Monday, April 11, 2016

Alberta Law Reform Institute Report on Reviewable Transactions

The Alberta Law Reform Institute (ALRI) has published a report on Reviewable Transactions that proposes major updates to the province's laws on fraudulent preference and conveyances:
"The law of fraudulent conveyances and fraudulent preferences is part of the broader commercial law of creditors’ remedies.  Provincial fraudulent conveyances and fraudulent preferences law supports the civil enforcement regime by offering a remedy to creditors whose rights are subverted as a result of transactions that remove property of their debtors from the reach of judgment enforcement law. Corresponding provisions in the federal Bankruptcy and Insolvency Act allow a trustee in bankruptcy to recover property lost to creditors who are entitled to share in a distribution under the rules of that Act once bankruptcy proceedings are invoked. While those provisions are designed to serve the same purpose as that served by provincial law, the conditions under which a transaction may be set aside under the Bankruptcy and Insolvency Act differ from those that apply under provincial law. A trustee may rely on either regime but, outside of bankruptcy, creditors are restricted to provincial law. "
"Alberta law in this area, like the law in other Canadian common law provinces and territories, is seriously dated, lacks a clear policy foundation and produces anomalous and uncertain results. The widely acknowledged need for reform prompted the Uniform Law Conference of Canada [ULCC] to undertake a comprehensive project culminating in 2012 with its approval of the Uniform Reviewable Transactions Act [URTA], recommended by the Conference for adoption across the country. The Act is accompanied by a detailed commentary explaining the meaning and operation of its provisions. The central recommendation of this report is that the URTA be enacted in Alberta, with such minor revisions as may be appropriate to interface with other legislation and generally meet local legal requirements. The ancillary recommendations deal with those revisions. "
According to the ALRI, among the changes the adoption of URTA would bring are the following:

  • Balancing creditors’ rights to recover what they are owed against a transferee’s right to be free from unsuspected claims to property or value received from a person who has creditors;
  • Focusing on the effect of a transaction (did it impede or defeat creditors’ rights of recovery?) rather than the intention of its participants;
  • Considering whether the transferee was in a position to recognise that the transaction was vulnerable because its terms were too good to be true or the transferee knew of and facilitated the debtor’s intention to obstruct creditors.

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posted by Michel-Adrien at 10:44 am


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