Directive No. 10 (Pre-1992)

Reporting of receipts resulting from the realization of assets in summary administrations

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Printable Version: Reporting of receipts resulting from the realization of assets in summary administration (PDF Format, 376 KB)

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Issued: June 19, 1989

Reissued: January 10, 1991

Purpose

1. The purpose of this policy is to further change the method of reporting of receipts in the realization of assets in summary administration bankruptcies.

   Background

2. Rule 115 of the Bankruptcy Rules dealing with the amount of tariff payable to trustees in summary administration estates, refers to the amount received by a trustee as being the total receipts after deducting the payments to secured creditors.
3. Potential areas of misunderstanding with respect to the realization of particular assets in a summary administration do exist. The total receipts coming into the estate are subject to the tariff. In Rule 115 the formula refers to the total amount to be paid to the trustee to pay remuneration and any administration disbursements. All funds received will be handled in a manner consistent with the treatment of estate funds as outlined in Directive No. 1R.
4. With respect to specific assets which are causing concern amongst the trustee community, the following comments are made regarding:
   1. vehicles and other movable chattels;
   2. R.R.S.P.;
   3. other trust claims; and
   4. real estate

   Vehicles and other movable chattels

5. The gross proceeds from the sale of these assets, whether by auction or private sale, are to be included as total receipts as itemized under the tariff.
6. It is recognized that there will be costs associated with the disposition of vehicles and other movable chattels but that the costs of disposition of these assets can be reasonably absorbed in the disbursement provision under the tariff.

   Registered Retirement Savings Plans

7. Registered Retirement Savings Plans comprise property of the bankrupt estate. The plan issuer (trust company, chartered bank etc.), upon termination is holding the monies in trust for the bankrupt and Revenue Canada Taxation with respect to withholding tax. The trustee may realize only the residual trust funds received from the plan issuer in respect of the deregistration of a Registered Retirement Savings Plan after income tax considerations and therefore only the amount received by the estate, net of tax liability should be recorded in the Statement of Receipts and Disbursements for tariff purposes.

   Other trust claims

8. With respect to trust claims of the crown or others, when the trustee receives funds from the sale of assets that are subsequently determined to be trust monies, the proceeds do not represent receipts in the estate. The trustee would be holding these funds in trust for the eventual trust beneficiary subject to the Directive on deemed trusts. However the receipts and disbursements should be disclosed by way of footnote or otherwise on the Statement of Receipts and Disbursements.

   Real estate

9. In the case of real estate where there is expected material equity for the estate, the associated legal problems on the disposition of real estate may warrant that any summary administration estate containing real estate equity should be converted to an ordinary administration.
10. With respect to the situations where it is apparent the estate has no or minimal equity in the real estate of the bankrupt, all legal costs with respect to the preparation of the quit claim documentation should be borne by the purchaser who is the eventual beneficiary of the real estate.

    Reimbursement of costs by a secured creditor

11. Where the trustee is reimbursed by a secured creditor for costs incurred for the safekeeping of encumbered assets for which the estate has no interest, such receipts can be offset against the actual costs involved.

    Change of status

12. It is important to emphasize the philosophy of the change of status provisions that is itemized in Directive No. 2 dealing with the definition of summary and ordinary administrations. The conversion from a summary administration to an ordinary administration should be encouraged to promote the proper administration of the estate and to ensure that both the trustee's and the creditors' interests are appropriately maintained.

The Superintendent of Bankruptcy
Wally Clare

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