Ottawa tables a simpler insolvency track for small businesses. Here's what Bill S‑7 actually says.

A new bill introduced in the Senate on Oct. 7 would, if it becomes law, give small corporations in financial trouble a simpler and cheaper way to go through a bankruptcy or a proposal. The Office of the Superintendent of Bankruptcy (OSB) flagged the change to Licensed Insolvency Trustees in a notice dated Oct. 8, saying the bill “was tabled yesterday in the Senate.”¹

It is early. Bill S-7, whose short title is the Cutting Red Tape for All Canadians Act, is listed on Parliament’s LEGISinfo page as being at second reading in the Senate, and it has not yet reached the House of Commons. Nothing described below is in force today.

What the bill would add for small businesses

According to the OSB, the bill would create simplified bankruptcy and proposal procedures for micro and small enterprises. The stated goal is to lower the cost and complexity of insolvency for these businesses and to help viable ones restructure rather than liquidate.

A proposal is an offer to creditors to settle debts for less than the full amount, or over time, which creditors vote on. Under the Bankruptcy and Insolvency Act (BIA), a business can file one without shutting down. A bankruptcy is a liquidation: a trustee sells the assets and distributes the proceeds.

The OSB notice sets out four limits on the new procedures:

• They would be available only to insolvent corporations.
• The asset and liability thresholds would be set by regulation, not in the bill itself.
• Joint proceedings would not be permitted.
• Further eligibility requirements would also be set by regulation.

In plain terms, we do not yet know which businesses will qualify. The size limits will decide whether this helps a corner store with a few employees, a 40-person manufacturer, or both. Because the procedures are for corporations, an owner who operates as a sole proprietor would not appear to be covered, based on the OSB’s description.

A fix aimed at “cascading proposals”

The bill is not only about small businesses. It would also stop a debtor from filing a new Division I, II or III proposal while a notice of intention or an earlier proposal is still open and the trustee or administrator has not been discharged. The OSB says this addresses “cascading proposals,” where one filing follows another.

Other changes listed in the notice are more technical. They would allow oppositions to a discharge to be withdrawn, let bankruptcy notices be published as the Superintendent’s Directives specify instead of in a local newspaper, and correct some French-language wording and obsolete references.

When would any of this take effect?

Not soon. Apart from the French-language corrections and the removal of obsolete references, the OSB says the changes would take effect on a date set by the Governor in Council. The notice explains that this approach “will provide the time needed to develop supporting regulations,” along with updated forms, directives and IT changes. No date is given.

A second consultation is open now

On Oct. 2 the OSB also announced proposed amendments to the Companies’ Creditors Arrangement Regulations, published in the Canada Gazette, Part I on Oct. 3. The Companies’ Creditors Arrangement Act (CCAA) is the restructuring law used mainly by larger companies. According to the OSB’s notice, the proposals fall into two groups: introducing a levy under those regulations, and amending the prescribed forms. Comments are open until Nov. 2, 2026.

What this means for you

If you own a small business and are struggling with debt, a bill that has just been introduced is not a plan. The existing BIA tools, including proposals and orderly wind-downs, are available today, and the right choice depends on your debts, your assets and whether the business is viable.

Three practical points:

• Don’t wait for a law that may change. Parliament may amend the bill, and the key thresholds are still unwritten. Cash-flow problems tend to get more expensive the longer they run.
• Check how your business is structured. The bill’s new procedures are described as being for corporations only.
• Get a general picture of your options. A Licensed Insolvency Trustee can explain how corporate insolvency options such as proposals and bankruptcy work today. We’ll update this story as Bill S-7 moves through Parliament.

This article is general information, not legal advice. Kyle Harris is a Licensed Insolvency Trustee at Harris & Partners Inc.