The Office of the Superintendent of Bankruptcy (OSB) is seeking input from stakeholders on two potential physical office requirement models for Licensed Insolvency Trustees (LITs). Feedback on the preferred model will be critical in determining how the OSB can best continue to promote an environment where LITs provide high quality services while adapting to modern practices.

Background

As a result of the pandemic, when people were encouraged to physically distance, many LITs began administering insolvency files and interacting with debtors and creditors predominantly online in lieu of providing in-person service.

To support these efforts, the OSB notified LITs that until December 31, 2021, they may continue to conduct assessments using methods other than in-person for those areas where they have an OSB-approved resident or non-resident office. The OSB has also indicated, through consultation on draft amendments to the Assessment Directive and the Counselling Directive, the intention to continue to allow assessments and counselling sessions by videoconference at the debtor's fully informed choice. Following the OSB's public consultation for its comprehensive review of directives and regulations, and as part of the OSB's modernization initiative for the insolvency system, the OSB is reviewing whether existing physical office requirements remain necessary, both during the pandemic and going forward as Canadians return to in-person activities. While the existing requirements have served the insolvency system well for quite some time, it is appropriate to challenge assumptions and question what policy bases support the continuation of those requirements within the current and evolving context. This is particularly relevant for those debtors who will choose to receive services via videoconference, on a fully informed basis. Should they be prevented from selecting an LIT of their choice based solely on physical office requirements? Undoubtedly, there will remain some debtors who prefer in-person services and there will be ongoing benefits to maintaining local offices. However, in a modern business world, sound considerations should influence business decisions over regulatory requirements, unless there is a policy reason to do otherwise.

Models

Model 1: One office per province in which the LIT is licensed in order to serve that entire province

Under Model 1, an individual LIT would be required to have at least one office in each province in which the LIT is licensed to serve. This model would allow an individual LIT to provide virtual service anywhere in a province where they have an office, irrespective of the locality of the debtor within that province. Any offices opened by LITs would continue to have to be registered with, and approved by, the OSB.

Individual LITs would be required to always offer and be prepared to provide a debtor the choice of in-person service at no additional cost to the estate, including costs related to travel for meetings and court appearances, regardless of whether a debtor chose virtual service in the past. Territories and remote provincial areas that are currently not serviced in person, would remain exempt from the requirement to maintain an office.

Model 2: A single resident office to serve the entire nation

Under Model 2, an LIT would be required, at minimum, to have one office within Canada to serve all of Canada. This model would allow an LIT to provide virtual service to debtors anywhere in Canada. The LIT would be required to always offer and be prepared to provide a debtor the choice of in-person service at no additional cost to the estate, including costs related to travel for meetings and court appearances, regardless of whether a debtor chose virtual service in the past. Any offices opened by LITs would continue to have to be registered with, and approved by, the OSB.

Model 2 does not envisage a national trustee licence. All existing rules and procedures around licence extensions would remain in effect. For greater clarity, should an LIT licensed in one province seek to accept a filing in another province they would need to seek an extension of their licence to that province from the Superintendent after fully satisfying the requirements of the OSB in order to do so.

Questions

The following questions are intended to help guide your feedback:

1. Of the two models offered as options in this paper, do you prefer one over the other? If so, please provide your rationale (including benefits and challenges to all stakeholders).
2. Would you propose another model that you feel would better serve Canadians and protect the integrity of the insolvency system? If so, please provide details (including benefits and challenges to all stakeholders).
3. For any challenges identified, can you suggest any mitigating strategies that could be employed?

Submissions Updated