Bankruptcy Offenses
What is the Trustee’s in Bankruptcy obligation with respect to reviewing the conduct of individuals just prior to bankruptcy? What is a bankruptcy offense?
Under the Bankruptcy and Insolvency Act of Canada (“BIA”) and the Criminal Code, there are provisions that make it an offence to abuse the Canadian insolvency system by obtaining and using credit with no ability to repay the money, as well as getting into debt by bad faith and/or fraud. Under Section 38 of the Code of Ethics for Trustees set out by the Office of the Superintendent of Bankruptcy (OSB) and Directive 24 under the BIA, trustees in bankruptcy have a professional obligation to investigate and report in any case where they believe there is a potential offence. If a trustee suspects a bankrupt of not respecting the law, the trustee will have an obligation to:
- Report to the OSB that he/she has reason to believe that an offence has been committed by the bankrupt;
- Analyze preferential payments made by the bankrupt prior to assignment;
- May ask the court to make a ruling on the bankrupt’s transactions to determine if an offence has been committed;
- Must prepare a report, at the time of the bankrupt’s discharge, dealing in particular with the bankrupt’s conduct and how the bankrupt fulfilled his/her obligations;
- May oppose the bankrupt’s discharge from bankruptcy
As a Trustee in Bankruptcy we must consider our roles while administering a bankruptcy file while considering our ethics and professional responsibilities as set out in the Code of Ethics published by the Canadian Association of Insolvency and Restructuring Professionals and OSB Directives.
As professionals we look for telltale signs that a possible offence has occurred taking into consideration possible offences that may have been committed and reviewable transactions.
In each case we investigate based on the information provided which include gathering evidence and possibly conducting examinations under oath. If the results of our investigation suggests that an offense has been committed, then we are required to communicate this information to the OSB and if directed, to the RCMP.
