Reinventing Bankruptcy Laws: A History of the Companies’ Creditors Arrangement Act

Oishani Nandi reviews “Reinventing Bankruptcy Law”, a critical analysis detailing the evolution of the interpretation of the watershed Companies’ Creditors Arrangement Act (CCAA).

The Canadian Companies’ Creditors Arrangement Act (CCAA) is a legal provision that allows companies that have claimed bankruptcy and owe more than CAD 5 million to restructure their business operations. Historically, the CCAA was ratified by the Canadian Parliament during the global economic crisis in 1933, where the act facilitated the parties involved to arrive at a compromise to prevent an impending liquidation of the company’s assets. This legislation attempted to rectify the status-quo set by the Bankruptcy Act and the Winding-Up Act. These two policies led to the immediate liquidation of shareholders’ investments, showed no room for recovery for the business’ stakeholders, and led to dramatically high rates of unemployment. The 1993 version of the CCAA emphasized the creditors whereas the contemporary version aids the debtors. Reinventing Bankruptcy Law critiques the once-thought-to-be revolutionary Companies’ Creditors Arrangement Act.

Dr. Virginia Torrie, the author of Reinventing Bankruptcy Laws, is a member of the Faculty of Law at the University of Manitoba and the Editor-in-Chief of their Banking and Finance Law Review. With JD and LLM degrees from Osgoode Hall Law School of York University and a Ph.D. from Kent Law School, Torrie has demonstrated excellence through grants and awards in the field in which she practices. Torrie’s interdisciplinary research amalgamates concepts from streams such as socio-legal theory, the recursivity of law, and historical institutionalism to study the cyclical nature of changes in legal systems. The main focus of Torrie’s research lies in understanding the relationship between modern bankruptcy and insolvency laws and the rights of secured creditors. The book, Reinventing Bankruptcy Law examines the role that private bodies have on commercial affairs and policymaking. Throughout the book, Torrie asserts that the contemporary CCAA law was framed to satisfy the needs of powerful stakeholders looking to restructure borrowers. Reinventing Bankruptcy Laws takes a holistic and historical lens at analysing the Canadian Companies’ Creditors Arrangement Act.

Reinventing Bankruptcy Laws: A History of the Companies’ Creditors Arrangement Act, is primarily bifurcated into two parts, part one detailing the traditions and emerging practices surrounding insolvency in the period of the 1920s to the 1950s—an era encountering great economic depression—and part two traversing the transformation of the Companies’ Creditors Arrangement Act (CCAA) throughout the years of the 1970s to the 2000s. Amongst these two primary sections, the book fronts ten separate chapters to analyse the evolution and viability of the CCAA. Before the in-depth critical chapters in this book, Anthony Duggan, a member of the faculty of Law at the University of Toronto, explores the intention of Torrie’s work in the foreword: to demonstrate how the contemporary legal interpretation of the CCAA conflicts with the early intention and history of the policy. The author explores intricate concepts, pertinent to her critique in the first chapter titled “Historical Institutionalism and the Recursivity of Law.” This chapter sets out to explore the social sciences approach that examines the influence of various establishments on socio-economic-political institutions over time, ie. historical institutionalism and the notion that not only does the law come from books to legal practice but that legal practices also come back and return to form the law, ie. the recursivity of law. Delving into part one, “Traditions and Emerging Practices, the 1920s-1950s” comes the second chapter titled “Corporate Restructuring as Bondholder Remedy.” This section, through its many quotations—notably that of Baron Bowen, effectively highlights how corporate restructuring once evolved outside of insolvency law due to suspicions by legislators but now has evolved with bondholder remedy. Leading from the common theme in the second chapter, the third chapter “Enshrining a Bondholder Remedy in Federal Legislation”, as its name proposes, details how bondholder remedies are integrated with legislation. The subsequent chapter titled “Constitutional References and Changing Conceptions of Federalism, 1934-1937” is the fourth chapter in this book. Beginning with a quote from Harold E. Manning of the Fortnightly Law Journal, this chapter traverses the ever-changing notions of federalists; as during the global economic depression of 1933, there was rampant doubt as to the authority that federal powers had to legislate bankruptcy and insolvency without meddling with creditor rights. Chapter 5, “Efforts to Repeal the Companies’ Creditors Arrangement Act, 1938-1953” constructively breaks down the popular notion that wished to revoke the CCAA due to its flaws. Following this chapter, the book enters into its second part, “Transforming CCAA Law, 1970s-2000s.” Chapter 6—the first chapter of the second part—“New Lenders, New Forms of Lending and Stalled Bankruptcy Reforms, 1970s-1980s”, befittingly examines the dynamic shift in culture which took place in the years following the recovery from the great financial crisis of the 1930s. The succeeding chapter, “Purposive Interpretation and Proactive Judging” highlights the purposive approach which seeks to determine a legislating body’s intention to pass an act and increased involvement of judges. Chapter 8, “Judicial Sanction of Tactical Devices” begins with a quote highlighting the duty of a court from Wimmer J. in Re Norm’s Hauling Ltd. and discusses the perspectives on the flaws of bankruptcy proposals. In the penultimate chapter, “Formalising a Modern Debtor-in- Possession Restructuring Narrative,” Torrie reiterates the purpose of the CCAA being Canada’s first reorganisation statute and how by taking matters before the legal courts, the narrative of the CCAA can be reformed. The book culminates in a conclusion in chapter 10, effectively highlighting the assertions made in the previous chapters.

The famous English novelist, Arnold Bennet once famously quoted “Any change, even a change for the better is always accompanied by drawbacks and discomforts.” This very notion is what is embodied in Virginia Torrie’s book, Reinventing Bankruptcy Laws. This book takes a critical and yet unique approach to examining the history and the interpretations of a statute once considered to be revolutionary to restructuring bankrupt corporations. Overall, this book successfully sheds light on the reality of the Companies’ Creditors Arrangement Act and the steps that can be taken to reimagine it for the better.