By Andrew Flynn

When Elisabeth Lang took up the mantle of Superintendent of Bankruptcy in late 2018, the insolvency regime was stable and on course for incremental improvement, the economy was growing slowly, and any threats appeared manageable and well known.

For 18 months, she oversaw one of the world’s most well-governed and time-tested insolvency systems, with an agenda to enhance its successful structure and keep it on course.

In March 2020, that business-as-usual outlook would come to an abrupt end – for the Office of the Superintendent of Bankruptcy and ultimately the rest of the world. Now, as she enters the second term of her appointment, Lang can afford to look back wistfully on those early days.

“In some ways it feels like it was a thousand years ago because of everything that's happened, right?” Lang says with a laugh.

“I'm so thrilled to be able to carry on with this mandate and I think, as you know, I was passionate about it five years ago,” she says. “I'm still just as passionate and really, really proud of what we've accomplished in the five years in spite of, in addition to, and in response to a pandemic. But at the same time, I feel like there's so much more to do, and we have lots of ambitious plans to try to situate the insolvency system for the future.”

“And as [hockey legend] Wayne Gretzky says, we're trying to skate to where the puck is going... That's not easy for government departments and agencies, but that's the goal.”

Like every other government department, business, and individual on the face of the planet, the pandemic “was not the easiest of times” for the OSB – it had to suddenly contend with many unknowns and adapt at a furious pace to the new reality.

It slowly became clear that there were some serious economic forces at work, forces that seemed ominously poised to have a direct impact on the insolvency system – the country lost two million jobs in April 2020 alone and by early June the national unemployment rate had spiked to a staggering 13.7 per cent.

First, the OSB had to make it possible for its own employees to work at home. Then it had to figure out how to support all facets of the insolvency system with minimal disruption - from managing filing procedures to issuing guidance to LITs, to the Omnibus orders intended to relieve pressure on stakeholders and the insolvency system.

“One of the phrases I've used at some speeches is that we got catapulted into the 21st century, whether we liked it or not,” Lang says. “And for government, that's hard.”

“I think a lot of the professionals in the industry who never would've considered a Zoom call as legitimate suddenly realized, wow, not only is it legitimate it's such a great tool because it creates massive efficiencies. So, you know, there's the bright side of the pandemic, and I think that's true for a lot of industries as well.”

Lang was appointed as Superintendent on the strength of her more than two decades of experience working with Canada’s financial system, including nearly 10 years as Deputy Superintendent, Program Policy and Regulatory Affairs at the OSB. Before assuming the post of Superintendent, she was an Associate Deputy Commissioner with the Competition Bureau following her work as Chief of Staff to the Bureau’s Commissioner of Competition.

None of that could prepare her for the utter chaos that pandemic restrictions would wreak on her mandate and the office she had so recently taken leadership of, not to mention the 370 OSB employees who would have to adapt to the emerging reality. As for every other business, organization, and individual everywhere, it was a “huge adjustment.”

“It was the shock of it, that first Notice to LITs to set them up to be able to deliver remote services,” Lang recalls. “I think everybody has a similar story where it didn't quite dawn on us what this was going to mean, and certainly not for how long.”

As the lockdowns extended and extended, Lang says her team dug in, stepped up, and made it work.

“We were laser-focused on helping the system continue to function. And I feel really privileged to work in the insolvency field where we have enough flexibility and control over our own environment through directives, as an example, to be able to do that in a nimble way.”

“I would have to go back and count the number of guidance documents we issued, but I feel like it was one to two a week at times,” Lang says. Staying in constant touch with the community, the OSB listened to what was needed and responded to keep the system functioning as normally as possible.

“Part of that was our relationship with CAIRP; we really have focused on that since the beginning, having a great collaborative relationship with the Association.”

Jean-Daniel Breton, CPA, FCIRP, LIT, who became CAIRP Chair in 2021, during the pandemic, praises Lang for spearheading a “quick and efficient” reaction to the situation. “CAIRP had started discussing interim measures with the legal profession and judiciary to seek relief from strict time delays that could not be met because of confinement, closure of offices and courts and other emergency measures,” Breton says.

The OSB and CAIRP collaborated closely on an application and draft order that could be used in every jurisdiction to deal with the emergency, which subsequently came to be known as the Omnibus Orders. The cooperation continued throughout the pandemic, to deal with issues as they arose.

Lang says she does not underestimate the value of keeping open lines of communication with LITs, nor does she take the relationship for granted. That has served to bring the OSB and CAIRP even closer, says CAIRP Chair André Bolduc, CPA, CA, FCIRP, LIT. Bolduc notes that for the first time ever, the two bodies have jointly issued two consumer alerts about the debt advisory marketplace over the past two years.

“The joint communication allowed the OSB and CAIRP to leverage their capabilities for the public good,” he says. “CAIRP is also working more closely with a number of OSB Deputy Superintendents on a range of issues.”

CAIRP can never take its good working relationship with the OSB for granted, Bolduc says. “Being a trusted partner is earned every day,” he says. “The OSB and CAIRP each have their roles to play. When the OSB and CAIRP find common ground to work together it benefits the insolvency system and all Canadians.”

To foster the relationship even further, Lang has made a concerted effort to attend and present personally at every CAIRP Forum across Canada since her appointment. Not only can she get out key messages, but she can also have the opportunity for hallway conversations that reveal what’s on the minds of LITs and the challenges they're facing and to understand where they're having issues – even if they’re with her own office.

“I sat beside one LIT at one of those events and she said, ‘Your online counseling products are excellent, I get people to use that every single time they come to see me.’ And she was clearly an LIT who goes above and beyond in trying to help her debtors and was really passionate.”

The LIT’s only problem? The counselling products were a bit buried and hard to find on the OSB website.

“Within, I would say a week, and it's probably even shorter than that, that was moved to the top of our website based on that feedback,” Lang says. “Such a simple little thing, but if you don't talk to somebody, you don't know that and you don't make the change.”

Lang’s personal touch and investment in maintaining a close relationship with the membership has not gone unnoticed among CAIRP’s leadership.

“Elisabeth makes herself accessible,” says Bolduc. “She always has the public interest in mind and is always open to dialogue. She is open-minded, driven, professional, focused, fair-minded, and tough when she needs to be.”

“CAIRP’s relationship with the OSB historically has been collaborative but it seems even more collaborative during Elisabeth’s tenure,” he adds, noting that the OSB and CAIRP have bi-weekly touchpoint meetings to stay on the same page. “Elisabeth leads by example and as a result, we see more openness to approach issues in a different way and to view CAIRP as a trusted partner.”

That leadership would be tested in new ways as COVID continued to shut down the world.

Considering the strain that pandemic lockdowns put on every corner of the economy, it stood to reason that insolvencies would rise as businesses shuttered their doors and consumers stayed home. When that didn’t happen, it became clear that something else was going on.

“We thought we were going to see a record number of filings and of course, the opposite happened,” Lang says. “And that carried on for much longer than anybody could have anticipated. We reached out to LITs in the middle of COVID, after we started to see this kind of prolonged lull in filings, just to check in to say, are you okay? How's everything going?”

Everything was not going well, as it turned out. As Canadians and Canadian businesses availed themselves of government relief payments and forgiveness measures, they also stopped filing. Many simply put their financial affairs on hold. Hundreds of small businesses simply shuttered their operations and walked away.

That was then. Now, the fallout from the pandemic is beginning to land and it shows in the rising number of insolvencies. Still recovering from the loss of income and revenue, consumers and companies alike are facing higher interest rates and higher debt loads and cost-of-living increases that include sky-high housing costs. As 2023 came to a close, the household debt to-income ratio remained stubbornly above 180 percent.

By October, the total number of insolvencies was 27.1 percent higher than in the same month a year earlier – consumer insolvencies were up 25.8 percent, while business insolvencies increased by 63 percent. While month-to-month statistics appeared to show a cooling off, it still worries Lang that a continued surge in filings is possible.

“On the business side, we're already seeing it,” she says. “The headlines are talking about the highest levels in 10 years and on the business side, I think that's right.”

“On the consumer side, the headlines are sensational because they're comparing to the last few years, which have been lower than normal, whereas we have not yet reached the 2019 levels,” Lang says. “I fully expect, with everything that's going on in the economy, with inflation and even more importantly with current debt loads, and particularly if employment rates start trending in a new direction, we could see a significant increase in consumer filing volumes.”

Nevertheless, Lang remains confident in the efficiencies built into the insolvency system to keep up with whatever volume of files does come.

“It's not something I take lightly or take as a given but I do feel like the system has a lot of built-in efficiencies,” she says. “I’m very grateful that we went to electronic filing in the early 2000s, that we've basically enabled paperless offices over the last few years, culminating during the pandemic, where I think we were able to eliminate that last paper document that required a wet-signature.”

One concern she does have is the existence of older files that have not been dealt with.

“There are some pockets of LITs who have aged files,” she says. “It surprises me, as you’d think when filing volumes are down that's the perfect time to catch up on the old ones - knowing new ones are coming. We don't know when, but they are coming. So, we'll just have to keep a close eye on that if people have an aging problem and start taking on significant volumes – it’s something we're prioritizing.”

According to Breton, the relationship between the two closely aligned bodies has grown even closer during Lang’s tenure. “While we are not always perfectly aligned on all issues, there is respect for differences of views,” says Breton. “The challenge will be in developing a model to address the debt advisory marketplace, to prevent abuse by advisors who are unregulated and unlicensed and charge fees for unnecessary services.”

“At the same time, the OSB will have to focus on ensuring that LITs are properly compensated for all services, to reduce the possibility that insolvency solutions may be downplayed or ignored because their implementation is uneconomical.”

Among the other priorities on Lang’s long list for her second term is a review of the tariff structure, something LITs have been asking for, for a long time. That will be included in the OSB’s regulatory submission to Treasury Board following its Comprehensive Review of Directives and Regulations, an exhaustive regulatory review launched in 2021 to identify areas of the insolvency system that can be made more agile, transparent, and responsive.

“That's where we'll bring forward the tariff review, which is top of mind for LITs,” Lang says. “It's been a long time since that's seen any change and it's due for a review. I know it's really important to LITs and I do try to assure people that it is on the list, it will get brought forward.”

Lang acknowledges that the process is not quick. “That one's probably another year or so, possibly two, before we get to see the end of the project. But we're pushing as hard as we can on it.”

Among the other changes in hand will be the insolvency forms review, which may be completed by summer 2024.

“The good news and the bad news of having everything online in the insolvency world is that anytime you make a change, you need to do the IT side on our end and the IT side on the LIT end as well,” Lang says. “Having said that, forms should be out well in advance, so people know the changes that are coming. And then implemented hopefully by the summer.”

As for the long term, Lang says, a full-scale legislative review of the BIA is not out of the question.

“The legislation was last changed in 2009 and now we're seeing a lot of little private members bills” that contain elements that could affect the BIA and how it is applied, Lang says.

“It takes a lot of time and effort and it's something I might want to support in the coming years, that is, bringing people together to start thinking about it again. Ultimately, the OSB does not have the lead role on legislative amendments, but we can effect a lot of change by updating regulations and updating directives.”

The question of assigning super-priority charges has been raised in several bills that have come before Parliament that could have an effect on implementation of the BIA. “The recent successes and speed in which private member’s bills focused on super-priorities are moving forward is … becoming a serious challenge for the insolvency system,” Bolduc says.

Lang notes that the OSB is keenly aware that the Pension Act and Bill C-280 (the Fresh Produce Act) both introduce new super-priorities. “Environmental case law has also effectively identified new priorities,” Lang says. “And the quotable quote is that if everything's a priority, nothing is, right?”

“The other really important consideration, and this goes back to my early days meeting with CAIRP when I was in the policy group here at OSB, is that LITs need to get paid to do this work, and if they don't have assurances of getting paid because of all of the priorities, then it’s like the metaphor about bananas rotting on the dock while you figure out if anyone will take the file on.”

Technological advancement is another initiative that Lang sees as critical to an OSB that evolves with the times – and that includes the adoption of some forms of artificial intelligence. “One of the things I'm trying to think about is where the technology should be in the future, finding more efficient ways of creating, managing and sharing information and whether OSB can play a supporting role in that. And we're in very early days of exploring this, but for me, we have various players who need some role with all the same information.”

“I think there are some efficiencies to be found there. I'm imagining - and I am not a tech person, let me just make sure that's clear – that documents themselves are created in a single location. And you could have rights to edit it as a debtor when it's your turn to add your information then it might get locked down and you just have view capability. The OSB would be able to have that information live, in real time, always accurate and up to date.”

Lang is also excited about the introduction of an AI-driven debtor compliance management tool.

“A lot of people are shocked, they're like, ‘You work for the government, you're sort of doing some cutting-edge cool stuff?” she says. “Yes, we are. Now having said that, it's rudimentary AI. We're not using, you know, generative AI here, we’re leveraging some technology so that we can work smarter.”

“The debtor compliance program was originally created in the early 2000s with some fairly static systemic issues. You could have debtor examinations in cases where there’s little or nothing to suggest anything problematic with their file. Well, in my opinion, that's wasting our time and their time.”

So, the OSB has begun developing a system that uses weighted risk attributes and some anomaly detection to identify files that have attributes that could be flagged by the AI, “and then the human beings, the smart people that work at the OSB who know debtor compliance, take a look at it. And in some cases, they'll say, oh, the system got this one wrong. And that information gets fed back into the system, and it learns.”

In a lot of cases, the system is getting it right and an exam will happen, Lang says. “The increased number of times that we're seeing exams resulting in deferred discharges and/or additional payments to creditors has blown my mind in the short amount of time that we've had this. It's really exciting. It's a really great start. And the team did a phenomenal job testing it, working through the change management and implementing it.

But, she says, the next frontier in adopting AI will be more complicated and might take some in the insolvency system by surprise – trustee compliance. “Hopefully applying the same approach to trustee compliance will allow us to put our money where our mouth is, put our effort where it's needed, and not necessarily waste time with LITs who are clearly doing everything that they're supposed to do.”

Such a system need not be too scary, Lang says, and could save time and energy for both OSB officials and LITs. “Trustee office visits, for example, are quite a significant investment of time on both our parts. If we go and spend two days in your office, for example, that's going to have a significant impact on your operations also. Well, if we have an ability to know that you are absolutely fine on all fronts, maybe we won’t have to do that.”

In terms of compliance and enforcement, the debt advisory marketplace continues to be a major concern for Lang who issued guidance in late 2023 to ensure the marketplace knows exactly where the OSB stands. This will be followed by more action to enforce the rules, as some are already underway, to ensure that those who try to skirt them face consequences.

Another longer-term goal that Lang has been emphasizing since her appointment in 2018, are the benefits to the profession and to the OSB of increasing equity, diversity and inclusion. This is another area of positive collaboration between CAIRP, many LITs and the OSB and the needle is starting to move in the right direction, which is very positive news from Lang’s perspective!

Lang is excited about what the future holds for the Canadian insolvency system and looks forward to leading important work while continuing to collaborate to position it for success.