Does a court-approved insolvency sale wipe out existing claims against the business?

The federal text, and how narrow it actually is

s.65.13(7) reads in full: the court “may authorize a sale or disposition free and clear of any security, charge or other restriction and, if it does, it shall also order that other assets of the insolvent person or the proceeds of the sale or disposition be subject to a security, charge or other restriction” in its place. CCAA s.36(6) authorizes the identical thing — “a sale or disposition free and clear of any security, charge or other restriction” — for a sale under CCAA protection. Both provisions transfer a secured claim from the asset onto the sale proceeds; neither one erases a claim, it relocates where the claim attaches.

Receivership sales run on a thinner statutory base

Neither s.243 nor any other BIA receivership provision contains an equivalent express “free and clear” power. A receiver’s approval and vesting order is granted under the court’s own general jurisdiction rather than a specific vesting subsection written into the Act — a real difference from the express text available on a proposal or CCAA sale, and a reason to read a receivership vesting order’s own wording carefully rather than assume it tracks s.65.13(7) or CCAA s.36(6).

What no vesting order reaches at all

“Free and clear” language, wherever it comes from, answers a question about security, charges and restrictions on the asset — it does not answer whether a different statute can order the new owner to do something once title passes. A regulator’s power to issue an order against whoever currently owns property is its own statutory trigger, engaged by ownership itself, and no vesting order extinguishes a trigger it was never asked to address. The same logic runs the other way for a licence: a statutory transfer power like the Aggregate Resources Act’s reaches a licence separated from its holder by insolvency on its own terms, independent of anything a vesting order says.

Case Files

The shield that stayed with the receiver is exactly this gap: a vesting order cleared the sale of security claims as intended, and seven months later the buyer was ordered to delineate contamination anyway, because the Environmental Protection Act’s owner-liability trigger was never something the vesting order could reach. A trustee who could lawfully keep the dispensary open and A pit licence transferred over the licensee’s objection are the same point from the licensing side — a sector statute’s own permission or transfer power operates independently of what a vesting order says, in both directions.

Sources

• • Bankruptcy and Insolvency Act, s.65.13(7) — marginal note Assets may be disposed of free and clear.
• • Companies’ Creditors Arrangement Act, s.36(6) — the equivalent CCAA power, identical wording.
• • Not addressed in the BIA itself: a receivership vesting order under s.243 rests on the court’s general jurisdiction rather than an express statutory “free and clear” power; the specific wording of the order in a given case governs, and was not generalised here.
• • Treadstone Law — what a vesting order does and does not protect a buyer from in an Ontario receivership sale — confirms the same limits from the buyer-diligence side.