OCTOBER 2006 ARM'S LENGTH At a distance, not familiar or on friendly terms, not related by blood or marriage, effectively beyond the length of your arm. B.I.A. The Bankruptcy and Insolvency Act. BANK ACT SECURITY, SECTION 427 A security available only to a chartered bank given by any wholesale or retail purchaser, by a manufacturer, by an aquaculturist, by a farmer, by a fisherman or by a forestry producer. The security will be inventory, raw material, production, packaging, crops and equipment, fertilisers, feeds, etc. Section 427 Bank Act Security was formerly Section 178 Security and formerly still, Section 88 Security. BANKRUPTCY APPLICATION An application by a creditor to the Court for a bankruptcy Order adjudging a debtor bankrupt (formerly called a Bankruptcy Petition). BANKRUPTCY ORDER An Order adjudging one bankrupt as a result of a Bankruptcy Application (formerly called a Receiving Order). BUSINESS REVIEW A review of the operations of the business for the purpose of reporting to the management, owners and/or creditors; scope and purpose of the review are normally set out in an exchange of letters between the appointing party and the reviewer. C.C.A.A. Companies' Creditors Arrangement Act, a Statute to restructure companies with debts of 5 million dollars or more. CIRP Chartered Insolvency and Restructuring Professional. This is the designation given a member of the Canadian Association of Insolvency and Restructuring Professionals. CONSUMER PROPOSAL A proposal (defined below) available to individuals who owe, apart from mortgage financing for their principal residence, less than $75,000. The administration is dealt with "summarily". Pending legislation, if enacted will increase this to $250,000. FIDUCIARY Relating to, or involving a confidence or trust. A person holding the character of a trustee in respect to the trust and confidence involved in it and the scrupulous good faith and candour which it requires. INDEMNITY A commitment given by one person to make good any loss another may incur; e.g. a bank may give an indemnity to a Receiver-Manager. INSPECTORS Individuals appointed, normally creditors, to authorise and direct Trustees in the administration of bankrupt estates and estates subject to proposals (compromises), pursuant to the Bankruptcy and Insolvency Act. INTERIM RECEIVER A licensed Trustee in Bankruptcy appointed by Court Order: Without notice to the Debtor while a Bankruptcy Application (formerly Petition) to adjudge a debtor bankrupt is before the Courts. The Interim Receiver is to preserve the assets; or to preserve the assets between the time a Notice of Intention to enforce security is sent by a secured creditor to a debtor, or if the Court orders, to control the business or liquidate it; or to preserve assets from the date that a Notice of Intention to make a proposal is filed or from the date of the proposal until such time as the proposal is voted upon. JUDICIAL TRUSTEE An appointment of a trustee by the Court under special circumstances. The powers can be broader than under a bankruptcy, and perhaps broader than under a CCAA appointment. LIQUIDATOR One appointed to wind up the affairs of a company. This is normally in a solvency situation, as opposed to an insolvency. MONITOR A monitor is a person, usually a CIRP, appointed by a contract or Court Order to monitor a debtor's operations and report to a lender or to the Court. NON ARM'S LENGTH Related parties, on familiar or friendly terms, close to the chest, not an arm's length away. OFFICIAL RECEIVER An officer of the Court having jurisdiction in a particular bankruptcy division of Canada reporting to the Superintendent of Bankruptcy. Official Receivers are located in Bankruptcy Branch offices and perform administrative duties as specified by the Act with respect to individual estates. This is a bankruptcy term, not a receivership term. ORDINARY CREDITOR A general creditor who has no priority, no preferred treatment and no security. P.M.S.I. Purchase Money Security Interest. A superior type of security interest under most Personal Property Security Acts whereby the lender who provides the funds to finance the purchase of an asset obtains the first secured charge on the asset. It is usually spoken as a "Pimsi" and written as "PMSI". P.P.S.A. Personal Property Security Act, a statute used in many provinces, including British Columbia, regulating the taking and enforcement of security. PETITION IN BANKRUPTCY An old term, now called a Bankruptcy Application. PREFERENCE An arm's length transaction occurring within three months prior to the date of bankruptcy which prefers one creditor over another, or a non-arm's length transaction occurring within 12 months prior to the date of bankruptcy having a similar effect. Preferences are reviewable by a trustee in bankruptcy and can be set aside, thus recovering for the benefit of all creditors payments made or assets taken out of the estate prior to bankruptcy. PREFERRED CREDITOR A creditor who is paid in priority to ordinary unsecured creditors as prescribed by the Bankruptcy and Insolvency Act, e.g. employee or landlord. PROPOSAL A compromise of debt between a debtor and its creditors, pursuant to the Bankruptcy and Insolvency Act. (Much like Chapter 11 of the U.S. Bankruptcy Code but with important differences.) RECEIVING ORDER An old term, now called a Bankruptcy Order. RECEIVER OR RECEIVER MANAGER An individual or corporation, a Trustee in Bankruptcy in the Province of British Columbia, appointed pursuant to an instrument or by Court Order to realise on one's security for the benefit of the security holder, or to realise assets subject to dispute, usually under a shareholders or matrimonial dispute. A Receiver may have management powers. REVIEWABLE TRANSACTION A person who has entered into a transaction with another person, not at arm's length (not related), shall be deemed to have entered into a reviewable transaction pursuant to the Bankruptcy and Insolvency Act. SECURITY AGREEMENT A verbal or written agreement between a secured party and a debtor giving the secured party a security interest in personal property. In some cases a written agreement is not necessary if the secured party is in possession of the collateral. SETTLEMENT A contract, covenant, transfer, gift and a designation of a beneficiary in an insurance contract to the extent that it is gratuitous or made for nominal consideration. Certain settlements are void pursuant to Section 91 of the Bankruptcy and Insolvency Act. STATEMENT OF AFFAIRS A specialized form of financial statement setting out the debtor's assets and liabilities - secured, preferred and unsecured. This document is usually prepared on short notice and from incomplete records. It is sworn to by an officer of the company and or by the bankrupt where applicable. The trustee often has a different opinion as to the value of the assets and the extent of liabilities included therein. SUMMARY ADMINISTRATION A personal bankruptcy where the realizable assets, net of secured claims, personal exemptions, and costs of administration, are not expected to exceed $10,000. SUPERINTENDENT OF BANKRUPTCY The person appointed by the Federal Government to supervise the administration of all estates in Canada. TRUSTEE IN BANKRUPTCY An individual or corporation licensed by the Superintendent of Bankruptcy pursuant to the Bankruptcy and Insolvency Act. The property of the bankrupt vests in the trustee on behalf of the creditors. UNSECURED CREDITOR A creditor who holds no security but is either preferred or ordinary but is unsecured.