Companies’ Creditors Arrangement Act

Marginal note:Certain rights limited

• 34 (1) No person may terminate or amend, or claim an accelerated payment or forfeiture of the term under, any agreement, including a security agreement, with a debtor company by reason only that proceedings commenced under this Act or that the company is insolvent.

• Marginal note:Lease

  (2) If the agreement referred to in subsection (1) is a lease, the lessor may not terminate or amend the lease by reason only that proceedings commenced under this Act, that the company is insolvent or that the company has not paid rent in respect of any period before the commencement of those proceedings.

• Marginal note:Public utilities

  (3) No public utility may discontinue service to a company by reason only that proceedings commenced under this Act, that the company is insolvent or that the company has not paid for services rendered or goods provided before the commencement of those proceedings.

• Marginal note:Certain acts not prevented

  (4) Nothing in this section is to be construed as

  • (a) prohibiting a person from requiring payments to be made in cash for goods, services, use of leased property or other valuable consideration provided after the commencement of proceedings under this Act;

  • (b) requiring the further advance of money or credit; or

  • (c) preventing a lessor of aircraft objects under an agreement with the company from taking possession of the aircraft objects

    • (i) if, after proceedings commence under this Act, the company defaults in protecting or maintaining the aircraft objects in accordance with the agreement,

    • (ii) 60 days after the day on which proceedings commence under this Act unless, during that period, the company

      • (A) remedied the default of every other obligation under the agreement, other than a default constituted by the commencement of proceedings under this Act or the breach of a provision in the agreement relating to the company’s financial condition,

      • (B) agreed to perform the obligations under the agreement, other than an obligation not to become insolvent or an obligation relating to the company’s financial condition, until the proceedings under this Act end, and

      • (C) agreed to perform all of the obligations arising under the agreement after the proceedings under this Act end, or

    • (iii) if, during the period that begins on the expiry of the 60-day period and ends on the day on which proceedings under this Act end, the company defaults in performing an obligation under the agreement, other than an obligation not to become insolvent or an obligation relating to the company’s financial condition.

• Marginal note:Provisions of section override agreement

  (5) Any provision in an agreement that has the effect of providing for, or permitting, anything that, in substance, is contrary to this section is of no force or effect.

• Marginal note:Powers of court

  (6) On application by a party to an agreement or by a public utility, the court may declare that this section does not apply — or applies only to the extent declared by the court — if the applicant satisfies the court that the operation of this section would likely cause the applicant significant financial hardship.

• Marginal note:Eligible financial contracts

  (7) Subsection (1) does not apply

  • (a) in respect of an eligible financial contract; or

  • (b) to prevent a member of the Canadian Payments Association from ceasing to act as a clearing agent or group clearer for a company in accordance with the Canadian Payments Act and the by-laws and rules of that Association.

• Marginal note:Permitted actions

  (8) The following actions are permitted in respect of an eligible financial contract that is entered into before proceedings under this Act are commenced in respect of the company and is terminated on or after that day, but only in accordance with the provisions of that contract:

  • (a) the netting or setting off or compensation of obligations between the company and the other parties to the eligible financial contract; and

  • (b) any dealing with financial collateral including

    • (i) the sale or foreclosure or, in the Province of Quebec, the surrender of financial collateral, and

    • (ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.

• Marginal note:Restriction

  (9) No order may be made under this Act if the order would have the effect of staying or restraining the actions permitted under subsection (8).

• Marginal note:Net termination values

  (10) If net termination values determined in accordance with an eligible financial contract referred to in subsection (8) are owed by the company to another party to the eligible financial contract, that other party is deemed to be a creditor of the company with a claim against the company in respect of those net termination values.

• Marginal note:Priority

  (11) No order may be made under this Act if the order would have the effect of subordinating financial collateral.