A Licensed Insolvency Trustee (LIT; French: Syndic autorisé en insolvabilité; SAI) is a private-sector professional that is federally regulated and authorized by the Superintendent of Bankruptcy to manage insolvency proceedings in accordance with the Canadian Bankruptcy and Insolvency Act. Licensed insolvency Trustees are generally members of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
It has been established by various jurisdictional courts that Licensed Insolvency Trustees are officers of the court. As a result, they have the obligation to impartially represent the interests of all creditors of the bankrupt and to act equitably between the competing interests of the different types of creditors.
To preserve the integrity of the insolvency system and reduce confusion in the marketplace, the Superintendent of Bankruptcy adopted by directive the professional designation "Licensed Insolvency Trustee" (French: "Syndic autorisé en insolvabilité") in April 2016. Although the designation does not appear in the Bankruptcy and Insolvency Act or the Companies' Creditors Arrangement Act, it applies to individuals licensed under that regime and distinguishes them from other service providers assisting debtors. Only those holding the designation are listed on the Superintendent's public Registry of Licensed Insolvency Trustees, and the designation is protected as an official mark of a public authority under the Trademarks Act.
Under the Superintendent of Bankruptcy's Directive No. 33, Trustee Designation and Advertising, trustees are required to identify themselves using the professional designation "Licensed Insolvency Trustee" or the acronym "LIT" in all communications and representations relating to activities carried out in their capacity as licensed trustees under the Bankruptcy and Insolvency Act. Additionally, any person who uses the designation "Licensed Insolvency Trustee (LIT)" without being duly licensed may commit an offence under the Bankruptcy and Insolvency Act, punishable on summary conviction by a fine, imprisonment, or both.
Prior to the 1992 reforms to the Bankruptcy and Insolvency Act, only individuals could be licensed as insolvency trustees under the legislation. Applicants were required to meet prescribed qualifications relating to knowledge, experience, financial standing, and professional reputation, and to satisfy examination requirements. Once licensed, individual trustees were authorized to administer insolvency proceedings in their own name and were subject to regulatory oversight by the Superintendent. It was through the enactment of the 1992 Bankruptcy and Insolvency Act that corporate Licensed Insolvency Trustee structures were first formally recognized.
Corporate insolvency trustee licences were introduced with the 1992 reforms to the Bankruptcy and Insolvency Act, which formally recognized the ability of firms to operate as Licensed Insolvency Trustees. Under this framework, corporate licences are granted subject to prescribed conditions, including requirements relating to ownership, control, and professional supervision. In particular, a licensed corporation must act through designated individual trustee(s), who remain responsible for the administration of insolvency proceedings and for compliance with the statutory and regulatory regime. Behind every corporate Licensed Insolvency Trustee there must be at least one individual Licensed Insolvency Trustee.
According to section 13.5 of the Bankruptcy and Insolvency Act, Licensed insolvency trustees are required to comply with the Code of Ethics for trustees set out in Rule 34 to 53 of the Bankruptcy and Insolvency General Rules The Code of Ethics for trustees establishes service and advertising standards, states the information that trustees are required to provide to creditors and contains rules relating to the treatment of funds in trust and to the sale or purchase of a bankrupt's property.
Licensed insolvency trustees are also expected to comply with the Standards of Professional Practice and the Rules of Professional Conduct issued by the Canadian Association of Insolvency And Restructuring Professionals (CAIRP). Designed to promote uniformity within the profession, these standards must be interpreted consistently with the Bankruptcy and Insolvency Act, the Bankruptcy and Insolvency General Rules, the Code of Ethics for trustees, the Superintendent of Bankruptcy's directives and all other applicable regulations.