How do I check title and liens when buying from an insolvency?

Buying assets from an insolvent business changes who you deal with, not whether you check. The seller may be a trustee, a receiver or the debtor under court supervision, and a court order may clear some claims while others sit outside the registers. Whether a court-approved sale wipes out claims covers the order. This answer covers the checking.

Confirm the process and who may sell

The Bankruptcy and Insolvency Act has the Superintendent of Bankruptcy keep a public record of proposals, bankruptcies, trustee licences and receivers’ notices (section 11.1). A receiver must send notice to the Superintendent as soon as possible and no later than ten days after becoming a receiver (section 245(1)). Subject to the timing rule in section 243(1.1), section 243 lets a court, on a secured creditor’s application and if it considers it just or convenient, appoint a receiver to take possession of all or substantially all of an insolvent person’s or bankrupt’s inventory, accounts receivable or other property acquired for or used in their business, and the Act’s definition of receiver also covers a person appointed under a security agreement (section 243(2)). Ask for the order or agreement and check that what you are buying falls inside it.

Search the debtor’s name and every serial number

Alberta’s personal property search forms accept a business debtor’s legal name or a serial number for motor vehicles, trailers, aircraft, boats and farm vehicles. Run both, because the forms treat a name search and a serial-number search as separate searches. If real property is part of the sale, a British Columbia title lists the registered owners and the charges, liens and interests registered against it.

Ask about claims that come from statute

Some claims do not come from a loan. WorkSafeBC says that if the seller owes premiums, the firm’s assets may be subject to a lien in its favour and that a clearance letter protects a buyer. Alberta’s Workers’ Compensation Board says a buyer has a responsibility to get a clearance when buying a business, its stock or equipment. WorkSafeBC says to contact it before buying any assets from a firm.

Read the order against the results

Where a notice of intention or a proposal has been filed, section 65.13(7) lets the court authorize a sale free and clear of any security, charge or other restriction, and if it does, it must also order that other assets or the sale proceeds be subject to a security, charge or restriction in the affected creditor’s favour. A registration on your search may therefore be cleared by the order without the claim disappearing. Have your lawyer match each registration to the order’s wording, and see buying through a BIA process.