OSB News August 2016

OSB News - August 2016

A word from the Superintendent

It is a pleasure to share the latest edition of the Office of the Superintendent of Bankruptcy’s (OSB’s) newsletter with you. The purpose of OSB News is to keep you up-to-date on initiatives and changes taking place at the OSB that either affect you or may be of interest to the insolvency community.

Roula Eatrides, Deputy Superintendent of Operations and Corporate Services, and I had the pleasure of attending the annual Canadian Association of Insolvency and Restructuring Professionals (CAIRP) Insolvency and Restructuring Forums in April and May. We both had many interesting conversations with Licensed Insolvency Trustees (LITs) from across the country and we appreciated the opportunity to hear about the issues that mattered most to trustees.

Your input concerning this edition or regarding issues of importance to the insolvency community is always welcome. Let us know what you think or inform the OSB Communications team if you have a topic you would like to see covered in a future issue of OSB News.

Bill James
Superintendent of Bankruptcy


Licensed Insolvency Trustee: Tools and information on the requirements of the new directive

With Directive No. 33, Trustee Designation and Advertising, in full effect, trustees are now required to use the new designation, "Licensed Insolvency Trustee," and to discontinue the usage of the "Trustee in Bankruptcy" title. This directive has been in effect since March 31, 2016. The OSB has published new materials to support public awareness of the new designation and assist consumers in making informed decisions when seeking help to resolve serious financial difficulties.

This information includes:

LITs are invited to share this content with debtors and with others who could benefit from it in an effort to support public awareness of the new regulatory designation.

Compliance validation

We are pleased to report that 99% of active LITs have entered into consent agreements with the OSB authorizing the use of LIT as an official mark. In addition, the vast majority of LIT websites already include clear, factual information on what the term "LIT" means, and representations outside the regulatory definition have been few to date.

Based on our compliance monitoring activities, we have highlighted a few things that LITs need to take into account:

  • the directive applies to both corporate and individual trustees
  • while trustees may continue to use "TIB" during the transition to "LIT", as prescribed by the directive, they should plan on actively phasing out the use of the term "TIB" by April 1, 2017, after which only the term "LIT" may be used
  • the directive applies in all cases where trustees are communicating or making representations regarding insolvency-related services, including, for example, LinkedIn profiles
  • LITs should take steps to update all forms of representation and consumer advertising, including, but not limited to, websites, letterhead, business cards, and office signage

Full and detailed implementation information on requirements can be found in the Implementation information for Licensed Insolvency Trustees regarding Directive No. 33, Trustee Designation and Advertising.

It is an offence for any person not holding a trustee licence to use the designation "Licensed Insolvency Trustee" or "LIT", or to act as a licensed trustee. Those found guilty may be subject to summary conviction and liable to a fine, imprisonment or both.

To file a complaint about someone misrepresenting themselves as an LIT, please contact the OSB's Service Centre at the following phone number: 1-877-376-9902.


Reminder: key changes, Directive No. 5R5, Estate Funds and Banking

The OSB would like to remind all LITs of the key changes that came into force on May 9, 2016, as part of Directive No. 5R5, Estate Funds and Banking:

Trust Transfer Account: to facilitate electronic transactions, LITs may now use a trust transfer account to receive electronic payments from debtors and the OSB. LITs may also receive payments for estate files using a debit machine within their office.
Monthly Trust Account Reconciliations: for monthly trust account reconciliations, LITs now have the option to sign reconciliations for all trust accounts or a single attestation.
Estate Filing Fees: estate filing fees may be paid from either an estate trust account or the LIT’s corporate account.

These amendments were brought to the directive to provide efficiencies for LITs and address technological advances in banking. For any questions pertaining to this directive, please contact your local OSB office.


Update on 2016 Oral Board of Examination

This spring, thirty candidates participated in the OSB's Oral Board of Examination. The results were extremely positive, twenty-four licences were recommended by board members. The 80% success rate is the highest observed since the new competency-based process was implemented three years ago. The OSB would like to thank the LITs and insolvency lawyers who participated in this very important process.

For three years now, the OSB has instituted numeric trends for the Oral Board Examination process. Notably, there has been a decline in the number of candidates taking the Competency-Based National Insolvency Exam (CNIE), as well as a decline in the proportion of candidates who were successful. There was a drop this year from approximately 55% to 36%. The data is proving useful for licensing policy analysis, as well as for annual meetings with CAIRP regarding the qualification process.

Figure 1: Numeric trends for Oral Boards

Numeric trends for Oral Boards
Long description for Figure 1

This stacked bar graph shows the number of candidates who passed or failed the Competency-Based National Insolvency Exam (CNIE), as well as the number of first-time and repeat candidates who passed or failed the Oral Boards in the 2013-2014, 2014-2015 and 2015-2016 periods.

The x-axis represents zero, with the portion of the bars above the x-axis representing those who passed and the portion of the bars below the x-axis representing those who failed. The first bar for each training period is for the CNIE candidates, with the bar shaded blue above the line (for those who passed) and shaded grey below the line (for those who failed). The second bar for each training period represents those who participated in the Oral Boards for the first time; the bar is shaded green above the line (for those who passed) and shaded yellow below the line (for those who failed). The third bar for each training period represents those who repeated the Oral Boards; the bar is shaded green above the line (for those who passed) and shaded yellow below the line (for those who failed). The graph lists the number of participants for each category and the percentages for those who passed.

In the 2013 to 2014 training period, fifty-four candidates (representing 54%) passed the CNIE; forty-six candidates failed. For the Oral Boards in that period, thirty-six first-time candidates (69%) passed and sixteen failed; sixteen repeat candidates (72%) passed and 6 failed.

In the 2014 to 2015 training period, thirty candidates (representing 42%) passed the CNIE; forty-one candidates failed. For the Oral Boards in that period, twenty-two first-time candidates (68%) passed and sixteen failed; sixteen repeat candidates (80%) passed and 4 failed.

In the 2015 to 2016 training period, nineteen candidates (representing 36%) passed the CNIE; thirty-four candidates failed. For the Oral Boards in that period, fourteen first-time candidates (82%) passed and 3 failed; ten repeat candidates (76%) passed and 3 failed.


New research paper on consumer proposals now available

The OSB recently released a research paper reporting on statistical trends in consumer proposal filings since legislative changes took place in 2009.

The main change that occurred to the BIA in 2009 as it related to consumer (Division II) proposals, consisted of the increase in the net debt (total debt minus mortgage debt on principal residence) ceiling from $75,000 to $250,000.

Key observations included a significant increase in the number of Division II proposals by individuals who were previously ineligible to file a consumer proposal. The majority were new proposal filers who had net debts in the $75,000 to $150,000 range, rather than in the $150,000 to $250,000 range.

For individuals who would have been previously ineligible to file, those who submitted after 2009 had a lower relative payment agreed to by their creditors ("cents on the dollar"), but a higher absolute payment agreed to by their creditors ("total dollar amounts").

The research paper entitled Consumer Proposals in Canada After the 2009 Legislative Amendments to the Bankruptcy and Insolvency Act can be requested via the OSB website.

Recent trends in consumer proposals

The trend to growth in the proportion of consumer proposals as a percentage of total consumer filings continued in 2015, in all regions. The national rate reached 48% in 2015. In Eastern Canada (Quebec and the Maritimes), growth in consumer proposals has been absolute, with volumes almost doubling since 2011. In contrast, in Ontario, the absolute number of consumer proposals has decreased since 2011, where the growth in proportion of proposals arises from the more significant decline in bankruptcy filings.

Figure 2: Consumer proposal growth and volume

Consumer proposal growth and volume
Long description for Figure 2

This line graph compares the growth in the proportion of consumer proposals as a percentage of total consumer filings for Office of the Superintendent of Bankruptcy Canada (OSB) regions of East, Ontario and West, as well as for Canada overall, for each year in the 2011 to 2015 period. On the left of the graph is the scale for proportion of consumer proposals: it starts at 10% and increases to 60%, in increments of ten.

To the right of the graph is the legend. East region is represented by a red line with squares marking the data points. Ontario region is represented by a dark blue line with diamonds marking the data points. West region is represented by a green line with triangles marking the data points. Canada is represented by a turquoise line with an X on the diamonds marking the data points.

Looking at all four lines together, all regions showed some increase in the proportion consumer proposals represent of total consumer filings over the 2011 to 2015 period, with West region having the sharpest increase and Ontario region having the slowest rise. Throughout the 2011 to 2015 period, Ontario region had the highest proportion of consumer proposals, and East region had the lowest proportion. West region had the third-lowest proportion in 2011, 2012 and 2013; in 2014 and 2015, however, West region’s proportion of consumer filings climbed higher than the proportion for all of Canada.

In 2011, consumer proposals made up about 36.7% of all consumer filings in Canada. By region, consumer proposals in Ontario region made up about 49.5% of all consumer filings, in West region, about 31.3%, and in East region, 25.9%.

In 2012, consumer proposals made up about 39.8% of all consumer filings in Canada. By region, consumer proposals in Ontario region made up about 51.0% of all consumer filings, in West region, about 36.7%, and in East region, about 29.9%.

In 2013, consumer proposals made up about 41.9% of all consumer filings in Canada. By region, consumer proposals in Ontario region made up about 50.8% of all consumer filings (a slight drop), in West region, about 41%, and in East region, about 34.6%.

In 2014, consumer proposals made up about 45.4% of all consumer filings in Canada. By region, consumer proposals in Ontario region made up about 53.5% of all consumer filings, in West region, about 47.5%, and in East region, about 38.3%.

In 2015, consumer proposals made up about 48.2% of all consumer filings in Canada. By region, consumer proposals in Ontario region made up about 55.3% of all consumer filings, in West region, about 52.5%, and in East region, about 41.1%.

The graph includes a table below it, listing the volume of consumer proposals for the OSB’s regions in 2011 to 2015 period.

In 2011, Canada had 45,006 consumer proposals, broken down by 11,986 in East region, 24,931 in Ontario region and 8,089 in West region.

In 2012, Canada had 46,903 consumer proposals, broken down by 13,809 in East region, 24,145 in Ontario region and 8,949 in West region.

In 2013, Canada had 49,454 consumer proposals, broken down by 17,531 in East region, 22,361 in Ontario region and 9,562 in West region.

In 2014, Canada had 53,211 consumer proposals, broken down by 20,311 in East region, 21,874 in Ontario region and 11,026 in West region.

In 2015, Canada had 58,203 consumer proposals, broken down by 22,878 in the region, 21,977 in Ontario region and 13,348 in West region.


Updated insolvency trends for 2015

The following are some of the latest statistics on insolvencies in Canada, including the average age of bankruptcy and proposals, BIA corporate filings, large corporate restructurings, and consumer proposals. This information was presented at the CAIRP Insolvency and Restructuring Forums in April and May 2016, and provides insight into the overall trends in insolvency filings under the BIA and the Companies’ Creditors Arrangements Act (CCAA).

The number of new filings increased slightly in 2015, and remained higher than closings, which have increased significantly year after year. As a result, open inventory increased slightly to 394,000 files. Open inventory for proposals, which represented 36% of files in 2011, has steadily increased to reach 54% in 2015.

Average age of bankruptcy and proposals

Over the past five years, the average age of open bankruptcy files remained relatively stable at about 23.5 months. The average age of open proposals has increased steadily from 24 months in 2011 to 28 months in 2015.

Figure 3: Average age of bankruptcy and proposals

Average Age of Bankruptcy and Proposals
Long description for Figure 3

This chart combines a stacked vertical bar graph and a line graph. The stacked bars are blue and yellow, with the blue part of the bars on the top representing all open inventory for bankruptcies and the yellow part of the bars on the bottom representing all open inventory for proposals. The line graph has a red line representing new files and a green line representing closed files. The chart compares data for these categories for each year in the 2011 to 2015 period. The scale on the left side of the chart is for the number of new and closed files (the red and green lines). It starts at 25,000 and goes to 145,000, in increments of 15,000. The scale on the right side of the chart is for the number of files in open inventory (the bars). It starts at 25,000 and goes to 375,000, in increments of 50,000.

Each bar also states the number of bankruptcy files open and the number of proposal files open during the year.

In 2011, there were 242,541 open bankruptcy files and 138,337 proposal files, with about 127,774 new files and 125,321 files closed during the year.

In 2012, the number of open bankruptcy files dropped to 222,804 while the number of proposal files jumped to 160,271; the same year, the number of new files decreased to about 122,751, and the number of files closed decreased to about 120,511.

In 2013, the number of open bankruptcy files further dropped, to 205,903, while the number of proposal files further increased, to 179,354; the same year, the number of new files stayed about the same, at 122,959 files, and the number of files closed also stayed the same at about 120,719.

In 2014, the number of open bankruptcy files continued to decline, reaching 194,272, while the number of proposals continued to climb, reaching 197,098; the same year, the number of new files stayed about the same at around 122,269, while the number of files closed decreased to about 116,118.

In 2015, the number of open bankruptcy files further declined to 181,227, while the number of proposals increased further to 212,750; the same year, the number of new files increased to 125,716 and the number of files closed increased to about 123,079.

BIA corporate filings

New corporate filings were down slightly in 2015, after two years of increases. The number of corporate file closings also fell in 2015. As a result, open inventory reached 10,739 in 2015, which is still less than the record levels set in 2011.

Figure 4: BIA corporate filings and file closings

BIA Corporate Filings and File Closings
Long description for Figure 4

This chart combines a vertical bar graph with a line graph. The blue bars represent all open corporate files under the Bankruptcy and Insolvency Act (or BIA). The line graph shows a red line representing new corporate files and a green line representing closed corporate files. The chart compares data for these categories for each year in the 2011 to 2015 period. The scale on the left side of the chart is for the number of new and closed corporate files (the red and green lines). It starts at zero and goes to 4,500, in increments of 500. The scale on the right side of the chart is for open corporate files (the blue bars). It starts at zero and goes to 12,000, in increments of 2,000.

Each bar also states the number of files open during the year.

In 2011, there were 11,150 open BIA corporate files, with 2,590 new corporate files opened and 2,877 corporate files closed.

In 2012, the number of open BIA corporate files dropped to 10,377; the number of new corporate files also dropped slightly, to about 2,507, while the number of files closed jumped to about 3,280.

In 2013, the number of open BIA corporate files stayed about the same, at 10,388 files; the number of new corporate files increased to 2,763, while the number of closed dropped to 2,752.

In 2014, the number of open BIA corporate files increased slightly to 10,509; the number of new corporate files increased to almost 2,957 files, while the number of files closed increased to about 2,836.

In 2015, the number of open BIA corporate files increased to 10,739; the number of new corporate files dipped slightly, to about 2,881 and the number of files closed dipped to 2,651.

Large corporate restructurings

Large BIA corporate proposals (those with over $5 million in liabilities) dropped to ninety-six in 2015, from one hundred and sixteen recorded in 2014. This decrease comes after two consecutive years of growth. In contrast, CCAA filings substantially increased in 2015 to a level similar to that recorded in 2011. This sharp increase is attributable to new filings in Quebec and the West.

Figure 5: Large BIA corporate proposals and CCAA filings

Large BIA Corporate Proposals and CCAA Filings
Long description for Figure 5

This vertical bar graph compares the number of files opened each year for large corporate proposals under the Bankruptcy and Insolvency Act (or BIA) with the number of files opened under the Companies’ Creditors Arrangement Act (or CCAA) over the 2011 to 2015 period. For each year, a green bar on the left represents the large BIA corporate proposals and a blue bar on the right represents CCAA filings. The scale for number of files is on the left side and goes from zero to 140 in increments of 20. A table underneath the bars lists the numbers filed in each year.

For every year shown, the number of large BIA corporate proposals is more than double the number of CCAA filings. Although the numbers in both categories hold steady for 2011 and 2012, in the 2013 to 2015 period, as one category increases, the other category decreases.

In 2011, there were 97 large BIA corporate proposals and 40 CCAA filings.

In 2012, both types of files dipped slightly, down to 93 large corporate files and 39 CCAA files.

In 2013, the number of large BIA corporate proposals increased to 103 while the number of CCAA filings dropped to 32.

In 2014, the number of large BIA corporate proposals further increased to 116 while the number of CCAA filings continued to drop, down to 25.

These trends reversed in 2015, with the number of large BIA corporate proposals dropping to 96 and the number of CCAA filings jumping to 40.


Photo of Bill James, Superintendent of Bankruptcy

New Licensed Insolvency Trustee web portal coming soon

Work continues on the development of the Trustee Licence Web Portal, which will function as a simplified web-based, self-serve interface for trustee candidates and LITs. A group of LITs was consulted earlier this year to confirm the design of the new portal. The new application will integrate all licensing administrative functions into one system. LITs will be able to view, update and maintain their licence information so that they can remain in good standing and make requests for changes, including those involving new corporate licences. Based on current planning, all elements of the new portal will be rolled out to LITs by spring 2017.

In order to better serve the public, consumers will be able to find LITs in their area with the enhanced LIT Directory, which will include the option to search for an LIT on a map.

For candidates who would like to become LITs, applications for licences will be available via the portal. Those preparing for the 2017 Oral Board process will be able to apply through the portal beginning in November 2016. The deadline for applications is January 16, 2017, and the Oral Boards will take place in February and March 2017. Keep an eye on the OSB website for further announcements and instructions.

 

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