A Critical Comparison between Australian and Canadian Creditor Protection Regimes: Voluntary Administration and Ccaa

Abstract

This article compares Canadian and Australian corporate insolvency regimes. The principles and application of the Canadian Companies' Creditors Arrangement Act (CCAA) and Australian Voluntary Administration (VA) are critically examined in light of the other's strengths and weaknesses. Extensive comparisons with regards to corporate insolvency have been made between these countries and major economies such as Great Britain and the United States, but there is limited literature directly comparing Australia with Canada. Comparisons with economically eminent nations can help provide indicators of successful principles, however, the broad and concise similarities between Canada and Australia produce a particularly valuable comparison because of the specific points upon which applicable recommendations can arise. While the CCAA lacks some of the statutory controls of VA, particularly with respect to the liability of the supervisory 'monitor' role, VA is more rigid, which may hamper the restructuring of larger complex corporations. Both countries have ambiguities: CCAA exists alongside the Business Insolvency Act, an alternative creditor protection regime in Canada; VA caters to two discrete but simultaneous objectives: returning to solvency and maximizing return to creditors. Finally, Canada has accepted a debtor-in-possession model similar to that of the United States, whereas Australia has pointedly rejected such a model, requiring an immediate appointment of an external administrator. The authors show that there are clear and substantial benefits to both countries' regimes and that each country can learn and benefit from the experiences of the other.

Keywords: insolvency, bankruptcy, restructuring, corporate restructuring, monitor, voluntary administration, creditor protection, Canada, Australia, CCAA, VA

JEL Classification: K20, K22, K29