Insolvency 2025: Trends And Developments

Insolvency in Canada: An Introduction

Canada offers an array of options and tools that enable insolvent companies to restructure. Canadian insolvency legislation provides for flexibility, which fosters creativity and promotes efficiency as companies navigate through insolvency and restructuring proceedings. The frameworks, features and tools that make Canadian insolvency proceedings unique are summarised below.

Core restructuring regimes

In Canada, there are various forms of insolvency proceedings, but most reorganisations occur under the two legislative regimes:

• The Companies' Creditors Arrangement Act, RSC 1985, c C-36 (CCAA) permits insolvent companies with debts over CAD5 million to reorganise their business and financial dealings. The CCAA is principally a debtor-in-possession restructuring framework (although we are seeing more and more creditor-driven processes, as discussed below) that allows debtor companies to continue operations while alleviating some of the pressure from creditors as the debtor company attempts to restructure its affairs. Proceedings under the CCAA are court supervised and overseen by a court-appointed monitor. The monitor is a licensed insolvency professional, and supervises the debtor company's business and financial dealings during the CCAA proceeding. The monitor is tasked with reporting to the court and the debtor's creditors on the activities of the debtor and the status of the proceedings. A successful restructuring under the CCAA may provide a greater recovery for creditors than they would otherwise receive in a liquidation.
• The Bankruptcy and Insolvency Act, RSC, 1985, c B-3 (BIA) provides Canada's bankruptcy regime for individuals and also for the liquidation of businesses, including receiverships (described below). For restructurings, the BIA provides for proposal proceedings, which are a form of debtor-in-possession restructuring that allows debtor companies to reach compromises with their creditors so they can continue with business operations. Generally, proposals are used for smaller and less complex restructurings (the threshold of debt required under the CCAA is not present). BIA proposals must be filed within six months of the initiation of the proceeding. Proposal proceedings are typically more straightforward and less costly than those under the CCAA. BIA proposal proceedings are sometimes converted into CCAA proceedings if the restructuring becomes complex or if a proposal cannot be filed within the six-month time requirement.

Insolvency proceedings may also lead to the appointment of private or, more typically, court-appointed receivers.

A receivership is a remedy available to secured creditors to recover amounts outstanding under a secured loan in the event the company defaults on its loan. While receiverships are rooted in the common law, they have now been enshrined in the BIA. Receivers are usually licensed professionals at accounting or financial advisory firms. A receiver may be privately appointed by a secured creditor with a security interest in the debtor company's assets, or may be appointed by the court on application by a secured creditor or other stakeholder. The BIA permits the receiver to take possession or control of all or substantially all of the inventory, accounts receivable or other property of the debtor company used in respect of the business. The BIA also contemplates the appointment of interim receivers to protect and preserve the debtor company's assets on a temporary basis under particular circumstances.

Trends in insolvencies

Business/commercial insolvencies saw a drop in 2025 as compared to the same period in 2024.

Utilities, retail trade, and agriculture, forestry, fishing and hunting recorded the most significant increases in the number of insolvencies in the 12-month period ending 30 June 2025. Accommodation and food services, other services (except public administration), and transportation and warehousing recorded the most significant decreases in the number of insolvencies in the 12-month period ending 30 June 2025.

The construction industry is on track again for the most insolvencies filed in the 12-month period ending 30 June 2025. During that period,Canadian construction companies filed at least 595 bankruptcies and 211 BIA proposals, more than any other industry (Government of Canada, "Insolvency Statistics in Canada – Second Quarter of 2025", Table 4). Manufacturing companies are on track for the most CCAA proceedings again this year, with a staggering 18 proceedings in the first quarter of 2025 and nine proceedings in the second quarter of 2025 alone. However, this is a decrease from 2024. Other industries seeing an increase in insolvencies include retail, and transportation and warehousing.

Among Canada's provinces, Ontario had the highest number of companies that filed CCAA proceedings in 2025. In the 12-month period ending 30 June 2025, there were 14 CCAA insolvency proceedings for debtors with head offices in Ontario, nine in Quebec, three in British Columbia and four in Alberta (ibid, Table 10). Quebec corporations filed the largest number of BIA proposals and bankruptcies in the 12-month period ending 30 June 2025, with a total of 1,308 BIA proceedings, which included 1,093 bankruptcies and 215 BIA proposals. Ontario was the runner-up, with 509 BIA proceedings filed in the same period, which constituted 427 bankruptcies and 82 proposals (ibid, Table 3a).

Insolvency proceedings before the court

In Canada, there is no independent bankruptcy court as there is in the United States. Instead, each province's Superior Court is vested with bankruptcy and insolvency jurisdiction, pursuant to the BIA and the CCAA.

Proceedings under these federal acts are administratively overseen by the Office of the Superintendent of Bankruptcy (OSB), an agency of the federal government. The OSB has a number of duties, including:

• licensing and regulating the insolvency profession;
• supervising the administration of estates in bankruptcy, commercial reorganisations, consumer proposals and receiverships;
• keeping a public record of BIA and CCAA filings;
• recording and investigating complaints from debtors and creditors in respect of insolvency proceedings; and
• mandating compliance through the maintenance and enforcement of the regulatory regimes (Office of the Superintendent of Bankruptcy, Government of Canada).

In addition, the federal government appoints Official Receivers to undertake these statutory administrative duties in each bankruptcy jurisdiction across Canada.

Under the CCAA, when an order is made on a debtor company's initial application, the court will appoint a monitor to supervise the business and financial operations of the company (Section 11.7(1) of the CCAA). Monitors are court officers and are subject to the supervision of the OSB. Monitors must be licensed by the OSB as licensed insolvency trustees (LITs).

Under the BIA, a proposal trustee, selected by the debtor, fulfils a similar role to the monitor in CCAA proceedings. The proposal trustee is also an LIT, and they oversee the debtor and advise it on the development of its cash flows and proposal. In addition to aiding in the development of the proposal, the proposal trustee is also responsible for:

• communicating with creditors on the content of the proposal;
• acting as an impartial court officer and not as an agent for the debtor;
• monitoring the debtor's business and financial dealings throughout the period beginning on the filing of the notice of intention to make a proposal;
• sending information to the creditors;
• administering the claims process; and
• voting on a proposal,

among other things.

Commercial list

Courts in certain jurisdictions across Canada, including Ontario and Alberta, have a "commercial list", which is of benefit to stakeholders. These specialised courts have been designed to expedite the resolution of commercial insolvencies and other complex commercial matters. Cases on the commercial list are overseen by judges with expertise in insolvency and other commercial law, which ensures that these proceedings are handled efficiently and with a deep understanding of the relevant legal principles. Procedural issues on the commercial list are often streamlined and more flexible than traditional matters, which allows for proceedings to be heard before a court in an expedited manner.

Useful tools in the insolvency toolbox

Insolvency proceedings in Canada encourage innovative strategies to maximise value for the greatest number of stakeholders, including creditors, customers, suppliers, government agencies and shareholders. The below tools have been utilised in 2025 proceedings that should be considered tools in the insolvency practitioner's toolbox.

Creditor-driven CCAA proceedings and enhanced monitor powers

In 2025, we have seen a number of creditor-driven CCAA proceedings. Although the CCAA is generally a debtor-driven process, the CCAA has been interpreted to grant standing to creditors to commence proceedings in respect of a debtor company. Courts have found that the commencement of CCAA proceedings is a proper exercise of creditors' rights in certain circumstances (Miniso International Hong Kong Limited v Migu Investments Inc, 2019 BCSC 1234 at paras 45, 47).

These proceedings demonstrate that creditors are not prepared to sit around for debtor companies to take actions to restructure when their financial position is at risk. A creditor may lead a CCAA process when it determines that it is in the best interests of the company to complete a going-concern sale but has lost faith in the management's ability to complete a CCAA process. Further, if there are instances of fraud or management interference, a debtor-led CCAA process may be beneficial.

Hand in hand with the creditor-driven CCAA, we are seeing courts grant orders which enhance the powers of the monitor to create "super-monitors". With these enhanced powers, the monitor effectively is taking on all care and management of the insolvent business and the assets of the corporation going forward.

A super-monitor may be a great tool for a creditor in CCAA proceedings.

Expedited litigation

In 2022, the Supreme Court of Canada released the Petrowest decision, which set out the legal test to determine when contractual arbitration clauses can be overridden in favour of litigating disputes in court within receivership proceedings (Peace River Hydro Partners v Petrowest Corp, 2022 SCC 41). In Petrowest, the Court decided that certain legal disputes against the debtor company could proceed in the receivership court proceedings rather than by arbitration, despite the existence of an arbitration agreement. In this way, the Petrowest factors were used as a sword rather than a shield for the debtor company so that the debtor company could pursue its action efficiently.

A recent trend in Canadian insolvency is that the Petrowest factors are being used as a sword by debtors in CCAA or proposal insolvency proceedings. For example, in the Matter of the Compromise or Arrangement of Mercy Falls BC Inc., the Court found that the Petrowest factors applied such that the debtor company could litigate against its largest creditor within the CCAA proceedings rather than by arbitration, despite the existence of an arbitration agreement (In the Matter of the Compromise or Arrangement of Mercy Falls BC Inc, "Order Made After Application", 8 September 2025).

Expedited litigation is often essential in insolvency proceedings where funds are in short supply. The expansion of the Petrowest test allows debtor companies to both defend against, and to commence, actions efficiently within insolvency proceedings.

Continued use of reverse vesting orders

Reverse vesting orders (RVOs) were once a unique and controversial transaction method in Canadian insolvency proceedings, reserved for transactions involving assets, such as government licences, that could not be purchased from a debtor company but were essential to the going-concern value of the business. RVOs continue to be a popular tool in commercial insolvency and restructuring proceedings in Canada.

While RVOs are increasingly popular, Canadian courts still warn that RVOs are only meant to be used in "unusual or extraordinary" cases. The fact that an RVO may be convenient for the debtor company or a purchaser may not be sufficient justification for its use.

Originally published by Chambers and Partners.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.