Introduction to the Symposium on Consumer Bankruptcies

The purpose of this Symposium is to make available to a larger readership a selection of the papers and comments that were presented at the Conference on the Contemporary Challenges of Consumer Bankruptcies in a Comparative Context held at the Faculty of Law,University of Toronto, 21-22 August 1998

Introduction to the Symposium on Consumer Bankruptcies

The purpose of this Symposium is to make available to a larger readership a selection of the papers and comments that were presented at the Conference on the Contemporary Challenges of Consumer Bankruptcies in a Comparative Context held at the Faculty of Law,University of Toronto, 21-22 August 1998

The Philosophy and Design of Contemporary Consumer Bankruptcy Systems: A Canada-United States Comparison

The rapid increase in the number of consumer bankruptcies in Canada and the United States over the past fifteen years has again focused attention on the philosophy and design of modern insolvency systems, and on the similarities and differences in the approaches adopted in Canada and the United States. In this article, the author points out that the single most important difference is that the United States has historically subscribed to the debtor\u27s right to a fresh start after surrendering the debtor\u27s non-exempt property, whereas Canadian law never has, and does not now, confer an absolute right of discharge. Although critical of many aspects of the recent amendments to the Canadian Bankruptcy and Insolvency Act (BIA), the author concludes that the qualified fresh-start policy followed by Canadian law is conceptually sound. At the same time, he indicates his preference for the more flexible, judicially-supervised surplus income regime in force before 1997, in place of the mandatory, surplus-income payment requirements introduced in the 1997 amendments to the BIA

The Philosophy and Design of Contemporary Consumer Bankruptcy Systems: A Canada-United States Comparison

The rapid increase in the number of consumer bankruptcies in Canada and the United States over the past fifteen years has again focused attention on the philosophy and design of modern insolvency systems, and on the similarities and differences in the approaches adopted in Canada and the United States. In this article, the author points out that the single most important difference is that the United States has historically subscribed to the debtor\u27s right to a fresh start after surrendering the debtor\u27s non-exempt property, whereas Canadian law never has, and does not now, confer an absolute right of discharge. Although critical of many aspects of the recent amendments to the Canadian Bankruptcy and Insolvency Act (BIA), the author concludes that the qualified fresh-start policy followed by Canadian law is conceptually sound. At the same time, he indicates his preference for the more flexible, judicially-supervised surplus income regime in force before 1997, in place of the mandatory, surplus-income payment requirements introduced in the 1997 amendments to the BIA

Is incorporation (with Iimited Iiability) too easily available ?

La constitution en corporation de sociétés commerciales est facile et peu coûteuse au Canada, tant sous la Loi sur les sociétés par actions que sous les lois provinciales correspondantes. Les avantages qu'en tirent les actionnaires sont aussi évidents que connus, surtout en ce qui a trait à la limite de leur responsabilité. Toutefois, la constitution en corporation, du fait de sa simplicité, peut porter atteinte de façon importante aux intérêts des créanciers volontaires et non volontaires, lorsque la société n'est plus en mesure de satisfaire à ses obligations. L'examen que fait l'auteur des divers moyens légaux et judiciaires destinés à réprimer l'utilisation abusive de la forme corporative fait ressortir l'existence de sérieuses déficiences. Par ailleurs, il semble peu probable que les législateurs renverseront la tendance centenaire, soit en rendant plus difficile la constitution en corporation des sociétés commerciales, ou en retirant aux administrateurs et aux actionnaires des sociétés à propriété restreinte la protection de la responsabilité limitée. De l'avis de l'auteur, il existe des recours de « seconde classe » qui, même s'ils sont moins efficaces, apparaissent beaucoup plus réalistes. Parmi ces moyens de protection, on pourrait ainsi exiger que toute corporation dépose ses états financiers auprès d'une autorité publique. De plus, les administrateurs pourraient être tenus personnellement responsables des dettes de la société si celle-ci poursuivait ses affaires, tout en étant dans une situation d'insolvabilité manifeste et durable.The incorporation of new businesses in Canada is remarkably cheap and easy, both under the Canada Business Corporations Act and under the provincial corporations statutes. The benefits conferred on shareholders by incorporation are obvious and well known, particularly the advantage of limited liability. Easy incorporation however also imposes significant burdens on the corporation's voluntary and involuntary creditors if the corporation cannot meet its liabilities. The author examines the various statutory and judicially created techniques for restraining the abuse of the corporate form, and finds them seriously deficient. Nevertheless, he sees no likelihood of the legislature reversing a century old trend either by making incorporation much more difficult or by denying directors or shareholders in closely held corporations the protection of limited liability. He concludes therefore that ''second order'' remedies are much more realistic, even if less efficient. He also recommends several new remedies, including the requirement that all corporations must file a copy of their financial statements in a public office and that directors will be held personally responsible for the corporation's debts if the corporation continues to trade when it is clear that it is insolvent and likely to remain so