Companies Creditors Arrangement Act
| Companies’ Creditors Arrangement Act | |
|---|---|
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| An Act to facilitate compromises and arrangements between companies and their creditors | |
| Citation | SC 1932‑33, c. 36 (now RSC 1985, c. C-36) [1] |
| Territorial extent | Canada |
| Enacted by | Parliament of Canada |
| Date enacted | 1933 |
| Amendments | |
| SC 1952‑53, c. 3; SC 1990, c. 17; SC 1997, c. 12; SC 1998, c. 30; SC 2000, c. 30; SC 2001, c. 34; SC 2005, c. 47; SC 2007, c. 29; SC 2007, c. 36 | |
| Related legislation | |
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Related Provisions (English) Dispositions connexes (French) |
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The Companies' Creditors Arrangement Act ("CCAA") is a statute of the Parliament of Canada that allows insolvent corporations owing their creditors in excess of $5 million to restructure their business and financial affairs.
In 1990, the British Columbia Court of Appeal discussed the background behind the introduction of the CCAA in one of its rulings:
The CCAA was enacted by Parliament in 1933 when the nation and the world were in the grip of an economic depression. When a company became insolvent liquidation followed because that was the consequence of the only insolvency legislation which then existed - the Bankruptcy Act and the Winding-Up Act. Almost inevitably liquidation destroyed the shareholders' investment, yielded little by way of recovery to the creditors, and exacerbated the social evil of devastating levels of unemployment. The government of the day sought, through the CCAA, to create a regime whereby the principals of the company and the creditors could be brought together under the supervision of the court to attempt a reorganization or compromise or arrangement under which the company could continue in business.
The Supreme Court of Canada did not have a chance to explain the nature of the CCAA until the groundbreaking case of Century Services Inc. v. Canada (Attorney General) in 2010. In it, a detailed analysis was given in explaining the nature of insolvency law in Canada.
The Bankruptcy and Insolvency Act (BIA) provides a more rules-based approach for resolving a corporate debtor's insolvency, which must be observed strictly. The CCAA, on the other hand, provides a more discretionary approach that is remedial in nature, which therefore must be broadly construed.
Although the CCAA was originally enacted in 1933, extensive use of it only began in the economic downturn of the early 1980s. Recent legislative amendments of the BIA and CCAA have served to harmonize key aspects, such as the use of single proceedings, a common priority of claims structure, and encouraging reorganization over liquidation.
The legislation is remedial in the purest sense in that it provides a means whereby the devastating social and economic effects of bankruptcy or creditor initiated termination of ongoing business operations can be avoided while a court-supervised attempt to reorganize the financial affairs of the debtor company is made.
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