A federal bill working its way through Parliament will, if passed and proclaimed into law, grant super-priority for unfunded pension liabilities of insolvent companies. This enhanced priority will be available when the company enters into formal insolvency proceedings under either the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act, the two main federal statutes dealing with insolvency.
Workers’ groups applaud the move, but others point out that such super-priority might make it harder for struggling companies to turn around, as lenders will be even more reluctant to provide support, given such an overhanging liability. This in turn would lead to more business failures and increasing job losses, hardly a worker-friendly result.
In addition, the prospect of such special treatment for pensions may make employers resist agreeing to pension benefits in the first place. According to a recent article in the Globe and Mail, the percentage of private-sector employees with defined benefit pension plans has declined in the last two decades from 20 per cent to nine per cent.
Bill c-228 has passed all readings in the House of Commons and has moved to the Senate, where it recently passed first reading.
If you are a worker with pension entitlement or a business with pension obligations, this coming change could affect your rights, and informed advice is critical in plotting the best strategy.
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