Public Institutions Exempt from Bankruptcy Laws

Summary#

This bill changes two federal insolvency laws so that certain public institutions cannot use them. It amends the definitions of “corporation” in the Bankruptcy and Insolvency Act (BIA) and “company” in the Companies’ Creditors Arrangement Act (CCAA) to exclude public institutions that meet two tests: they receive government operating grants and they are subject to government policy directives on governance, accountability, finance, and administration (Bill, BIA s.2; Bill, CCAA s.2(1)). The bill does not list specific institutions.

• Excludes qualifying public institutions from BIA bankruptcy proceedings and CCAA restructurings (Bill, BIA s.2; Bill, CCAA s.2(1)).
• Prevents creditors from using these federal insolvency laws against such institutions (Bill, BIA s.2; Bill, CCAA s.2(1)).
• Shifts any debt workouts to government-led processes or other laws, not federal insolvency courts.
• No direct funding or fees are created by the bill.
• No separate coming-into-force clause is included; the text provides only the amendments to definitions.

What it means for you#

• Households and service users

  • Services from a public institution that meets both tests would not be restructured under the BIA or CCAA. Any financial crisis would be managed by the relevant government through policy or other statutes, not through federal insolvency courts (Bill, BIA s.2; Bill, CCAA s.2(1)).
  • The bill does not name which institutions qualify. Applicability would be case by case based on the two tests in the text.

• Workers and unions at affected institutions

  • Employers that meet both tests could not seek court protection under the CCAA to restructure contracts or obligations. Any changes would occur under public-sector labour and governance rules, not under the BIA/CCAA (Bill, CCAA s.2(1)).
  • Creditors could not initiate a bankruptcy against such institutions under the BIA (Bill, BIA s.2).

• Creditors, suppliers, and lenders

  • You could not file to place a qualifying public institution into bankruptcy under the BIA, nor could it seek CCAA protection to propose a plan to creditors (Bill, BIA s.2; Bill, CCAA s.2(1)).
  • Debt recovery would proceed through contract claims, negotiation, and government oversight outside the federal insolvency regime. Payment timing and recovery rates could change. Data unavailable.

• Provincial/territorial and local governments

  • Larger role in monitoring, intervening, or creating frameworks to handle financial distress at affected institutions, since federal insolvency courts would not be available (Bill, BIA s.2; Bill, CCAA s.2(1)).
  • If the bill becomes law, the change would apply once in force; the bill includes no separate coming-into-force clause.

• Pensioners and benefit plan members tied to affected institutions

  • Court-led adjustments to obligations under the CCAA/BIA would not be available for institutions that meet both tests. Any changes would be handled under public policy tools, not these federal insolvency processes (Bill, CCAA s.2(1); Bill, BIA s.2).

Expenses#

• Estimated net cost: Data unavailable.

• Key points:

  • No appropriations, new programs, taxes, or fees are created in the bill text.
  • No federal or provincial fiscal note identified. Data unavailable.
  • Potential indirect fiscal effects (for example, government support in a crisis or borrowing cost changes) are not quantified. Data unavailable.

Proponents' View#

• Protects essential public services from disruptive creditor-driven restructurings by excluding qualifying public institutions from BIA/CCAA proceedings (Bill, BIA s.2; Bill, CCAA s.2(1)).
• Keeps decisions about service levels, programs, and assets in elected governments’ hands, rather than in insolvency courts, when publicly funded institutions face distress (Bill, CCAA s.2(1)).
• Reduces the risk that court processes alter collective agreements or pensions at such institutions, because those federal tools would not apply (Bill, CCAA s.2(1)).
• Creates a clear national rule that public institutions meeting both tests are outside the federal insolvency regime, improving predictability (Bill, BIA s.2; Bill, CCAA s.2(1)).

Opponents' View#

• Removes a restructuring tool that can impose discipline and a timeline, which could make turnarounds slower or less certain for distressed institutions. Data unavailable.
• Limits creditor rights and may raise borrowing costs for affected institutions because lenders lose access to BIA/CCAA remedies; costs are not quantified. Data unavailable.
• The definition of “public institutions” relies on two tests and lists no entities, which may create legal uncertainty and litigation over who is covered (Bill, BIA s.2; Bill, CCAA s.2(1)).
• Shifts financial risk to governments and, indirectly, taxpayers if public funds are needed to stabilize institutions when federal insolvency tools are off the table. Data unavailable.