Dear Member of Parliament
As your constituent, I am writing to you regarding the urgent need for bankruptcy law reform in Canada. The recent introduction of “hedge funds” has made it risk free for investors to bankrupt Canadian businesses and legally steal the employees’ retirement income. Under the current BIA and CCAA, Canadian courts have no choice but to reject pleas for the unjust treatment of former employees. Preferred status for pension fund deficits and unpaid severance is the norm in most G20 countries. Canada is aligned with the third world and emerging economies in our treatment of workers’ earned benefits.
Pension and benefits obligations are the savings accounts of a company’s employees. Canadian law currently permits the erosion and cancellation of those savings by any company that enters bankruptcy protection. Pension and benefits debts are now treated as the lowest priority in CCAA. Banks, bond holders and hedge funds walk away whole while the company’s retirees receive an underfunded wound up pension and no benefits. This outrageous asset stripping makes Canada a prime target for take-over arbitrage and liquidation of Canadian businesses.
Independent financial research has shown that giving severance, pensions and benefits preferred status over the other creditors produces a negligible change in a company’s cost of credit. The credit market will be focused on the overall strengths of the business, including its long term obligations.
Pensions and benefits are deferred wages. Pension benefits limit a person’s access to RRSPs during his/her career. An underfunded bankrupt pension will shatter a retiree’s income plans. All levels of government may now be in the position of costly supplements. In these situations, it is not uncommon for the retirees to lose their own homes.
When bankruptcy reform legislation comes to the house, please ponder. Do you want to support legislation that protects vulnerable Canadian citizens, or do you want to protect wealthy banks, bond holders and hedge funds?
Sincerely