December 16, 2022
On November 23, 2022, the House of Commons passed Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985. Bill C-228 proposes amendments to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA) which, if passed by the Senate and Bill C-228 becomes law, will give “super priority” to Canadian DB registered pension plan deficits in insolvency proceedings.
Bill C-228 introduces fundamental changes to the treatment of defined benefit (DB) registered pension plan deficits in insolvency proceedings. Currently, DB registered pension plan deficits are unsecured creditors. If Bill C-228 becomes law, a deficit under any Canadian DB registered pension plan will rank above the claims of secured creditors.
More specifically, the amendments to the BIA provide that:
The amendments to the CCAA provide that the court may sanction a compromise or an arrangement only if it provides for payment of the following unpaid amounts to the pension fund:
Similar changes to the BIA and CCAA have been introduced numerous times in the past but have never been adopted. If Bill C-228 becomes law it will undoubtedly impact lending arrangements for employers that maintain DB registered pension plans.
The Bill has been passed by the House of Commons and is currently at second reading in the Senate. It must pass through the Senate’s second reading, committee and report stage, and third reading. If it is passed by both the House of Commons and the Senate, the Bill will receive Royal Assent and come into force on that day. For existing DB registered pension plans the changes become effective on the 4th anniversary of Bill C-228 coming into force.
We will continue to monitor Bill C-228 and report on whether it is passed by the Senate. If you have any questions about Bill C-228 please contact any of the pension law experts at our Firm
To view the bill as passed by the House of Commons, please click on more information below: