Insolvencies hit 35-year low

Just 160 businesses filed for insolvency in July, marking a 35-year low in new filings, according to new data from the Office for the Superintendent of Bankruptcy.

The record low, which represented a 28.3-per-cent decrease in filings from the month prior, is largely due to the federal government's pandemic wage and rent subsidies and other business support programs such as the Canada Emergency Business Account, which have been extended until October.

Business insolvencies were down 21.2 per cent in the 12-month period that ended on July 31 compared to the year prior.

But the Canadian Association of Insolvency and Restructuring Professionals said the end of those subsidies may precede a wave of new filings if businesses aren't able to fully ramp back up before that point.

“Our fear is when the subsidies do stop, whether that's the fourth quarter of this year or the first quarter of next year, there will be a slew of insolvencies that will have to be dealt with,” Mark Rosen, the association's chairman, said in an interview.

More than a third of Canadian businesses accessed the $83.5-billion Canada Emergency Wage Subsidy program during the pandemic, Statistics Canada said in June.

Rosen said business creditors such as banks and landlords haven't been as aggressive in advancing their claims during the pandemic because the federal subsidies have allowed them to receive at least some payment from businesses.

The construction and retail trade sectors experienced the largest declines in insolvency filing, while mining and oil and gas extraction and finance and insurance saw the biggest increases.

Saskatchewan, New Brunswick and Quebec saw the largest decreases month-overmonth, at 75 per cent, 50 per cent and 40 per cent, respectively. Ontario, meanwhile, saw a 4.2-per-cent increase in new filings.

Rosen said the business filings are the tip of the iceberg, because they fail to capture companies that closed or plan to shutter their businesses instead of attempting to restructure. They also don't capture small business owners that filed for insolvency as consumers.