Notice of intention to enforce security (BIA section 244)

A borrower whose secured lender intends to enforce may receive this notice, and a buyer looking at the borrower’s assets may meet it too. Section 244(1) covers a secured creditor that intends to enforce on all or substantially all of the inventory, accounts receivable or other property of an insolvent person that was acquired for, or is used in relation to, a business the person carries on.

What the Act requires

• The creditor may not enforce until ten days after sending the notice, unless the insolvent person consents to earlier enforcement (s. 244(2)). That consent cannot be obtained before the notice is sent (s. 244(2.1)).
• The notice must be in the prescribed form. The Bankruptcy and Insolvency General Rules (rule 124) say it is served, or sent by registered mail or courier, or electronically if the parties agree.
• Section 244 does not apply where there is a receiver (s. 244(4)); read s. 244(3) for the other limits.

Why a buyer cares

Where a notice is to be sent, the court may not appoint a receiver before ten days after it is sent unless the insolvent person consents or the court considers it appropriate (s. 243(1.1)). See buying from a trustee versus a receiver and court-appointed receiver. The BIA is federal.