The Winding-up and Restructuring Act is a statute of the Parliament of Canada that provides for the winding up of certain corporations and the restructuring of financial institutions. It was passed in 1985, and has been amended since. Predecessors of the act date back to 1882.
History
Following the 1880 repeal of Canadian insolvency law at the federal level, the Parliament of Canada returned to the field in 1882, passing legislation "for the purpose of winding-up insolvent banks, and insolvent trading companies," known as An Act respecting Insolvent Banks, Insurance Companies, Loan Companies, Building Societies and Trading Corporations. Until the passage of the Bankruptcy Act in 1919, it was the only federal statute governing insolvency, and it only extended to corporations. The 1919 Act covered individuals and corporations, so corporations were given a choice as to how to proceed with the liquidation of their affairs. In 1899, provision was made for compromises and arrangements to be made during winding-up proceedings, subject to the approval by the creditors and the court. In 1966, bankruptcy proceedings were given precedence over winding-up proceedings, and any of the latter instituted prior to a bankruptcy petition or assignment coming into effect had to be abated forthwith. In 1996, the Act was retitled as the Winding-up and Restructuring Act, and provision was made for the restructuring of insurance companies.
Application
A company is deemed insolvent when:
it is unable to pay its debts as they become due,
it calls a meeting of its creditors for the purpose of compounding with them,
it exhibits a statement showing its inability to meet its liabilities,
it has otherwise acknowledged its insolvency,
it disposes of any of its property, in order to defraud or avoid any or all of its creditors,
it has procured the seizure of any of its assets through any process of execution,
it has made any general conveyance or assignment of its property for the benefit of its creditors, or, where it cannot pay its debts in full, it conveys any of its assets without the consent of its creditors or without satisfying their claims,
The Act cannot be used when proceedings have already been instituted under the Bankruptcy and Insolvency Act, but it is the only route for insolvent financial institutions to take, as they are not covered by the BIA. It also offers a little-used route for corporations to seek liquidation or winding-up that does not necessarily call for being insolvent. Companies for which there is no provision for winding-up either within their native statutes or under applicable provincial legislation comprise those incorporated under:
Operation
Nature relative to the ''Bankruptcy and Insolvency Act''
The WURA contains several provisions that stand in contrast to the BIA:
While the BIA provides that a creditor can only petition a debtor into bankruptcy only where the latter has committed an act of bankruptcy, the WURA provides that a debtor who fails to settle a demand served by a creditor within 60 days is deemed to have committed an act of insolvency and can thus be petitioned immediately into a winding-up proceeding. This is in contrast to any other act of insolvency established under the Act.
Crown immunity is not abolished with respect to its proceedings, and by extension Crown claims cannot be compromised in a restructuring.
Provisions relating to the avoidance of preferential transactions and contracts do not contain limitation periods, and payments made within thirty days of the commencement of proceedings are automatically presumed to be capable of being set aside.
There are only two classes of preferred claims, being the costs of administration and certain wages and salaries due to employees.
Inspectors may be appointed by the court in WURA proceedings, although their powers are undefined.
Nature of liquidator
In Coopérants, Mutual Life Insurance Society v Dubois, the Supreme Court of Canada held that a liquidator appointed under the Act was conceptually distinct from a trustee in bankruptcy appointed under the Bankruptcy and Insolvency Act:
