OSB News June 2012
A word from the Superintendent
Since joining the Office of the Superintendent of Bankruptcy (OSB) in October, it has been a pleasure to participate in a number of insolvency related events across the country, including most recently the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) 2012 Insolvency and Restructuring Forums. The opportunity to meet with stakeholders and hear a variety of perspectives has provided a great introduction to the insolvency field, and also helped to inform the OSB’s business plan for 2012 to 2013.
On the regulatory side, our priorities for the coming year will include implementing changes to the Directive on Trustee Licensing, flowing from the consultations and review of the trustee licensing framework. We will also be undertaking a review of mandatory counselling to look at its impact and ensure it continues to respond to current needs. As well, the OSB will take a number of steps to streamline its guardian trustee model to facilitate increased involvement of private-sector guardian trustees in administering estates subject to conservatory measures.
A second major priority will involve updating our compliance programs, where we will be seeking to ensure a consistent approach to compliance risks through implementation of standardized procedures and roles for OSB employees and an increased alignment of activities with risks to the insolvency system.
As part of our role in providing information on and supporting awareness of insolvency matters, we will also implement a number of new initiatives, including the introduction of a web portal for submitting complaints on insolvency matters, more timely publication of insolvency statistics and a review of our approach to supporting insolvency research.
We look forward to hearing from you as we move forward on this year’s priorities.
Superintendent of Bankruptcy
Update on the review of the Trustee Licensing Regulatory Framework
The process of updating the licensing framework for trustees is continuing to move forward. Comments received following the consultation with stakeholders last April are being analyzed and Directive No. 13R4, Trustee Licensing, and related policy documents will be issued shortly.
This consultation on straightforward or technical amendments to the Licensing Directive was part of Phase I of the implementation process. Stakeholders had a chance to review and comment on the proposed amendments, which included provisions for changing the time limits for and number of attempts at taking the oral board of examination and reducing the makeup of the oral board from four members to three; clarifying the criteria for lifting the two-year probationary period; and increasing flexibility around the reactivation of licences.
Phase II of the implementation process includes gathering feedback from major stakeholders on the next set of proposed amendments. The amendments are outlined in the Results report and include Issue 2b: Administrators of Consumer Proposals, which addresses facilitating business relationships in part; Issue 5: Corporate Names; Issue 6: Closed Company (or Private Company) and Share Ownership; and Issue 8: Succession Agreements and Annual Licensing Reports.
A first round of consultations on Phase II took place between October 2011 and March 2012, during which trustees and credit counsellors were consulted in five major cities: Halifax, Montréal, Ottawa, Toronto and Vancouver. Two telephone consultations were also conducted, mainly on consumer issues. In addition, trustees who focus on commercial insolvencies were met to discuss issues related to their area of practice. Information on the process for finalizing Phase II changes will be provided once feedback has been analyzed and drafts of the proposed changes have been developed.
It's important to note that none of the proposed Phase I and Phase II changes have been implemented; all existing directives and policies remain in force.
Questions about the implementation process can be emailed to email@example.com.
Mandatory counselling review: fall survey
As mentioned in the last edition of OSB News, an initiative has been launched to conduct a review of mandatory counselling, which was introduced under the Bankruptcy and Insolvency Act in 1992. The review is aimed at ensuring that mandatory counselling responds to current needs.
The first step of the review will involve an evaluation study. Various evaluation tools will be used and preliminary research will start this summer. A survey is planned for the fall to capture stakeholders' perceptions of the effectiveness of mandatory counselling in terms of building awareness and changing behaviour as well as the strengths and weaknesses of the current model. The evaluation will also include other activities, such as a review of the literature in Canada and elsewhere, and a review of approaches used in other countries.
Depending on the findings of the evaluation, Directive No. 1R3, Counselling in Insolvency Matters, which explains the content and goals of mandatory counselling, may be revised and updated.
Increasing the number of pre-qualified guardian trustees
The OSB will soon issue a streamlined Request for Standing Offer (RFSO) to increase the number of licensed private-sector trustees who may act as guardian trustee. The purpose of the RFSO is to establish, in every province, a Standing Offer Agreement with qualified trustees who can be appointed as guardian trustee to complete the administration of insolvency estates where conservatory measures have been issued.
Both mandatory and rated requirements will be simplified from the previous RFSO to make the submission process less complicated, to reduce the associated administrative burden for trustees and to encourage as many as possible to make a submission.
Trustees will be notified by email when the RFSO has been posted on MERX, the electronic-tendering service used by the federal government.
Debtor Compliance Referral Program achieving results
Under the Debtor Compliance Referral Program, trustees advise the OSB if they become aware of instances of debtor non-compliance. Between the launch of the program in June 2011 and , the OSB has received 250 referrals from trustees; 207 debtors have been assigned for examinations (112 examinations completed and 95 scheduled). During that period, the OSB intervened in court in nine cases and issued 12 criminal investigation orders among the trustee referrals.
When a trustee advises the OSB of a case of potential non-compliance, the file is reviewed to determine whether the debtor's actions meet any of the four referral criteria: inappropriate disposition of assets, inappropriate delivery and disclosure, lack of cooperation on the part of the debtor or inappropriate behaviour by the debtor. If so, an investigation is initiated, beginning with a review of documents in the file. The trustee may also be asked for more information. In addition, the debtor may be examined under oath by the OSB.
An investigation can lead to a number of results:
- the OSB may intervene in court
- the file may be sent back to the trustee for action
- a criminal investigation order may be issued; or
- the file may be closed
Results achieved to date are encouraging and the OSB would like to thank trustees for their collaboration in identifying debtor non-compliance.
Trustees can refer files to the OSB through the E-Filing system by uploading the electronic copy of the Debtor Compliance Referral Form and choosing "Debtor Compliance Referral" from the drop-down list.
In the coming year, the OSB will continue to promote the Debtor Compliance Referral Program. As well, a sample of major creditors will be consulted to explore ways to collaborate in detecting cases of non-compliance by debtors.
Working together to reduce unclaimed dividends
The process surrounding distribution of unclaimed dividends is being examined to reduce the inventory of unclaimed dividends and maximize the dividends distributed to creditors. Currently, there are more than 86,000 records in the unclaimed funds database totalling approximately $15 million.
Money collected for creditors by trustees during a bankruptcy or a proposal are distributed to creditors as a dividend. When a creditor cannot be located, the trustee turns over the dividends to the OSB who holds it in trust as unclaimed dividends until the rightful creditor comes forward to make a claim.
The collaboration of trustees will be sought to ensure that every effort is made to locate creditors before sending dividends to the OSB. In particular, trustees are encouraged to be particularly diligent with regard to the distribution of dividends belonging to nationally known businesses which can be located more easily.
Statistics on criminal investigations conducted in 2011 to 2012
When the OSB has reasons to believe that an offence has been committed, the file is sent to one of the Special Investigation Units. There are three Special Investigation Units—in Montréal, Toronto and Vancouver. The Special Investigation Units work in close collaboration with the Royal Canadian Mounted Police (RCMP) to investigate alleged offences under the Bankruptcy and Insolvency Act and the Criminal Code.
Between , and , 148 criminal investigation orders were issued across the country to the three OSB Special Investigation Units and the RCMP, an increase of 51% compared with the previous year.
During the same period, charges were laid in 75 bankruptcy files, several of which resulted from investigation orders issued in prior years. As a result of these prosecutions, or prosecutions undertaken earlier, 57 bankrupts were found guilty of criminal offences.
Each quarter, the OSB publishes a list of the latest criminal/penal sentences rendered, on its website.
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