.95 of the BIA. -I could also assist in the filing of a proposal or a CCAA plan that attempts to carve out his personal liabilities and limit directors exposure – clause for the compromise of personal liabilities; directors’ liabilities (GST can be but RP cannot be)

Answer 53

I would first do a conflict check on the bank. Ensure there’s no statutory prohibition (DERAT) from acting and to verify my independence. I would suggest to the bank to retain my firm as consultant so we can perform a look-see on the Winery company. Get permissions from Winery to review books and records, access to premises and being able to report back to Bank (engagement letter). Figure out reason for financial difficulties; competitor taken market share? Bad management? Unpredictable event like cold snap that destroyed the crop? Do owners want to operate or no? Is the company insolvent? Get legal opinion of validity and enforceability of bank’s security. Is there any equity in the property? If yes, then bank can extend that 250K as a secured loan. Assess the bank’s security position; environmental cleanup charge by crown rank ahead of all creditors; 30 goods supplier claims are super priority; source deductions (DT), wages (super priority). Review lease agreement to see if there’s an actual lease. See if the lease has any value. If bank is worried about dissipating assets, they can get a court order for an Interim Receiver. MOC – 3 capacities: monitoring; observational and conservatory capacity. Bank’s options: Informal: -advance the funds principals are requesting given past relationship (do a forbearance agreement and put a clause in there require company to report frequently) -issue NOITES, allow 10 day period before enforcing on security Company is insolvent: -court appointment Receivership; court order may provide stay against trade suppliers; costly; GST is DT so ranks ahead of bank; WEPP available for unpaid wages; need to issue NOITES and wait 10 days before court appt; no right to occupy landlord premises like in a bankruptcy (landlord can terminate Receiver) -private Receivership, fees (but less expensive that court-appointed Receiver); no stay -file application for bankruptcy order; delayed process, value of security could erode; OSB levy so less net realization to bank; WEPP available for unpaid wages; Trustee allowed to remain on premises for upto 90 days while paying occupancy rent. Business is viable and owners want to keep operating: -petition company into CCAA (if corp’s debts are atleast $5M) -ask the company to file an NOI and then a proposal or CCAA if company is viable; provide Interim financing or DIP lending secured by a charge from court; debtor driven so bank has less control; Consider environmental risks; get phase 1 (qualitative) to get information; inquire with management regarding environmental damage. Receiver not liable for pre and post appt environmental liabilities.

Answer 54

13.5(1.1) A trustee shall act honestly and in good faith and shall exercise the care, diligence and skill of a reasonably prudent person in order to maintain the confidence of the public in the bankruptcy and insolvency system.

Answer 55

-counselling sessions are not a requirement in a div I proposal -trustee has a duty to serve the public interest/confidence and reduce repeat filings so can let debtor know the sessions are free/informative and send him the OSB module content link -review proposal to see if there’s a clause to attend counselling sessions -if there is, then the debtor is in default; need to check if inspectors (if appointed) will waive the default

Answer 56

* The debtor has failed to provide complete information at the examination so that is a breach of his s.158 duty and an offence under s.173 so report on 170 report o Hold meeting with debtor; let debtor know he’s not eligible for an automatic discharge; attempt to get more info out of the debtor regarding the funds o Investigate nature of this $50K; is it an inheritance? Was he under reporting his income? Is it a lawsuit settlement for pain and suffering (exempt). There may be additional conduct issues to include in your 170 report o Inquire with the debtor which bank it is * We need to maximize the value for creditors/estate so need to collect on this $50K as it’s non-exempt. * Call the bank, follow up with appointment letter and demand letter for them to wire the funds to you * If no cooperation, then engage legal counsel to apply for court order but that’ll be delayed so the funds could dissipate * The funds don’t vest with the estate until the Trustee intervenes/acts. * If debtor doesn’t provide those funds right away, then that’ll constitute an offence which you’ll need to report on the s.170 report; the Trustee would need to oppose discharge and recommend a conditional discharge (the condition being the $50K be provided to the estate for the benefit of the creditors) * May need to convert the estate from summary to ordinary due to complexity/anticipated legal costs; let OSB know immediately if realizations exceed $15K

Answer 57

* Within 10 days of NOI, ABC must file CF. If the CF has been filed and you’re asking for an extension then you need to resubmit an amended CF (prepared by debtor company). * CF must accompany debtor’s report; debtor co also needs to sign off on CF; * Trustee needs to review CF and assumptions; Trustee needs to file report on reasonable of CF * CF must be on monthly basis or at least up to court approval * It’s weekly in a CCAA * Request extensions to file proposal in 45 day increments up to 6 months (or initial 30 days plus 5 months is the max) * If debtor requires an extension to file a proposal, then Trustee must file a report with court, supporting an extension.

Answer 58

1. if Trustee files a supportive report/affidavit 2. does granting the extension enhance viability of proposal 3. whether or not granting the extension would prejudice any party 4. is the debtor acting in good faith and due diligence 5. is it likely that a successful proposal will be filed

Answer 59

* The company is not allowed to sell assets outside the ordinary course of business without court approval * Call attorney and ask to briefly adjourn the hearing (even if for an hour or so) – provide them the professional courtesy that a issue has been raised. * The info has not been verified yet and we must use our professional judgement * We’re an officer of the court and our report is accepted as evidence unless other proved * The Trustee is going to have to amend their report (or deliver it verbally given the timing) and bring the matter to court attention o State that the company is selling assets outside ordinary course of business without court approval o The debtor is potentially not acting in good faith * Based on this info, the court may: o Grant the extension IF debtor can prove allegations are false o Not grant the extension and terminate the period in which to file the proposal – in this case company would be deemed bankrupt o Appoint an Interim Receiver to protect estate and ensure assets aren’t dissipated. Interim Receiver is limited to 3 capacities (MOC; monitoring, observational and conservatory)

Answer 60

* The primary consideration is whether there is a real or perceived conflict of interest. While the individual is not an employee of my firm, they are employed by a third-party counselling agency that my firm uses, which creates an associative relationship. This could give rise to a perception that the debtor is being favoured, particularly by creditors. * That said, this would not constitute a true conflict of interest, as there is no direct employment, ownership, or financial interest between my firm and the individual debtor. * To mitigate the perceived conflict, I would ensure: * Full disclosure on the EIS, at the time of filing, and again at the First Meeting of Creditors (FMOC) if one is held * Transparency so creditors are aware of the relationship * Recognition that creditors retain the right, by special resolution (¾ in value and a majority in number), to substitute the Trustee if they are uncomfortable with the appointment * Pursuant to section 13.3(1) of the Bankruptcy and Insolvency Act, a consumer proposal may only be filed by a Licensed Insolvency Trustee acting for the debtor, which remains satisfied in this case. Conclusion; would you take this file?: * I would be prepared to take the file, as there is no actual conflict, provided that proper disclosures are made and independence is preserved.

Answer 61

* I would not enter into any arrangement where referrals are offered in exchange for reduced consumer proposal payments. * Such an arrangement would: * Violate the CAIRP Rules of Professional Conduct, including the duty to: o Uphold the reputation of the profession o Act with integrity, objectivity, and due care o don’t let any influence, interest or relationship compromise your judgement and objectivity. o don’t pay or receive commissions directly or indirectly for referrals o Trustee has an associative responsibility for those that work under us and are non-members. * Undermine Trustee independence, particularly where the individual is a referral source * Be unethical, as proposal terms must be based on the debtor’s financial circumstances, not external benefits * Additionally, consumer proposal terms are ultimately determined by creditors, requiring a majority in dollar value and a majority in number. A Trustee cannot manipulate payments to secure personal or firm benefit.

Answer 62

* The concerns are more significant in a bankruptcy context. In bankruptcy: o The debtor must submit monthly income and expense statements o Payments are determined by surplus income rules o If the individual receives commissions or bonuses based on referral volume, their income may fluctuate depending on file volume * This creates a serious independence concern, as the debtor could: o Delay or accelerate referrals to influence their income o Artificially suppress surplus income obligations * This would compromise my ability to administer the estate objectively and could reasonably be viewed as impairing my independence. Conclusion: * In the case of a bankruptcy, I would not accept the appointment, as the independence concerns rise to a level that cannot be adequately mitigated through disclosure alone.

Answer 63

If an insolvent person: * Fails to comply with the requirements after filing an NOI, or * Fails to file a proposal within 30 days of the NOI, or * Fails to file a proposal within an approved court extension then the following happens: 1. Automatic assignment o On the expiry of the 30-day period or any extension, the debtor is deemed to have made an assignment in bankruptcy. 2. Trustee’s obligation o The Trustee must immediately file a report of the deemed assignment with the Official Receiver, in the prescribed form. 3. Official Receiver’s role o The Official Receiver issues a Certificate of Assignment, which has the same legal effect as a voluntary assignment under s. 49. 4. Meeting of creditors o Within 5 days after the Certificate of Assignment is issued, the Trustee must:  Send notice of a meeting of creditors under s. 102, where creditors may, by ordinary resolution:  Confirm the Trustee’s appointment, or  Appoint another Licensed Insolvency Trustee in their place.

Answer 64

I would first do a conflict check to verify my independence. I would let Mr. Reed know that I can provide general information but if he’s looking for specific information then he’d have to engage me as a Consultant and they’d have to sign an engagement letter together. Here’s what I would tell Mr. Reed about the legal Hypothecs: -Yes, Builders’ are able to register liens if they’ve improved the property and they’re not compensated for the work done. -We need to examine the legal Hypothec documents and seek legal counsel to determine if they’re valid, properly registered. -If the charges are properly registered, then the Builders’ are considered a secured creditor. -The Builder Hypothecs may rank ahead of the bank’s hypothec, causing concern to the bank and then the bank may demand the entire loan at once or issue a NOITES. 1-He can enter into a forbearance agreement with the bank to satisfy them until busy season starts. 2-I would ask Mr. Reed why he didn’t pay the $1.5M. Determine if there was a deficiency in the work completed by the Builders or if they didn’t fulfill their contract fully. If he can pay the $1.5M then this would diffuse the situation and the builder’s would voluntarily discharge the Builders’ liens. 3-We could also look at negotiating with the Builder’s, providing them some sort of compensation to voluntarily discharge the Builders’ liens. 4-I would also determine value of lodge and inn (appraisal), and see if there’s any equity; if there is then I would contact an asset based lender to lend funds to pay off the Builders’. Renovations would have improved the value.

Answer 65

Informal: Enter into a forbearance with the bank. This will help preserve the relationship. Formal: -First step would be to determine if the business is viable and whether Mr. Reed wants to run operations. 1-File an NOI to temporarily stay everyone (even the secured creditors), then file a subsequent Div I proposal or flip it into a CCAA (if proposal hasn’t been filed and CF statement period (10 days from NOI) hasn’t passed; and debts exceed $5M). Two types of proposals; liquidating or restructuring (if he intends to carry on business & business is viable). He should talk to the bank first and not surprise them with an insolvency because banks don’t like to be surprised; they’re his largest secured creditor and he’d need their support to keep operations going. 2-File an assignment into bankruptcy (Trustee is under no obligation to run the business) 3-Consent to a Receivership

Answer 66

-There’s a perceived conflict of interest; Big Bank being your firm’s major client compromises your independence. -Let Mr. Reed know that Big Bank is your firm’s major client. Disclose the relationship to Mr. Reed. -this would allow him to decide -Reassure him that you would not share any confidential information with them. -Trustee has a duty to confidentiality, cannot give away information unless required to do so by law; or party to which info relates to has granted permission to disclose

Answer 67

-No, at this point I wouldn’t speak to Big Bank re the situation with IDEAL SKI INC and my conversations with Mr. Reed -should Big Bank approach me to do a look-see or Receivership, I would disclose that I met with Mr. Reed but would not share specifics re my discussion with Mr. Reed as that is confidential information. -I would let them know that I have an ethical duty as a Trustee to confidentiality, and unless Mr. Reed had consented to a waiver, I cannot disclose it to the bank. -CAIRP RPC: “A member shall protect and not disclose any confidential information concerning any professional engagement, unless required to do so by law”

Answer 68

-I would lay out the options for Mr. Reed, including pros and cons for each option. -CAIRP RPC – “Members shall accord to any other member the courtesy and consideration due between professional colleagues.” -The brother is an LIT and you should treat each other with professional courtesy. -I would let Mr. Reed know that if he engages me as his Trustee, I will have a duty to look after interests of all parties involved including creditors, court and debtor; not jut look after the personal interest of Mr. Reed as his brother in law is doing which is why Victor’s recommendations are differing. -discuss requirements for court to grant an initial order: company debts at least $5M, it’s a corporation and not an individual, the stay would provide a greater likelihood of a successful restructuring, no party is being prejudiced by the Stay. 10 day stay initially and extension up to court discretion. Need BOD resolution.

Answer 69

In the proposal, we could put a clause compromising Mr. Reed’s personal liability, if the secured creditor accepts it then they’re bound by the clause. Court approval of proposal is also required.

Answer 70

-CBA can’t be terminated with a filing. -Currently, a CBA has not been reached. -Let the employees know that the company is insolvent and there isn’t any likelihood for them to meet the union’s demands -For now, let employees know of imminent insolvency and let them know how their claims rank and that in a proposal: pre-filing wages need to be paid immediately upon court approval, post-filing wages need to be current as at court approval, source deductions (DT) needs to be paid within 6 months of court approval unless court consents to extension. Make them feel respected as stakeholders. -if the CBA is already in affect, the Trustee can negotiate the bargaining agreement with the help of legal counsel. If court is satisfied, a notice to bargain can be issued but a proposal cannot force a change. -In a bankruptcy scenario, CBA seizes as the company is no longer a going-concern

Answer 71

Mr. Reed had given shares of the company to 62 employees, so the 62 employees collectively hold 10% of the shares of ideal. Minister of Financial markets says this is a public company so IDEAL must provide financial statements to the SH and file quarterly reports. Minister is investigating the situation and wants to press charges. -The filing can’t stay the investigative wing of a regulatory body. -It can stay them from enforcing fines. -We could apply to court to stay the charges. -Let the minister know of the imminent insolvency, so they don’t bother with pressing charges as in a bankruptcy, the company will cease operations rendering the issue dead. -we could also consider just filing the reports (cost benefit analysis)

Answer 72

A builders’ hypothec is a civil law security interest arising by operation of law in Québec, whereas a builders’ lien is a statutory right in common law provinces that only arises upon registration on title.

Answer 73

* I would need to ensure the horse has adequate insurance that covers injuries for such races. * If there’s no inspectors and there’s no time to call a FMOC before the race, Trustee has the right to continue operations until FMOC * Professional horse racing could meet the definition of a business. * Since there’s no inspectors, I could get the opinion of the major creditors and/or another horse trader.

Answer 74

Clearly insolvent, assets

Answer 75

Security by possession under the PPSA does not override prior registered interests unless: • The statute explicitly gives super-priority (like repairer’s liens) Storage liens generally do not.

Answer 76

* If the consultation was done within 60 days of filing for a formal proceeding then the consultation fee needs to be deposited into the estate account per BIA. * The Trustee has a responsibility to safeguard trust funds and estate assets; even small amounts not accounted for can lead to liability. * Immediately transfer $200 from GENERAL ACCOUNT to ESTATE TRUST ACCOUNT. * Investigate: which day were funds paid; method of payment (cash or cheque or e transfer); do we have any supporting documents (photocopy of cheque, bank deposit record, receipt); look in the safe, review bank statements to see when it was deposited. * Update internal procedures/policies; segregation of duties; clear procedures for handling consultation funds; ideally deposit same day into bank * Self report the situation to the OSB and advise what is being done to resolve

Answer 77

* report on preliminary report, EIS, on SRD as footnote; * ensure third party funds are not from debtor’s own resources; have a written third party agreement. * Deposit into separate trust account

Answer 78

RRSP’s are exempt per the AB Civil Enforcement Act; exempt property does not vest with the Trustee We can’t apply exempt property against surplus income owed (unless we get court approval) If surplus income owing is the only outstanding duty then we can apply for mediation; if there’s additional outstanding duties then report on 170 report, oppose discharge and apply to court for discharge hearing. (recommend conditional discharge: request that these funds be used to pay the outstanding surplus payments.) Investigate further; obtain RRSP statement; bank may have improperly liquidated an exempt RRSP and remitted the proceeds to the estate. As a result, the Trustee is holding funds to which the estate is not entitled. We need to comply with BIA; administration would be improper if we used the exempt asset to offset surplus income payment; We could also seek court direction on this matter. Trustee’s are officers of the court; duty to debtor and creditors; Per CAIRP RPC; must maintain the integrity of the insolvency system and uphold good reputation of the Association. Per BIA, we need to uphold public confidence in the system * Arrange for the immediate return of the $5,500 to the bankrupt (or directly to the RRSP issuer if appropriate). * Ensure the transaction is fully documented on the estate file, including: * the bank’s error, * the corrective action taken, and * confirmation of repayment.

Answer 79

* Under OSB Banking Directive, Trustees must maintain complete and accurate trust records, including interest allocation. * Interest earned in a consolidated trust account must be allocated to the estates whose funds generated the interest * Credit the appropriate interest amounts to each estate ledger. * Update internal policies and procedures so interest is being allocated properly; monthly bank rec’s within 45 days of statement date; that would’ve prevented this issue * Advise OSB of situation and what actions are being taken to rectify * For the closed SA estates; see if the interest is material * Guidelines for materiality; o For 1 creditor - distribute if funds exceed $5 o For 2-5 creditors – distribute if funds exceed $50 o For 5+ - distribute if average dividend will exceed $10 * If funds are material; amend SRD and dividend sheet; issue dividend * If funds not material; then remit to OSB

Answer 80

* Trust funds must be deposited immediately or no later than next business day; he shouldn’t wait till end of month. * Should not hold “general trust funds” in a transfer account; that would be commingling of trust funds. Transfer account shouldn’t have any money left in the end if all funds are properly transferred to the appropriate estate trust account. * Delaying deposits means interest is not being earned from the trust funds; the interest earned should be allocated to the individual estates * Transfer account shouldn’t have any money left in the end if all funds are properly transferred to the appropriate estate trust account. * Report this to the OSB and let them know what you’ll be doing to correct the issue * Handle trust funds in accordance with the BIA * Do a bank rec within 45 days of bank statement date for the transfer account Receipts: Client → satellite office → deposited in NWT local bank → transferred to main Bank A in Edmonton Disbursements Bank A in Edmonton → transfer account → NWT local bank

Answer 81

* Conduct a conflict check on ABC Co, D&O of ABC Co and Bank; to verify independence. * For the PG’s he would need to file a personal insolvency (bankruptcy or proposal) and to stop the legal action * Initial things to do: o Ask for financial statements to assess viability of company/is it solvent o Get legal opinion on validity and enforceability of security * That large shipment could qualify for a 30 day goods claim (super priority; paid ahead of secured creditors). Supplier needs to file a valid POC within 15 days of initial bankruptcy event; the goods were delivered within the 30 days preceding the bankruptcy or receivership * Right to repossess if: 1. In possession of Trustee or Receiver 2. Identifiable 3. Same state as delivery 4. Not fully paid for 5. Has not been party of an arm’s length sale * I’m an officer of the court; looking after debtor and creditors; I cannot advise him to delay filing to favor one creditor; I would refer him to talk to legal counsel regarding how to minimize personal exposure. * Obtaining inventory right before insolvency; could be a director’s liability; supplier could sue him personally for breach of fiduciary duty

Answer 82

* Trustee could attack that as a TUV (transfer under value) per section 96 of the BIA; if no consideration or consideration conspicuously less than FMV. * Wife is a related party per BIA definition of related. * If transfer was within 12 months of initial bankruptcy event then no need to prove insolvency nor intent. * If transfer was within 5 years of initial bankruptcy event, then need to prove either insolvency or intent. * Trustee could ask court to reverse the transfer or obtain court order for judgement against wife. * If transfer outside of 5 year period then we could use statute of Elizabeth to attack it. * CRA could go after wife per ITA 160; If you transfer an asset at a time that you owe tax debt then the CRA can assess the beneficiary for the lesser of the FMV of the asset or tax debt owed. There’s no time limitation for CRA to do this. Just let debtor know of this.

Answer 83

Initially when he came in, you could have also suggested a proposal in which all or a portion of the inheritance could be used as a lump sum to entice creditors to accept proposal. Do a BIA search; see which Trustee he filed with; obtain SOA from OSB to review if transaction was reported; offer professional courtesy to the Trustee and let them know of concerns; also inform the OSB of the misconduct. New Trustee could have the bankrupt examined. The new Trustee would need to put executor on notice, obtain copy of will, demand funds from bankrupt; report facts (material omission) on s.170 report and oppose discharge; Trustee could recommend a conditional discharge (condition being he pays the entire inheritance into the estate);

Answer 84

* Trustee has duty to maximize value for estate * Appraisal was done prior to appointment; if circumstances (lawsuits eroding value) have changed since then, then conduct new appraisal reflecting litigation risk * If FMOC hasn’t been held then there’s no inspectors appointed whom you can seek direction from; in this case you can reach out to major creditors to get their opinion; disclose offer and litigation risk * See if there’s a deadline to accept the offer * Consult legal counsel to check likelihood that the plaintiff’s will win the case/potential outcomes * Get court direction; It’s a OA so will need court approval * Canvass the market; see if there are other buyers * Use this $1.1 million as a baseline for a stalking horse bid

Answer 85

The partner is a non-arm’s length party Need court approval for sale. There’s enhanced scrutiny for sale to non-arm’s length party Court factors: whether sales process is reasonable, trustee’s opinion, trustee report, extend to which creditors were consulted, effect on stakeholders, if consideration is fair, whether good faith efforts were made to sell to unrelated (are these court factors for proposals)

Answer 86

(b) if appointed by the creditors, file with the court a copy of the minutes of the meeting signed by the chair; (c) notify the Superintendent of his appointment; (d) if required by the inspectors, register a notice of the appointment in the land register of any land titles or registry office where the assignment or bankruptcy order has been registered; and (e) as soon as funds are available, pay to the former trustee his remuneration and disbursements as approved by the court.

Answer 87

The partner is a non-arm’s length party Need inspector and court approval for sale. There’s enhanced scrutiny for sale to non-arm’s length party.

Answer 88

* Do not proceed with the dividend simply because notice was already sent * You must first deal with the new claim in accordance with the BIA claims process. * Review claim; is it properly done; is it a provable claim * Amend R&D and dividend sheet; reissue to all creditors if claim is valid; Let creditors know of delay and why * If claim is not valid, issue Notice of Disallowance – The creditor retains the right to appeal the disallowance so wait 30 days before issuing dividend

Answer 89

* Send an amended final R&D and dividend sheet with the proper notice and issue the funds to the various parties * Yes o Prepare amended R&D, final invoice, call inspector meeting and get approval, send amended R&D for comments, tax new account, send out revised notice, wait issue funds proceed to discharge

Answer 90

Authority * As a court-appointed Receiver and Manager, my authority comes from the court order and the BIA. Landlord * I would consider whether continued occupation is necessary. * When considering continued occupation, I would take into account whether management is on board, the instructing party’s wishes, my role as an officer of the court, and any Crown claims. * If management is not on board, this would likely leave me with very limited options. * Need to determine amount of unremitted source deductions to assess whether it’s worthwhile to occupy and realize on assets; RP comes before bank’s security as its DT. If there’s a large crown claim then receiver may cease operations and do a controlled liquidation. * I do not have the right to retain the lease as in a bankruptcy unless the court order specifically provides for it. * The landlord may terminate the lease, sue for arrears, exercise distraint, or negotiate occupational rent with me. * The Receiver is not responsible for pre-appointment rent, it’ll be a preferred claim (s.136) but if I want to occupy then I will probably need to pay arrears unless I can negotiate another arrangement with the landlord. * Occupational rent is charged to the receivership, not to the debtor. * Occupational rent is a personal liability of the Receiver. * Steps to take possession include: changing the locks, notifying the alarm company, negotiating occupational rent with the landlord, and posting a notice on the premises indicating the receivership. * I would advise the landlord that they may file a preferred claim for three months’ rent arrears and three months’ accelerated rent, if provided for in the lease, less any occupational rent received, payable up to the net realizable value of the assets on the premises. Supplier * A 30-day supplier claim also applies in a receivership, similar to a bankruptcy, and I would ask the supplier to complete a Proof of Claim. * A 30-day supplier has a right of repossession if: o the goods were delivered within the 30 days preceding bankruptcy, and o a Proof of Claim is filed within 15 days of bankruptcy. * If the test is met, I would release the goods to the supplier, provided that the goods are: 1. Identifiable 2. Not fully paid for 3. In the same state as when delivered 4. Not subject to an arm’s-length sale * I would advise the supplier that post-appointment deliveries, if approved by me, may be paid in the ordinary course as receivership expenses. Bankruptcy may be necessary to invert GST priority to unsecured.

Answer 91

1. Court imposed fines and penalties 2. Alimony and child support 3. Debts arising from fraud or misrepresentation or embezzlement 4. Student loans (within 7 years) 5. Intential bodily harm, sexual assault, wrongful death 6. Undisclosed debts

Answer 92

Liquidating proposal: * Controlled winddown * Higher recovery for creditors * Lower Trustee fees * Preserve tax losses and director reputation * Can compromise DL in a proposal except unpaid source deductions * You can complete contracts; it avoids the automatic termination triggered by the bankruptcy * More likelihood of collecting Receivables * Sale of inventory overtime; bankruptcy can force rapid liquidation

Answer 93

1. -issue NOITES, wait 10 days before appointing Receiver (debtor or court can waive 10 day requirement) 2. -did the bank provide the company with appropriate opportunity to remedy the default i) forbearance ii) alternate lender 3. -legal opinion on validity and enforceability of the security 4. -is private Receivership appropriate? Is Corp X in my locality or international -I would advise the bank that a better first step would be to engage us in a LOOKSEE; we would need an engagement letter (SIFRT) -is there a risk that assets are being dissipating? Then interim Receivership is appropriate. -In a court appt Receiver, I wouldn’t be working for the bank; it’d be for all creditors.

Answer 94

-when it's unclear, facts are missing -when bank is considering advancing new money (they need to know if it's safe) -when business might still be viable, like potential for a high Receivables balance to come in -before issuing NOITES -when bank has a good working relationship with borrow; no evidence of defaults -when bank wants to confirm it's security position without going full enforcement

Answer 95

-breach of s. 158 duty and s.173 offence -report on 170 -oppose discharge -let debtor know they’re not eligible for automatic discharge

Answer 96

Trustee must intervene in order to acquire after-acquired assets. S.67(1)(c) and S.99

Answer 97

Garnishee proceeding would cease. -Payment remaining in Court will vest with the Trustee; execution not complete. -amount paid to creditor is non-recoverable as execution is complete. -amount with creditor’s solicitor depends; -if solicitor is agent of creditor then non-recoverable -but if agent is third-party then amount is recoverable Do funds go to Trustee or debtor? Debtor entitled to return of funds if he has no surplus income. *this answer is only applicable provided that Garnishee was not for child support or alimony

Answer 98

In an SA, a creditor’s meeting will only be called if requested by OR, Trustee or 25% value of creditors. In an OA, there has to be an FMOC within 21 days of bankruptcy.

Answer 99

-see if there’s Intent, Subject, Object (ISO) to make case for a trust -if not, then Trustee will ask for funds and oppose discharge if she refuses to hand them over

Answer 100

-If he’s not a creditor, no reason for Trustee to send him notice of the bankruptcy. -If we choose to register on title of the house for the one-half interest, then he’ll learn of the bankruptcy. -Otherwise, practically, Mary doesn’t have to tell him.

Answer 101

-Releases the bankrupt from all claims provable in bankruptcy. -A discharge only releases the bankrupt, not the guarantor. Bank can still demand loan from guarantor.

Answer 102

-return the card -obtain permission from Amex to use it -tell him to ask his employer to get a company card for him and their permission in writing for him to use it

Answer 103

* Full disclose of all debts and assets. * They’ll need to share the dividend. * Paying them back can be attacked as a preference. Non-arm’s length party within 12 months of initial bankruptcy event.

Answer 104

* Security not properly registered * Disallow secured claim

Answer 105

* Security not properly registered * Disallow secured claim If bank appeals then negotiate a 50/50 settlement.

Answer 106

No, car only exempt up to $5K. Get debtor to arrange for friends to provide $1K so he can redeem the non-exempt equity. Follow-up: What if he lives in rural area with no public transportation? -leave it so he can earn an income and contribute Follow-up 2: if he’s a travelling salesman then it’s exempt. Follow-up 3: still exempt because issue is decided at date of bankruptcy.

Answer 107

Definition of Insolvent Person: -not bankrupt and, 1 of 2 -resides or carries on business in Canada, or -liabilities amounts to atleast $1K AND 1 of 3 -unable to meet obligations as they come due OR -ceased paying for his current obligations in the ordinary course of business, OR -FMV of property not sufficient to pay all obligations

Answer 108

-MEANS PRINCIPAL PLACE -where debtor has carried on business immediately preceding bankruptcy -where debtor has resided during the year immediately preceding bankruptcy -in cases not coming within the points above, where the greater portion of the property of the debtor is situated

Answer 109

He will need to comply with the conditions or if more than a year has passed then he can apply to court to have the conditional order varied.

Answer 110

His discharge would only be automatic if no one – Trustee, creditor or Superintendent objects. He can apply for an earlier discharge before the expiration of the 9-month period. There must be a reason for the early discharge i.e bankruptcy is adversely affecting his ability to make a living.

Answer 111

* The increase in share value could be considered after acquired property; point in time for after-acquired is between date of assignment and date of discharge. * After acquired property is an asset of the estate. * After acquired assets only vest with the Trustee if the Trustee takes action/intervenes. * Confirm with debtor that they still own the shares and ask them to provide a further contribution to the estate for the increase in value.

Answer 112

Yes, there is case law to support the ability to claim a house as exempt if you can show that you are living elsewhere temporarily for reasons of work or other extenuating circumstances.

Answer 113

* Shares were sold within one year of the bankruptcy. * * Therefore, this is a reviewable transaction. S101 says when a corporation redeems shares of the corporation to a director, an officer or any person who manages or supervises the management of the business within one year before initial bankruptcy even, then the court (on application of the Trustee) look into those payments to check if a) was company insolvent at time of transaction? b) did making those payments cause the company to become broke? * Profits in the year of the sale suggest that shares were sold at undervalue. * The trustee first checks whether it’s even worth pursuing. Trustee should try to ascertain whether the sister (former partner) has any assets/ net worth before expending money on getting a judgement against her. * After obtaining inspector approval to proceed, the trustee should obtain a valuation of the company ‘when shares were transferred’ to determine if consideration was adequate. * If consideration was not adequate, Trustee should first try to negotiate with the former partner; if unsuccessful then get court order for a judgement against former partner for difference between share value and consideration actually paid.

Answer 114

Yes, any interested party can act as inspector. Media Rep. must understand that the matters dealt within in the meeting are confidential.

Answer 115

D&O, employees of the bankrupt company are not allowed to vote on the appointment of the trustee or inspectors (Section 113(3)).

Answer 116

Most important consideration is the powers you have pursuant to your appointment -if Trustee, take directions from inspectors. -if receiver under a security agreement, you are an agent of the secured creditor. Should take instructions from them/and follow security agreement. -if you’re a court-appointed Receiver, review the court order -if you face deadlines, a tender may be preferred, it defines terms of sale and avoids possible delays in negotiation -tender is when multiple buyers submit bids, compare all offers and choose best one -consideration should be given to type of asset, seasonality of product

Answer 117

-it’s called distraint when landlord seizes assets or landlord could also be enforcing security -serve bailiff with copy of assignment or Receiving order -stay of proceedings stops the distraint but not the enforcement of security

Answer 118

-accelerated rent is for period immediately following bankruptcy; Trustee must review lease to determine if landlord is entitled for accelerated rent -preferred claim for rent is paid up to NRV of assets on premises (s.136) -occupation rent reduces amount of preferred claim

Answer 119

-Trustee can be personally liable for damage to premises during its occupation. -I would check if trustee has insurance on the assets and its activities

Answer 120

Landlord has the right to distrain for unpaid rent. Review receivership court order to see if there’s a stay provision for landlords. If note, try to negotiate with the landlord – make a deal. Let him sell the fruits/vegetables but request accounting for proceeds. Figure out how much rent was owing and compare with proceeds from fruits/vegetables.

Answer 121

Get retailer to file for bankruptcy. With a bankruptcy, the stay will apply and landlord will need to return goods unless distraint fully executed. OR Appy for Interim Receiver appointment with a stay. ---consider materiality/cost/benefit.

Answer 122

Bankruptcy: Landlord is stayed. DT: source deduction Wages upto 2K super priority if earned within preceding 6 months of DOB, secured against current assets. Secured Creditor. Wages: If assets insufficient then remainder of 2K is preferred (ranked above unsecured). Amount over the 2K would be unsecured. Landlord gets preferred claim as well; 3m arrears and 3m accelerated rent if lease provides for it, upto NRV of assets on premises. Unsecured: GST Receivership: Landlord not stayed unless court Receivership order says there’s a stay. GST is also DT.

Answer 123

Preference, pmt within 3 months before initial bankruptcy event can be attacked by Trustee per section 95 of the BIA. Go to court to reverse. Criteria: 1. debtor/creditor relationship. 2. Transfer of property or pmt by insolvent debtor at expense of other creditors. Supplier can rebut: Rebuttals: I. -transaction was in the ordinary course of business II. -there was a binding agreement in place III. -it was to remedy a wrongful act IV. -with expectation that he could continue business

Answer 124

Trustee should freeze/seize the funds. Report to OSB immediately. Notify RCMP. Can’t distribute proceeds of crime to creditors. If money is unclaimed, trustee may apply to court for order to keep as property of the estate.

Answer 125

Ethics issue: recognize the president is scheming. I would tell him to seek a lawyer regarding compromise of personal guarantee. My role as trustee is officer of court, I cannot be guiding the President on how to compromise his liability at the expense of creditors.

Answer 126

-payment of o/s source deductions within 6 months of court approval of all amounts including penalties and interest. -current remittances to be kept up to date otherwise CRA has right to take action and garnish; stay lifted.

Answer 127

Figure out where pollutant is coming from? Determine cause. Trustee can do a cost (cost of cleanup)/benefit analysis re decision to take possession. Take measures to ensure safety of all stakeholders. Take measures to contain the pollutant. Trustee liable where there is willful misconduct or gross negligence. Where an order is made that requires the Trustee to remedy any environmental condition, the trustee is not personally liable for failure to comply with order if within 10 days of appointment, the trustee: 1. Complies with the order 2. Abandons or disposes of the property 3. Contests the order 4. Releases interest in the property a. If crown cleans up damage and environmental issues after the Trustee abandons the property, the charge will rank ahead of any security.

Answer 128

-Can be attacked as a TUV (transfer under value) per section 96 of the BIA. No consideration or consideration conspicuously less than FMV -criteria: no need to prove intent nor insolvency if within last 12 months for non-arms length party. -if within last 5 years to non-arms length party, intent OR insolvency.

Answer 129

I would determine if there’s a conflict of interest. I would review the validity and enforceability of their security. Trustee should request fee or payment in return.

Answer 130

-get legal opinion on validity of GSA from legal counsel -5 days is a very short timeline, may not be sufficient for approvals (from inspectors not yet appointed or court) -segregate property that cannot be sold like 3rd party property or 30 days goods -hire a valuator to appraise the property -determine whether the proposed sale proceeds are enough to cover: secured creditor, priority claims, trustee fees -get approval from major unsecured creditors & secured creditor ahead of FMOC, then apply to court for approval -hold sales proceeds in trust until GSA validity, creditor, and court approval have been obtained.

Answer 131

-change locks, notify alarm company of appointment so your changed to the main contact. -put notices on the premises of the bankruptcy. -decide to retain, disclaim or assign. -90 days to occupy if you pay occupation rent.

Answer 132

-you review lease and see what the market value is in order to design if there’s value in assigning the lease -if not value, then you can disclaim the lease -Trustee is personally liable for occupation rent

Answer 133

-attractive site/ value in lease so you can assign it -estate property on premises

Answer 134

-go to court for an order. Court looks at 3 factors: 1. new business is not more hazardous then business than business previously conducted 2. Lease arrears have been paid 3. New leasee must be able to honour its financial obligations under the lease

Answer 135

-get release from landlord for any future liability under the lease -or obtain court order providing relief from any future liability under the lease before completing the transaction -new lessee must agree to terms of lease and must satisfy the 3 court criterias.

Answer 136

-once bankrupt is discharged, they don’t have to pay you anything Page 6; Kaplan doc

Answer 137

-assets, liabilities -talk to them about provincial exemptions -income and expense information -transfers, disposals, preferences

Answer 138

-bankruptcy -consumer proposal -refinance house or sell the house -monthly orderly payments of debt program

Answer 139

-house gets 40K exemption, car gets $5K. Any remaining equity the debtor can redeem or trustee can sell property for benefit of estate and give back exemption to debtor -keep mortgage, furniture and car payments up to date or else the secured creditor will be able to realize on their security. No stay on secured creditors. -verify validity and enforceability of security -need third party appraisals on file

Answer 140

-child care, medical expense, family support (child or spousal), fines, expenses permitted by ITA

Answer 141

-check if mother is claimed as a dependent on the income taxes -if she’s a dependent then we’ll need to add her household income in -then her non-disc expenses can be subtracted if she’s included in the household size

Answer 142

Bankrupt had paid parents $5K in last 3 months. They had loaned him money for the house. Bankrupt wants to pay parents back as they are pensioners. What do you tell him? -bankrupt can’t pay parents while undischarged -trustee can attack payment as preference under section 95 of BIA 1. debtor creditor relationship and transfer of property or 2. pmt by insolvent person at expense of other creditors -look back period is 3 months for arm’s length creditor and 12 months for non-arms length creditor. -report on s170, file opposition to discharge, recommend conditional discharge on basis that the $5K paid is returned to estate or get court judgement of $5K to go after parents.

Answer 143

-car exempt per AB civlil enforcement act but if car is not in AB then AB provincial exemption won’t apply. -Trustee may seize and sell car; do cost benefit analysis.

Answer 144

-find out exemption laws for province of BC

Answer 145

-find out where RRSP was helped, date if was collapsed. RRSP only exempt if held in a registered account. If collapsed then non-exempt. -Truste can apply to annul the discharge if collapsed before auto discharge date

Answer 146

-Must be registered with Superintendent’s office -need to have taken counselling course and have hours to be a qualified counsellor Hiring a counsellor, considerations? -have an agreement/contract -time frame for providing counselling -debtor pays trustee, not counsellor; counselling fee is tariffed -confidentiality agreement -remuneration -certificate to be returned to trustee on timely basis -security of documents/records -indemnity for damages: giving false information -counsellor should not use relationship to benefit re: other business services he offers

Answer 147

-credit rating goes from r9 to r7 -unsecured creditors get more money -annuls the bankruptcy so the assets vest with the debtor -easier discharge from bankruptcy if shown that debtor tried to make a proposal

Answer 148

-s.173 reckless spending offence -report on 170 report -file opposition to discharge

Answer 149

-potential 10K tools of trade exemption if using to earn an income -if no exemption then trustee can sell for benefit of estate

Answer 150

-Bia says, can’t refer to self as specialist -unprofessional to quote percentage even if true

Answer 151

1. Being turned down for credit 2. Receiving overdue notices 3. Bank balance decreases while debt balance increases 4. Converting assets to cash to pay for bills 5. Using credit as income 6. Paying one debt by taking out another debt

Answer 152

-just approving the SRD without trying to set up creditors meeting is in breach of the BIA I should be instructed to start the process of setting an inspector’s meeting to discuss & approve SRD -call a meeting of creditors and have creditors approve the SRD before submitting it for comment

Answer 153

-if licenses are not renewed by Dec 31st as required then they will be invalid -failure to pay will cause the OSB to make the licenses inactive -as a consequence, firm will be unable to accept any new files until the matter is resolved -e-filing privileges will be impacted as we have no valid license -duties that require the action/signature of a licensed trustee cannot be completed -this matter is very serious as estates must always have a LIT appointed & responsible -Trustee must also pay penalties & provide written explanation of why the license should be reinstated before the SOB can make a decision on the reinstation -can’t take money out of the consolidated trust account as those are estate funds. OSB license fee is not a trust expense. Consolidated account to only be used for estate related disbursements. -If I have access to the general account then the cheque can be signed by me (Trustee) -also cannot use the facsimile name stamp, as no confirmation that stamp is authorized for this account -stamp should be secured/controlled; estate admin shouldn’t use it; it should be monitored What should I do? -I should notify the trustee immediately -confirm if I have signing authority for the general account -flag the issue as urgent -ensure license fee is paid before deadline

Answer 154

-Immediately contact the bankrupt to inquire about the failure to submit the agreed upon monthly -request that they be provided without delay -advise creditor that trustee hasn’t received them but is following up with debtor -report non-compliance on s170 (s.158 breach) -oppose discharge

Answer 155

Exparte, in order to prevent more assets from being dissipated.

Answer 156

-go to court, get order against debtor for Contempt of Court.

Answer 157

-no IR has no higher rights than debtor (unless court order includes stay against any proceedings against debtor)

Answer 158

-show of hands to see which way vote would go -gives chance to amend proposal so that it will pass

Answer 159

-trustee should adjourn the meeting -call new meeting of creditors -send out amended proposal with new voting letters -it’s not good to proceed with the vote because creditors could later complain that they could have swayed the vote if given a chance - Creditors could later argue they were not given a fair opportunity to vote on the revised terms

Answer 160

-not reasonable -not beneficial to general body of creditors -doesn’t meet BIA requirements: does not provide for payment priority to preferred creditors and payment of trustee fees/expenses.

Answer 161

-creditors holding 25% in number(headcount) or 25% in value of proven claims may request trustee to call meeting of creditors and have vote to replace trustee -or apply to court to have trustee replaced

Answer 162

-if funds have been deposited to landlords account then distraint is complete and trustee cant do anything -if funds are still with bailiff then distraint isn’t complete and trustee can get those back

Answer 163

-Trustee can stop landlord and request release of property -The costs already incurred by the landlord in carrying out the distraint are treated as a first charge (priority lien) against the assets distrained so the landlord gets paid those costs first, ahead of other claims, but only for the costs, not the rent itself.

Answer 164

-yes, but they can do the due diligence defence (exercised care and diligence of reasonable prudent person)

Answer 165

-CRA can go after director for breach of Trust (fiduciary) and debt will survive discharge.

Answer 166

-ask president if this is true -were there any business dealings between my firm’s accounting partner and president of bankrupt company. -fraudulent preference; Trustee may have to sue accounting partner for return of funds -Trustee should step down due to the perceived conflict

Answer 167

-ask if creditor has a conflict of interest. Otherwise, can’t stop him from being nominated. -ask for more nominations and put selection to vote. -can make sure there are enough other inspectors so that majority resolutions can still be passed without his vote

Answer 168

the supplier presents a written demand within 15 days of the date of bankruptcy (can be extended by the court, trustee or receiver) ● goods were delivered in within 30 days before the date of bankruptcy/receivership/NOI/Proposal 30supplier15

Answer 169

-tell bidder that deposit is forfeit -that you intend to sell by re-tender -sue for losses if deficiency in price and costs for retendering

Answer 170

-Trustee has duty to integrity of process. -Advantage of Jones was not a result of trustee’s actions -dispute allegations of unfairness and accept highest bid

Answer 171

-get additional info -was plan established by transfer from non-exempt RSP? -were payments to establish RSP made when debtor was insolvent -consult with legal counsel if this can be attacked

Answer 172

-RSP exempt as preferred beneficiary. -you may try to attack as preference. -prove intent -show badges of fraud -otherwise, include in conduct of debtor on s.170 report

Answer 173

-filing the proposal stays proceedings against landlord. -recommend debtor seek legal advice re damage claim.

Answer 174

-conflict check to verify independence -legal opinion on validity and enforceability of security -inform creditors of: the appt, provide copy of legal opinion and basis of remuneration

Answer 175

-Bankruptcy Trustee has right to retain the lease and assign it -conflict: you want bank to get money from lease lumpsum as the Receiver -apply to court for advice 30 day goods claim scenarios: Santo Importers delivered 24 boxes of component parts eight days ago. 24 are still packed and in their original cartons: Yes, repossessable by supplier since: -identifiable -same state as delivery -haven’t been re-sold at arm’s length -not subject to a sale agreement at arm’s length -haven’t been fully paid for in full

Answer 176

-already subject to a sale agreement to presumable arms length party so not repossessable

Answer 177

-if not easily identifiable (comingled with computermark and ABC) then not repossessable

Answer 178

-the share of the bankrupt in the house belongs to the bankruptcy estate -the ex-wife can payoff the estate for the bankrupt’s share; the share/interest of the bankrupt will need to be determined as ex-wife has been paying all the house’s expenses -if ex wife is not interested then: -trustee can go to court, get an order to be able to sell the house for the benefit of the creditors; sale order -trustee can register on land title so when property is sold, the trustee is notified and will receive proceeds from the sale of the property

Answer 179

-he can purchase it -there’s a 4K vehicle exemption so buy-back amount would be 9-4=5K -have a purchase agreement in place -ensure you value the vehicle via BBV*

Answer 180

-S.158 says to deliver all credit cards to the Trustee, except a credit card issue to a third party (employer, friend, spouse) -for a third-party card, trustee must have confirmation that the issuer or third party has authorized the bankrupt to continue to possess and use the card. -determine amount spent on the cards since DOB and if any payments were made (were these payments on the I&E report -report on s170 report under conduct -cut up the cards to prevent further use, give card issue the notice of the bankruptcy

Answer 181

-make a reasonable attempt to trace the current address of the nationally known creditor (RBC) -check to see if DEF is bankrupt -before proceeding to discharge, trustee must forward the SOB all o/s unpaid dividends -Forward the interest of $75.68 to the SOB

Answer 182

-director -shareholder related to the director

Answer 183

- I could attack as a TUV - Consideration conspicuously less than FMV - Sale occurred within one year of initial bankruptcy event to non-arms length party so no need to prove intent nor insolvency

Answer 184

-deposit remaining funds into the account of the corporation and obtain discharge from secured creditor who appointed you. Someone could argue that you didn’t act in commercially reasonable manner. -seek advice and direction from court, court could bless your actions eliminating any potential liability -make application to court to convert to court appointment (has benefit of clear process to deal with the funds)

Answer 185

-Trustee has power to search and seize assts -report theft to police -have drivers examined under oath to determine location of assets -obtain independent legal opinion on the validity and enforceability of the security -it may be practical to settle with the drivers rather than incur legal costs

Answer 186

It’s a piece of paper that proves goods were shipped and says who has the right to receive them.

Answer 187

-power of trustee to demand return of books and records -assets subject to bank’s security providing security is valid -Receiver/agent should recover as there is nothing to be gained by estate in recovery of assets

Answer 188

-Trustee has power to demand books and record and this is effective over a solicitor’s lien.

Answer 189

-seek opinion of absent inspector, if any -or trustee resolves matter unless matter related to trustee’s conduct or remuneration

Answer 190

-encourage non-creditors present to seek appointment -obtain court or creditor approval for all matters that would otherwise be approved by the inspectors

Answer 191

-no offer can be accepted from an inspector without court approval

Answer 192

-no, they can’t delegate their authority.

Answer 193

-in a div I, there’s an FMOC within 21 days -an LIT must be in attendance -if estate admin sick then bring a replacement staff member -start the meeting if you’re the chair -bring Attendance sheet | 2. Agenda | 3. Proposal | 4. Statement of Affairs (SOA) | 5. Cash Flow (CF) | 6. Trustee’s Preliminary Report (cause of insolvency, insolvent person’s conduct, business and financial affairs) | 7. Proofs of Claim (POCs) | 8. Proxies and voting letters received | 9. Proof of service of Notice of Meeting | 10. Claims register -need to be able to take in POC’s and voting letters up to the meeting -adjourn meeting for a few minutes to review these if they’re last minute -need someone to take attendance -need someone to take minutes -need someone to record the votes -need to ensure those voting are eligible to vote; need someone to review POCs, proxies and voting letters received to date -if it’s a company, they need a proxy to vote

Answer 194

* Re-check the votes, each class of unsecured creditors should have approved the proposal by 2/3 in dollar value and majority in number present at the meeting (in person or by proxy) * Ensure that each party that votes was permitted to vote i.e had properly filled out POC and proxy form * Cousin not “related” so she can vote for and against * Controllers/employees can’t vote for the preferred portion ($2K unpaid wages and vacation) of their claim, only on the unsecured portion * Appoint inspectors and get their collect their contact info so you can hold a subsequent inspector meeting * Once meeting ends, apply to court for approval

Answer 195

-OSB name search to check if she was discharged from her last bankruptcy - you must obtain the full details of that earlier bankruptcy, including the assignment documents and file history. -surplus income payment 2800-2089=711/2=355.5 per month for 36 months -eligible for automatic discharge; unless Trustee objects or creditor objects

Answer 196

-She’d be bankrupt for 36 months since she’s got surplus income over the $200 threshold -For a second timer its 24 months (no surplus) and 36 months (if surplus) -caution her that she must comply with duties S.158 and any offences will be reflected on her s.170 report

Answer 197

-I would advise her that she can individually call these creditors to negotiate with them since it’s a small list -they could forgive the amount or freeze the interest or reduce the amount -she’s essentially creditor proof if she has no assets

Answer 198

-gambling (I would ask if it’s ongoing or if he’s over it now; has he had gambling counselling) -should gambling have been a contributing factor of his bankruptcy, he may have committed an offense which may lead to an opposition to his discharge and will need to be disclosed on the 170 report. It may be that he is submitted for examination under oath. -I would do a new appraisal on the house -I would check if it’s encumbered -The sister can purchase his portion of the shares or Trustee can get sale order through court -trustee must register on title on the house -if he can’t afford bankruptcy then he can apply through BAP (Bankruptcy Assistance Program) where he’d pay a voluntary fee -should he have surplus income over the course of the bankruptcy the BAP agreement will be void, he’ll need to pay in accordance with surplus income guidelines and his bankruptcy term would be extended -I would explain the stay of proceedings so collection efforts from credit card companies would stop -He’ll need to swear an SOA and disclose all assets and creditors -He’ll need to file monthly I&E’s

Answer 199

-I’d want to know if the Aruba property was disclosed -Whether Adam disclosed that he had gambling issues -Conduct BIA name search -call the trustee and ask if he’s aware of gambling and Aruba property -Adam’s trustee is required to report these to the court and SOB -we need to uphold public confidence and integrity of the insolvency system -report these alleged offences to the SOB so senior bankruptcy analyst can investigate further -Adam’s trustee can examine Adam to ask about prior consultation, gambling and property

Answer 200

-should gambling have been a contributing factor of his bankruptcy, he may have committed an offense which may lead to an opposition to his discharge and will need to be disclosed on the 170 report. It may be that he is submitted for examination under oath.

Answer 201

-if he can’t afford bankruptcy then he can apply through BAP (Bankruptcy Assistance Program) where he’d pay a voluntary fee -should he have surplus income over the course of the bankruptcy the BAP agreement will be void, he’ll need to pay in accordance with surplus income guidelines and his bankruptcy term would be extended

Answer 202

-BIA does not provide guidance to Receiver’s on this matter -In general, return the records to the debtor. -See if the court order has anything specifically to deal with the debtor’s records -Per CRA, we may need to retain certain docs for 6 years if Receiver filed returns on behalf of the company -If they don’t take them back, seek permission from Court to destroy the records. -Receiver can apply to court for direction and advice but need to suggest a method for dealing with the records.

Answer 203

-Receiver is not obligated to store these records -Receiver does not believe that proceeds from the sale should be used to fund storage costs since effectively it would be Bank A funding the storage costs as the money is meant for them -Bank A has indicated they don’t want to retain the records -Receiver will only store the records if the shareholders indemnify the Receiver for COSTS TO STORE and ANY RETRIEVAL COSTS -Tell the shareholders that the Receiver will require a retainer for these costs

Answer 204

-Bia has no guidance to Receiver’s on this matter -4 years following completion of assignment

Answer 205

-yes - BIA Rule 68 and OSB Directive 17 specifically outlines the Trustees obligations with respect to debtor records. - After being discharged, the Trustee must send a written notice to the last known address of the bankrupt or the officer of the bankrupt corporation advising that he/she has 30 days to take back any of the books and records, otherwise the Trustee may dispose of them. - Retention period should be extended where the Trustee foresees that particular documents should be available because of investigations or possible litigation, or where records are required to be retained pursuant to the ITA

Answer 206

-it’s Tremblay’s duty to get in touch with me and keep me apprised of his situation at all times -to provide me of address changes; phone number and contact info changes need to be reported to me -continue to try to get in touch -not reporting his complete income would be a breach of his s.158 duty and s.173 offence -try to get more info from linkedin or social media -if we have no info then we must oppose his discharge -we have a duty to uphold public confidence in the insolvency system -use time in between hearing to investigate further -set up meeting with debtor -contact his bank, see if there’s a second account -recommend him for examination -try to get written accusation from third party -if you think third party is lying then recommend absolute discharge as of the date of auto -if investigation turns up something – reassess surplus and make a conditional order recommendation.

Answer 207

Q: What is the main decision the Receiver must make early in the mandate? A: Whether to continue operating the manufacturing plant or shut it down pending asset realization. Q: What must the Receiver confirm before operating the plant? A: Whether the receivership order gives authority to operate or if court approval is required. Q: What is the key financial test for continuing operations? A: Operations must be cash flow positive on a contract by contract basis. Q: What non financial factors must be considered before operating? A: Staffing availability, union constraints, supply availability, supplier payment terms, insurance, safety, and environmental compliance. Q: Why are warranties a concern? A: The Receiver cannot provide warranties, which may affect customers’ willingness to buy. Q: What insurance issues must be checked before operating? A: Adequacy of coverage, including product liability and long tail risk. Q: How should the Receiver assess requested bonuses? A: Determine if they are necessary, if operations remain profitable after bonuses, and whether court approval is required. Q: With whom must the Receiver discuss the operating decision? A: The Bank (as fulcrum creditor), management, and potentially the Court. Q: What must be done about the stolen forklift? A: Investigate, attempt recovery, notify insurer, consider police involvement, and report to court if necessary. Q: What statutory notices must be prepared early in the receivership? A: Notice and Statement of the Receiver (NSR) under BIA sections 245 and 246. Q: Is Ms. Goodwin’s personal guarantee the Receiver’s concern? A: No. It is a matter strictly between Ms. Goodwin and the Bank. Q: How can the Receiver protect itself from claims of improvident realization? A: By completing a documented, reasonable analysis and seeking court approval if the decision is contentious. Q: What is the guiding principle for the Receiver’s decision for selling? A: Act in a commercially reasonable manner to maximize realizations for the estate, supported by evidence and documentation.

Answer 208

-judgements and writs stayed by the bankruptcy - Judgment relates to fraud, misrepresentation, or support arrears are non-dischargeable -Car to wife: -TUV 1.no consideration or consideration conspicuously less than FMV -if within last 12 months to non-arm’s length party then no need to prove INTENT nor INSOLVENCY -if within last 5 years then prove 1 of the two tests -payback to uncle: 1.debtor-creditor relationship 2.payment by INSOLVENT debtor at expense of other creditors -if within 12 months to non-arms length party then Trustee can attack as preference -if effect is preferential then view is presumed -difficult to rebut -I would inquire about dates for advance from LOC and transfer of car, worth of the car, how much he paid his uncle, was he insolvent at time of payment to uncle, are there other payments or transactions not disclosed -I would inquire why the debtor didn’t provide this info to me at the initial interview -they were not being forthcoming (material omission) so report this on s.170 report and oppose discharge

Answer 209

-can we Commence proceedings to set aside a transfer at undervalue against the wife in respect of the car, if criteria are met. -can we Commence preference proceedings to recover the payment made to the uncle, depending on timing, relationship, and insolvency -discuss with inspectors Cost vs. benefit of recovery actions - Conduct a more detailed examination of the bankrupt regarding pre bankruptcy conduct and intent.

Answer 210

Trustee, OR or Court can examine -creditors and inspectors need court permission.

Answer 211

- Candidate must discuss all options available to the debtor per the Assessment directive o Do nothing – Potential risk to debtors bank account if creditor gets a judgement to seize ▪ But they are unlikely to be successful to garnish Social assistance o He could try to negotiate with his creditors on his own – he has a small number of creditors and considering the nature of debts may be successful in settling for a lesser amount or interest freeze, potentially refer to outside resources for budgeting assistance or additional resources that he may apply for. o Credit counsellor to negotiate for him – be aware of fees o ODP - would need to review budget for affordability o CP – potentially if there is a third party of family member that can support o Bankruptcy – the administration cost may be too high ▪ Refer to BAP if no other option of reach a fee agreement ▪ Needs to be aware of future repercussions ie: 2x bankruptcy is longer Candidate should make a recommendation along the lines that he could file a formal proceeding but given the low debt amount, relative ‘credit proofing’, young age and limited living expenses he has he should talk to the various other resources and determine what is best for him.

Answer 212

● Advise workers of WEPPA, which covers claim for unpaid wages, vacation pay, severance and termination up to maximum of four times the maximum weekly insurable earnings under the Employment Insurance Act (approximately $ $9,275). ● For amounts paid by the government for wages and vacation pay (under WEPPA), the government is subrogated to any rights the employee may have in respect of those amounts. This includes the priority secured claim over current assets for unpaid wages and vacation pay up to $2,000 (per s.81.3 and 81.4 of BIA). The secured claim does not cover severance and termination pay. ● Employees can file unsecured claims in the bankruptcy for any amounts not paid through WEPPA. ● Directors have personal liability for unpaid wages and vacation pay. ● Union v. non-union issues. ● Is there a pension plan? If so, there could be priority claims for unremitted pension contributions.

Answer 213

unsecured claims in bankruptcy - no priority.

Answer 214

● Need to calculate if GST owing, following netting of input tax credits. ● CRA has unsecured claim in bankruptcy - no priority. ● Directors have personal liability.

Answer 215

Regulator / Environmental Issues Advise the environmental regulator if there may be insufficient funds to remediate the property Regulator can take whatever action it deems appropriate Environmental Orders & Disclaimer If regulator issues a remediation order: Where an order is made that requires the trustee to remedy any environmental condition the trustee is not personally liable for failure to comply with the order if within 10 days of appointment the trustee: 1. Complies with the order 2. Abandons or disposes of the property 3. Contests the Order 4. Releases interest in the property a. If the Crown cleans up the damage and environmental issues after the trustee abandons the property the charge will rack ahead of any security Sale of Contaminated Property Trustee decides whether property can still be realized upon despite contamination Obtain information on environmental status: Environmental reports (Phase I, II, or III) Trustee does not need possession to sell, but: Lack of possession makes showing/marketing more difficult Possession & Liability If trustee does take possession: Protected under BIA s. 14.06(2) from environmental liability Protection applies as long as contamination is not continuing Sale Mechanics Property can be sold, but trustee must: Fully disclose contamination to purchaser Sell on an “as is, where is” basis Consider obtaining a vesting order, especially if: Environmental issues are complex Purchaser requests one (likely) Security & Title Issues Confirm whether there is: A mortgage Other registered charges on title Marketing the Property Consider multiple sale options: Real estate agent Contacting industry players / competitors Tender or sealed‑bid process

Answer 216

Support payments reduce his disposable income and directly affect surplus income calculations and affordability of payments. Support obligations also help explain why he filed (cash flow strain). What the Trustee does: Verify support order/agreement. Confirm what he actually paid and when support ended (spousal ended Aug 2017).

Answer 217

Surplus income is based on actual income—bonuses can increase surplus materially. At discharge, big “extra” income raises the question: Did he pay the correct surplus? Also raises: Could he have made a proposal instead of bankruptcy? (conduct/appropriateness issue). What the Trustee does: Request T4s, paystubs, bonus letters, bank statements. Recalculate surplus with actual income including bonuses. Consider whether the mediated surplus amount still makes sense given the bonuses.

Answer 218

If he still owes money under the agreement, that’s a reason for the Trustee to recommend: Adjournment, or Conditional discharge (finish paying), rather than absolute discharge. Also: if income changed (bonuses/trust distributions), the agreement might be understated. What the Trustee does: Confirm remaining balance precisely. Bring payment history to court. Ask whether surplus needs reassessment due to new income facts.

Answer 219

Title suggests he owns something, but beneficial ownership may have been transferred already. Trustee needs to confirm if there’s actually any realizable interest for the estate (likely no, if properly transferred under divorce settlement). Also possible review: was the transfer a reviewable transaction? (timing is 2014; bankruptcy 2016—still something to understand, but often part of family law equalization). What the Trustee does: Obtain separation/divorce agreement, transfer documents, land title. Confirm whether he truly has no beneficial interest despite name still on title.

Answer 220

Non‑arm’s length sale = heightened scrutiny: was it marketed properly, fair price, proper process? Trustee must be able to show the sale was commercially reasonable and in creditors’ best interests. Condo funded by RRSP collapse ties into the CRA debt story and pre‑bankruptcy conduct. What the Trustee does: Ensure file has valuation/appraisal, marketing evidence, approval (if needed), and clear rationale. Provide court with proceeds summary and transparency.

Answer 221

Shows Trustee realized an asset successfully (good administration). Court approval helps defend value and process (hard to sell a ¼ interest to outsiders). What the Trustee does: Present it as a positive: realization was maximized given practical limitations.

Answer 222

Non‑disclosure is a conduct issue. Even if it’s not estate property, he should have disclosed it. Trustee must determine: Is his interest property of the estate or not? Are distributions income for surplus purposes? Discretionary trusts often mean no enforceable right to demand money, but distributions received during bankruptcy can still affect surplus. What the Trustee does: Obtain and review trust deed (often with legal counsel). Determine if any portion is realizable. Treat actual distributions as potential income and reassess surplus. Tell court Trustee needs time to investigate → supports adjournment.

Answer 223

Why it matters: Court must consider creditor opposition. The creditor’s request to “exclude the debt from discharge” only works if it fits non‑dischargeability grounds (e.g., fraud, misrepresentation, false pretences). If it’s just “he borrowed and didn’t pay,” that’s normally discharged. What the Trustee does: Present opposition fairly. Explain what evidence exists (or not) for fraud/misrepresentation. Keep the focus on facts and whether the legal test is met.

Answer 224

Failure to disclose a material asset disposition is a classic bankrupt conduct problem. Trustee must assess: Was the car sold for fair value? Where did proceeds go? Was there intent to mislead creditors? Could support: Adjournment (to investigate), Conditional discharge (if misconduct but not severe), In serious cases: suspended discharge or opposition. What the Trustee does: Verify valuation around sale date, obtain bill of sale, bank deposit trail. Confirm use of funds. Report to court on whether omission appears innocent vs deliberate.

Answer 225

Shows why the CRA debt arose (RRSP collapse to restart life after divorce). Also confirms he is not a “high tax debtor” case (threshold not met), so special discharge restrictions don’t apply on that basis. Still relevant to overall financial history and conduct. What the Trustee does: Confirm CRA claim and basis. Present as part of overall liabilities summary.

Answer 226

Courts sometimes consider whether the bankrupt took advantage of bankruptcy when a proposal may have been viable — not always determinative, but it can influence the type of discharge order. This is especially relevant where new information suggests higher payment capacity. What the Trustee does: Raise it carefully as a consideration. Use it mainly to justify adjournment to investigate income and trust impacts.

Answer 227

KEY POINTS ● Type of Receiver – court v. private. ● Receiver would not pay arrears of supplier, and would probably not accept delivery of goods recently purchased by debtor unless the Receiver is planning to operate. In that case, the Receiver will probably have to pay for supplies on C.O.D. basis. ● Possible priority 15 day claims from farmers and 30-day goods’ claims from other suppliers. ● Inventory is perishable and will need to be realized on quickly. ● Landlord issues - A private receiver will have to pay ongoing rent while in occupation of the premises and will probably have to pay rent arrears unless he/she can negotiate another arrangement with the landlord. ● A Court appointed receiver only needs to pay current per-diem rent while in occupation if order says so. ● Need to determine amount of unremitted source deductions to assess whether it’s worthwhile to realize on assets. ● A bankruptcy should be considered to reverse priority of GST arrears.

Answer 228

A Trustee cannot accept appointments or make professional appointments based on reciprocal referrals or personal benefit. I would advise the lawyer that, if I am to act as Trustee, it must be without any expectation regarding the appointment of counsel. Legal counsel appointments must be based on merit/qualification/expertise and the best interests of the estate, not relationships. Per the RPA, Trustee must not let any influence, interest or relationship impact their judgment and objectivity. If there is any concern about perceived conflict, I would decline the trustee appointment altogether and consider referral to another trustee in the firm.

Answer 229

Liquidated amount=provable in bankruptcy. Unliquidated amount is a contingent claim. Disallow. If the claim is proven in court and results in a judgement, then it's a provable claim in the bankruptcy.

Answer 230

If there’s a remediation order, trustee is not personally liable for failure to comply with the order if within 10 days of appointment the trustee: CACR 1. Complies with order 2. Abandons or disposes of interest in the property 3. Contest the order 4. Release interest in the property in writing *Trustee must obtain inspector approval. In the RedWater example, if Trustee abandons the property, and clown cleans up then they rank ahead of any security. Trustee is protected for conditions: 1. That arose before appt 2. That arose after appt unless due to gross negligence of Trustee *Trustee must report the issue to Environment Regulator. Trustee can advise the Regulator that there may not be sufficient funds in the estate to remediate the property and that the Regulator can take whatever steps it deems appropriate.

Answer 231

1. See if there’s a mortgage or other charges on the property – to assess realizable value 2. Obtain information regarding the status of the environmental issue – via an environmental report (Phase I, II or III) 3. Determine whether the property can be realized upon, even with the contamination 4. Trustee does not need to go into possession directly to sell the property – but it can be difficult to “show” a property if no one is in possession 5. Consider options to sell the property – real estate agent – contacting competitors – tender sale 6. Ensure the buyer is fully informed of the contamination 7. Sell on an “as is, where is” basis 8. Seek a vesting order with respect to the sale of the property – transfers the property to the purchaser free and clear – reduces the risk that environmental claims will follow later

Answer 232

Third time bankrupt: oppose at 10 month mark. Apply for discharge hearing no earlier than 3 months and no later than 12 months. Trustee must send notice 15 days before hearing to sob, bankrupt and every known creditor.

Answer 233

CRA DT only attached to cash, receivables, inventory and other personal property. DT does not prime a valid mortgage or real-property security. DT does not attach to real property.

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