Canada collection profile



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Complexity of collecting debt:

Notable High Very High Severe

Executive summary

  • Although the payment behavior of domestic companies is good, the law provides no standard payment terms and does not facilitate the debt collection process meaning late payment conditions (delays, interest rates, collection costs) are left for the parties to consider contractually.
  • Canada offers an efficient judiciary system despite being complex insofar as different federal and local rules are applicable. Contractual ownership protection mechanisms commonly admitted in many countries are not recognized by Canadian courts.
  • Insolvency law provides sophisticated mechanisms, but their efficiency in recovering unsecured debt is very limited so that pre-legal action ought to be considered as the best debt collection opportunity.
General Information GENERAL INFORMATION arrow-transparent
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
General Information 


Days Sales Outstanding (DSO)

The payment culture in Canada is excellent and, even though the law does not provide for standard payment terms, payments take place within 30 days on average whilst delays are short (5 to 10 days) and uncommon.


Late payment interest

Late payment interest and collection costs in Canada cannot be charged unilaterally to the debtor, and the law provides no legal interest rate when payment is not received in time. It is necessary, therefore, that contractual terms contain a provision specifically allowing for late payment interest and collection costs to be added to the outstanding debt. In practice, these costs would tend to be levied as a tool to prompt the debtors to pay sooner than later.

collection practice 


Orchestrated negotiation first

Canadian courts are reliable but amicable settlement opportunities should nonetheless be considered as an alternative to formal proceedings. Before starting legal proceedings against a debtor, assessment of assets is important as it allows verification as to whether the company is still active and whether recovery chances are at best. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below).

Court Proceeding 


Canada offers an efficient and reliable judiciary system, despite being complex insofar as different rules are applicable in the ten provinces and three territories of which the country is composed: as a general rule, Civil Law applies in Quebec under de Civil Code of 1994, but Common Law is otherwise applied. Under the Constitution Act of 1867 (as amended in 1982), the judicial authority is divided at the federal and provincial levels. Federal Courts have priority in dealing with federal claims, administrative litigation, intellectual property, insolvency or maritime law. Each province is in charge of justice administration and commercial litigation is dealt with as a matter of general jurisdiction before Provincial Courts (small claims up to CAD 25,000) or Superior Courts depending on the amounts at stake. The Court of Quebec is made of several divisions, competent on various subject matters.

Fast track proceedings (in their European shape) do not exist in Canada, but 'small claims' proceedings are available, provided that the dispute is certain and undisputed. Different thresholds apply but most provinces are at CAD 25,000 or lower (Saskatchewan is CAD 20,000, New Brunswick is CAD 12,500, Prince Edward Island is CAD 8,000, Manitoba CAD 10,000 and Quebec at CAD 7,000). Rules as to whether an attorney must assist the parties would also vary from one region to another. If these attempts do not succeed, ordinary legal action would usually commence once the debtor has been served with a Writ of Summons (bref d'assignation) summarizing the claim and placing the debtor in default. If the debtor does not attend or fails to bring a defence (appearance) within fourteen days, the court may consider the claim trustworthy and render a default judgment without trial, but this default of appearance judgment may be reversed if the debtor provides sufficient evidence that a counterclaim is legitimate. The court would otherwise set up a conciliation phase (amicable settlement conference / conférence de règlement à l’amiable) prior to conducting an Examination for discovery (interrogatoire préalable) phase to consider the evidence and hear the parties (together with their witnesses) before taking a decision. Canadian courts normally order remedies in the form of monetary damages, specific performance, declaratory relief and punitive damages.

insolvency Proceeding 


Insolvency in Canada is a matter of cash flow and balance sheet alike: a debtor is deemed insolvent when it is illiquid, i.e. when it is permanently unable to pay its outstanding debts or when the debtor's liquidated assets cannot satisfy all the creditors. The Winding-up and Restructuring Act of 1882 has now been replaced by the Bankruptcy and Insolvency Act (BIA) and the Creditors Arrangement Act (CCAA) of 1985. Proceedings would usually take place the Superior Courts in each province. The law provides for an opportunity to rescue viable companies in order to increase repayment chances. In practice, restructuration normally gives unsecured creditors some chance of getting some payments in the future, but returns - although higher than through liquidation - would often be very small. Overall, debt collection chances when the debtor has become insolvent would remain extremely poor and pre-legal action collection efforts remain the best opportunity to obtain payment.


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