How do I buy assets from an insolvent company through a BIA process?

Under the Bankruptcy and Insolvency Act (BIA), a buyer can reach an insolvent company’s assets by three routes, and each has its own gatekeeper. Step one is working out which process the company is actually in, because that decides who can sell, who must approve the sale and what protection the sale carries.

In a bankruptcy, the trustee sells

When a company is bankrupt, a licensed insolvency trustee receives its property, and the Office of the Superintendent of Bankruptcy describes selling those assets as part of the trustee’s role. The Act lets the trustee, with the permission of the inspectors who oversee parts of the trustee’s work, sell all or part of the property, including goodwill, by tender, public auction or private contract, at a price the inspectors approve. A sale to a person related to the bankrupt needs the court’s authorization.

In a proposal, the court authorizes the sale

Once a company has filed a notice of intention or a proposal, it may not sell assets outside the ordinary course of business unless a court authorizes it. The court considers, among other things, whether the sale process was reasonable, whether the trustee approved it, how far creditors were consulted, what the sale does to them and whether the price is reasonable and fair against market value. The court may authorize a sale free and clear of any security, charge or other restriction.

What to do as the buyer

• Ask the trustee or receiver which proceeding applies and who must approve the sale: the inspectors, the court, or both.
• Read the sale process and any approval order before you bid, since an order is how security can be cleared from the assets.
• Check the staff position. In British Columbia, if a trustee sells a bankrupt business, employment is not treated as continuous and the purchaser is not liable for wages unpaid before the bankruptcy. Other provinces differ.
• Remember the third route. Can I buy a business that is in receivership? covers it.