Businesses in British Columbia that are struggling to get by financially should be aware that there are multiple options that may be available to resolve the issue. Seeking bankruptcy protection to avoid having to liquidate assets is one option. When this route is the one selected, there is a process in place that needs to be followed. Throughout that process a Licensed Insolvent Trustee will play a role.
What is a Licensed Insolvency Trustee?
Also referred to as a Chartered Insolvency and Restructuring Professional (CIRP) or a Trustee in Bankruptcy, a Licensed Insolvency Trustee (LIT) is authorized to administer bankruptcies and other insolvency proceedings. To be eligible for a licence, LITs must have successfully completed a formal course of study and must have demonstrated experience and knowledge in the insolvency industry. Once licensed, they must comply with all applicable directives, regulations and legislation for protecting the public.
LITs are subject to inspections, audits and regular reviews to ensure compliance with the rules set forth in the Bankruptcy and Insolvency Act and the Code of Ethics for Trustees. If any issues are uncovered in the course of those inspections, audits or reviews, an investigation could lead to discipline such as the suspension or cancellation of their licence.
What is a LIT responsible for?
All bankruptcies and all proposal proceedings under the Bankruptcy and Insolvency Act require the involvement of a LIT. In proposal proceedings, a LIT will work with the business on developing and filing a proposal and will also coordinate a meeting with creditors to vote on the acceptability of the proposal. The LIT provides a report for that meeting regarding how much creditors could expect to receive under the proposal as compared to what they would receive in a bankruptcy. If the proposal is accepted, the LIT handles the distribution of the funds from the debtor to the creditors.
Matters related to bankruptcy and insolvency in Canada can be complicated. Consult a lawyer with a thorough understanding of this area of the law to avoid the many pitfalls.