Part XIII of the BIA: The Right Statute for Individual, Liquidation, and Asset-Tracing Recognition Cases

Cross-border insolvency files do not stay in one jurisdiction. A debtor in administration, liquidation, or bankruptcy abroad may hold Canadian bank accounts, real property, or receivables; face litigation in Canada; or have Canadian creditors positioning to enforce against an insolvent debtor's assets. When that happens, the foreign officeholder needs a Canadian recognition order. The question is which one.

Canada has two parallel recognition regimes. Part XIII of the Bankruptcy and Insolvency Act (“BIA” )and Part IV of the Companies' Creditors Arrangement Act (“CCAA”) were both enacted in 2009 as Canada's implementation of the UNCITRAL Model Law on Cross-Border Insolvency. 

The provisions largely mirror each other. Part IV of the CCAA receives most of the attention. Part XIII of the BIA receives less attention.

The threshold question

The first question is whether you have a choice at all. CCAA s. 3(1) applies only to debtor companies with claims totaling more than $5 million. That cuts out two substantial categories of debtor:

• Individual debtors, who are entirely outside the CCAA regime; and

• Corporate debtors with claims under $5 million.

  
  

If the debtor is an individual or a smaller corporation, Part XIII of the BIA is the statute. Fellowes, Maslowski, Doelman and Bell in their paper "Part XIII of the Bankruptcy and Insolvency Act: The Less Recognized Recognition Statute" observed that although no reported decision has explicitly applied s. 3(1) of the CCAA to a foreign recognition application, a plain reading of the section suggests that the threshold applies.

For files where both statutes are technically available (i.e. the debtor is a corporate entity with debts exceeding $5 million), the second filter is what the proceeding actually looks like. 

Fellowes et al. reviewed 42 Part XIII decisions between 2009 and 2023. The pattern is worth stating re-stating:

• 52% of reported Part XIII cases involved individual debtors (22 of 42).

• Liquidation-oriented proceedings dominate; Receiverships (15 cases), bankruptcies (14), and liquidations (6) account for 35 of 42 reported decisions.

• Asset tracing and recovery is a recurring theme in reported ancillary relief applications.

• The most common origins are the United States (19 cases), China (8), and the Cayman Islands (5).

  
  

The CCAA, with its corporate restructuring orientation and its $5 million threshold, tends to capture complex reorganization files. On the other hand, Part XIII of the BIA captures liquidations, individual bankruptcies, and tracing work. That is not an accident of practice, but  reflects what each statute is designed to do.

Recognition mechanics

The framework itself is straightforward: a foreign representative applies and files evidence establishing (a) the existence of the foreign proceeding and (b) the representative's authority. If the court is satisfied, it must issue a recognition order and specify whether the proceeding is a foreign main or foreign non-main proceeding.

The main versus non-main distinction carries consequences. Under s. 271 of the BIA, recognition as a foreign main proceeding triggers a mandatory stay against actions, executions, and other proceedings concerning the debtor's property, along with a freeze on dispositions of the businesses’ or individual’s Canadian property outside the ordinary course. Recognition as a foreign non-main proceeding carries no automatic stay; any stay is discretionary under s. 272(1)(a) of the BIA.

"Foreign main proceeding" means a proceeding in the jurisdiction where the debtor has its centre of main interests, or COMI. COMI is where the evidentiary dispute usually happens, particularly for holding companies, individuals with cross-border lives, or corporate groups with operations in multiple jurisdictions. 

A foreign representative seeking main-proceeding status should expect to lead evidence on head office location, where operations are directed, where creditors typically deal, and where books and records are kept.

The trustee-as-receiver tool

Section 272(1)(d) of the BIA is Part XIII's signature provision, and it has no CCAA equivalent. The court may appoint a licensed trustee as receiver of the debtor's Canadian property, with authority to take possession and exercise control over the debtor's property and business. Combined with s.272(1)b), which allows for the examination of witnesses, and s. 272(1)(c), which allows the court to entrust administration or realization of Canadian property to the foreign representative or another designated person, Part XIII gives a foreign liquidator or trustee a powerful and fully functional Canadian realization tool. 

By contrast, the CCAA, uses information officers, a role courts have constructed from the general discretionary powers in ss. 49, 50, and 52. Information officers report, monitor, and communicate. They do not take possession of property. For a file that requires active Canadian asset realization, such as  seizing accounts, selling real estate, enforcing security, pursuing assets, s. 272(1)(d) of the BIA is the ideal tool to use rather than a workaround.

The public policy exception

There is one defensive note worth raising. Under s. 284(2) of the BIA, the Canadian court may refuse to take an action if doing so would be contrary to public policy. This is the standard recognition defence. It is rarely successful, but it should be anticipated in politically sensitive files, including proceedings with state involvement, or procedural concerns in the foreign forum.

Practical takeaway for foreign officeholders

When a foreign insolvency has a Canadian dimension, recognition should be considered early. Delaying recognition costs assets, evidence, and control. For the right file,  an individual debtor, a liquidation-oriented proceeding, an asset tracing and recovery exercise, or a corporate debtor under the $5 million CCAA threshold,  Part XIII of the BIA is not an alternative to the CCAA. It is the preferred statute.

This article is for general information only and is not legal advice. Legal advice should be obtained about the specific facts of any cross-border insolvency or recognition matter. About the Authors

Cody G. Reedman is the founder of Reedman Law and practises in bankruptcy, insolvency, restructuring, fraud, enforcement, and financial disputes. His work includes insolvency litigation, asset recovery, debtor-creditor disputes, bankruptcy discharge matters, and cross-border recognition and enforcement issues. He has appeared as counsel in precedent-setting insolvency matters, including appeals before the Supreme Court of Canada.

Faye Griffiths is Associate Counsel at Reedman Law and brings extensive international restructuring and insolvency experience across common law jurisdictions. She has practised in England and Wales, the British Virgin Islands, Hong Kong, Ontario, and British Columbia, and has also worked in Singapore. Her work includes restructuring, liquidation, enforcement, distressed business matters, and cross-border insolvency issues.

Reedman Law advise foreign representatives, trustees, creditors, debtors, directors, and stakeholders on Canadian insolvency recognition, enforcement, tracing, and related litigation in British Columbia and Alberta.