Section 95 — Bankruptcy and Insolvency Act: Preferences

A transfer of property made, a provision of services made, a charge on property made, a payment made, an obligation incurred or a judicial proceeding taken or suffered by an insolvent person in favour of a creditor who is dealing at arm’s length with the insolvent person, or a person in trust for that creditor, with a view to giving that creditor a preference over another creditor is void as against — or, in Quebec, may not be set up against — the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the date of the bankruptcy;

and in favour of a creditor who is not dealing at arm’s length with the insolvent person, or a person in trust for that creditor, that has the effect of giving that creditor a preference over another creditor is void as against — or, in Quebec, may not be set up against — the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is 12 months before the date of the initial bankruptcy event and ending on the date of the bankruptcy. If the transfer, charge, payment, obligation or judicial proceeding referred to in paragraph (1)(a) has the effect of giving the creditor a preference, it is, in the absence of evidence to the contrary, presumed to have been made, incurred, taken or suffered with a view to giving the creditor the preference — even if it was made, incurred, taken or suffered, as the case may be, under pressure — and evidence of pressure is not admissible to support the transaction. Subsection (2) does not apply, and the parties are deemed to be dealing with each other at arm’s length, in respect of the following: a margin deposit made by a clearing member with a clearing house; or a transfer, charge or payment made in connection with financial collateral and in accordance with the provisions of an eligible financial contract. In this section, clearing house means a body that acts as an intermediary for its clearing members in effecting securities transactions; ( chambre de compensation ) clearing member means a person engaged in the business of effecting securities transactions who uses a clearing house as intermediary; ( membre ) creditor includes a surety or guarantor for the debt due to the creditor; ( créancier ) margin deposit means a payment, deposit or transfer to a clearing house under the rules of the clearing house to assure the performance of the obligations of a clearing member in connection with security transactions, including, without limiting the generality of the foregoing, transactions respecting futures, options or other derivatives or to fulfil any of those obligations. ( dépôt de couverture )