Is a trustee authorized to distribute dividends to creditors via electronic means such as Paypal?
On April 5, 2017, the Debtor lodged a proposal with the Trustee pursuant to Part III, Division I of the Bankruptcy and Insolvency Act (the “Proposal”). The creditors voted to accept the Proposal and the Court ordered the approval of the Proposal on May 23, 2017. The Debtor complied with its financial obligations under the Proposal and paid to the Trustee the money required to be distributed to creditors. The Trustee anticipated that it would be able to make the first distribution to creditors in the Fall of 2018.
The Proposal was silent on the frequency of distributions to creditors. The Trustee took into account the costs associated with issuing a distribution by way of printed cheques, including mailing costs, bank fees and administrative costs. The costs of processing and distributing cheques on an anticipated semi-annual basis were significant. As at December 15, 2018, there were 273 unsecured creditors who had proven claims, and 254 unsecured creditors who had not yet filed or proven their claims. Many of the unsecured creditors were located in various countries around the world.
The Trustee informed creditors of the risk that international creditors may have trouble negotiating Canadian denominated and issued cheques. Many of the creditors would have received a distribution of less than $81, and the costs incurred in cashing semi-annual cheques would have been disproportionately high when measured against the funds that stood to be received from the Trustee. The creditors requested that the Trustee seek the Court’s advice and direction authorizing the Trustee to make distributions to creditors using electronic transfers instead of printed cheques. Most of the Debtor’s creditors were accustomed to receiving payments from the Debtor electronically, and sought to extend this practice in respect of distribution payments.
- eliminate the cost associated with cheque production;
- reduce postage and/or distribution expenses;
- decrease staff time spent on administration; and
- increase accuracy through electronic banking.
- every bank and authorized foreign bank within the meaning of s. 2 of theBank Act;
- every other member of the Canadian Payments Association established by the Canadian Payments Act (the “CPA“); and
- every local cooperative credit society, as defined in the CPA.
The Court approved the Trustee’s motion, and authorized and directed it to make distributions to creditors in the manner proposed in the Trustee’s report to the Court.
Counsel: E. Patrick Shea of Gowling WLG (Canada) LLP for the proposal trustee, MNP Ltd.