Hon. O. H. CAHAN (Secretary of State) moved for leave to introduce Bill No. 77, to facilitate compromises and arrangements between companies and their creditors.
He said: Mr. Speaker, at the present time any company in Canada, whether it be organized under the laws of the Dominion of Canada or under the laws of any of the provinces of Canada, which becomes bankrupt or insolvent is thereby brought under either the Bankruptcy Act or the Winding-up Act. These acts provide for the liquidation of the company under a trustee in bankruptcy in the one case and under a liquidator in the other, and the almost inevitable result is that the organization of the company is entirely disrupted, its good-will depreciated and ultimately lost, and the balance of the assets sold by the trustees or the liquidator for whatever they will bring. There is no mode or method under our laws whereby the creditors of a
Companies and Creditors
company may be brought into court and permitted by amicable agreement between themselves to arrange for a settlement or compromise of the debts of the company in such a way as to permit the company effectively to continue its business by its reorganization. Sections 144 and 145 of the Companies Act of Canada provide that the shareholders of a company may meet to adjust the relationship between classes of shares in the company. Several of the provincial acts also contain provisions whereby the shareholders may meet to make compromises and arrangements between the shareholders. Under the British North America Act, bankruptcy and insolvency fall exclusively within the legislative jurisdiction of the parliament of Canada.
At the present time some legal method of making arrangements and compromises between creditors and companies is perhaps more necessary because of the prevailing commercial and industrial depression, and it was thought by the government that we should adopt some method whereby compromises might be carried into effect under the supervision of the courts without utterly destroying the company or its organization, without loss of good-will and without forcing the improvident sale of its assets. Therefore, we have studied carefully the provisions of the English Companies Act of 1929. This act contains a provision to permit such compromises and arrangements with creditors and I should like to read section 153 of that act upon which this bill is based. It reads:
(1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the court may, on the application in a summary way of the company or of any creditor or member of the company, or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be summoned in such manner as the court directs.
(2) If a majority in number representing three-fourths in value of the creditors or class of creditors, or members or class of members, as the case may be, present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors or the class of creditors, or on the members or class of members, as the ease may be, and also on the company or, in the case of a company in the course of being w-ound up, on the liquidator and contributories of the company.
In attempting to draft an act which will certainly be within the legislative competence of the parliament of Canada we felt that we should not seemingly entrench upon provincial jurisdiction so far as to provide for compromises between classes of shareholders of provincial companies, and therefore we have provided in this bill, which I am about to introduce, that the provincial law shall apply in respect of provincial companies in so far the the compromise may affect the shareholders, but we provide also for the convening of a meeting of creditors of any company which is bankrupt or insolvent under supervision of the court, so that, if possible, an amicable compromise or arrangement may be arrived at; and, in so far as such compromise or arrangement may necessitate with respect to provincial companies compromises or arrangements between classes of shareholders we have authorized the court to proceed conjointly under this proposed act and the provincial acts for the purpose of convening meetings of shareholders or classes of shareholders.
The bill as drafted is quite simple. It seems to the government very necessary that such a measure should be introduced, and I commend it to the careful consideration of the members of the house.
Motion agreed to and bill read the first time.