The Bankruptcy and Insolvency Act (the Act) contains specific provisions concerning suppliers that are not paid for goods sold and delivered to a purchaser for the purchaser's business. Under the Act, where the purchaser is bankrupt or is in receivership, suppliers can repossess the goods at their own expense, subject to certain conditions:
- First, the unpaid supplier has 15 days after the debtor's bankruptcy or the appointment of a receiver to submit a demand to repossess the goods. In addition, the goods must have been delivered no later than 30 days before the bankruptcy or appointment of the receiver. The demand must be presented to the Licensed Insolvency Trustee (LIT) using Form 75 and must contain all the details of the transaction.
At the time when the demand is presented, the following conditions must also be met:
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- the goods are in the possession of the purchaser or the LIT;
- the goods have not been resold or been subject to any agreement for sale at arm's length;
- the goods are identifiable;
- the goods are in the same state as they were on delivery; and
- there is a balance owing after the demand is presented.
If the sale price has been paid in part, the supplier can repossess a portion of the goods proportional to the unpaid amount or repossess all of the goods and reimburse the purchaser an amount equal to the partial payment previously received. Suppliers who exercise their right to repossess are no longer entitled to be paid for the goods in question.
A supplier's right to repossess goods expires if is not exercised within 15 days after the debtor became bankrupt or subject to a receivership. However, this period may be extended before its expiry by the LIT, the receiver or the Court.
Sometimes, goods are supplied to a buyer who subsequently files a proposal or a notice of intention to file a proposal. In that case, to submit a demand to repossess, the goods must have been delivered no later than 30 days before the date of the filing of proposal or notice of intention, whichever comes first.
To find out more about the rights of unpaid suppliers, contact us.