Canadian business insolvencies are picking up, after heading lower the past few years. Office of the Superintendent of Bankruptcy (OSB) data shows a rise in business insolvencies this year. The increase year to date marks the end of five consecutive years of fewer filings.
Insolvency, Bankruptcy, and Consumer Proposals
If you’re not familiar with insolvencies, there’s a little debt lingo you need. Insolvencies comes in two flavors – consumer proposals, and the extra spicy bankruptcy. Consumer proposals are a formal offer made to settle a borrower’s debt at less than owed and/or over a longer timeline. Bankruptcy is when a borrower files to hand over most of their assets, in exchange for a discharge of debt. Neither are great, but one is often considered more serious than the other.
Ideally, borrowers seek early intervention of debt issues through a consumer proposal. Bankruptcies are often used when more immediate relief from debt is needed. An uptick in consumer proposals isn’t ideal, but it’s not all that bad. Rising bankruptcies are more serious, at least for the borrower’s lenders. Hopefully that’s the most you’ll need to know about insolvency. On that note, let’s look at these business stats.
Canadian Business Insolvencies Rise To 2016 Levels
Canadian business insolvencies are brisk this year. Businesses filed 316 insolvencies in May, up 0.32% from the year before. There have been 1,651 insolvencies filed year-to-date (YTD) as of May, up 6.93% compared to last year. The monthly increase was a small increase. However, YTD businesses have filed the most insolvencies since 2016. This is also the first uptick of YTD insolvencies for May in five years.
Canadian Business Insolvencies
The number of business insolvencies filed year to date across Canada, at the end of May.
Source: Office of the Superintendent of Bankruptcy, Better Dwelling.
Breaking down those numbers, consumer proposals are losing ground to bankruptcies. Consumer proposals represented 80 May insolvencies, down 14.89% from last year. YTD there were 384 consumer proposals as of May, flat from last year. To contrast, bankruptcies represented 236 May insolvencies, up 6.78% from last year. YTD there were 1,267 bankruptcy filings, up 9.22% compared to the same period last year. The more serious type of insolvency isn’t just gaining ground, they’re growing.
One In Four Businesses Going Broke Are In Ontario
Ontario business insolvencies are picking up this year. There were 83 business insolvencies in May, flat from last year. That brings the total to 415 YTD, up 5.60% compared to the same period last year. The YTD number is the highest it has been since 2016. The local government has placed various “open for business” stickers around the province. Maybe they need more time to work?
Ontario Business Insolvencies
The number of business insolvencies filed year to date across Ontario, at the end of May.
Source: Office of the Superintendent of Bankruptcy, Better Dwelling.
Breaking that down, consumer proposals only represent a quarter of filings. Ontario businesses filed 15 consumer proposals in May, down 21.05% from last year. That brought YTD consumer proposals to 100, up 13.63% compared to the same period last year. To contrast, bankruptcy filings represented 68 of the filings in May, up 6.25% from last year. YTD bankruptcies hit 315, up 3.28% compared to the same time period last year. Bankruptcies were much higher, but consumer proposals are experiencing the biggest growth.
British Columbia Business Insolvencies Are Very Low
British Columbia businesses are filing for more insolvencies, but the number is surprisingly low. Businesses filed 10 insolvencies in May, up 25% from last year. That brought YTD filings to 55 at the end of May, up 10% compared to the same period last year. The growth rate is huge, but the numbers are too small to mean anything.
British Columbia Business Insolvencies
The number of business insolvencies filed year to date across British Columbia, at the end of May.
Source: Office of the Superintendent of Bankruptcy, Better Dwelling.
Breaking that down, consumer proposals are moving higher while bankruptcies are stagnant. Consumer proposals represented 3 insolvencies in May, up 50% from the same month last year. YTD there have been 16 consumer proposals, up 45.45% from the same period last year. Bankruptcies represented just 7 of May insolvencies, up 16.67% from last year. YTD businesses filed 39 bankruptcies, flat compared to the same period last year. Once again, these are tiny numbers.
Quebec Filed More Than Half of Canadian Businesses Insolvencies
Quebec is home to the most business insolvency filings in Canada. Businesses filed 177 insolvencies in May, down 7.33% compared to the same month last year. That brings the YTD number to 970 filings, up 5.78% compared to the same period last year. Yes, Quebec represents more than half of all business insolvencies filed this year.
Quebec Business Insolvencies
The number of business insolvencies filed year to date across Quebec, at the end of May.
Source: Office of the Superintendent of Bankruptcy, Better Dwelling.
Quebec businesses are opting for fewer consumer proposals, and more bankruptcies. Consumer proposals represented 51 May insolvencies, down 21.54% from last year. YTD consumer proposals hit 216 filings, down 9.24% compared to the same period last year. Bankruptcy filings represented 126 May insolvencies, flat from the same month last year. YTD business bankruptcies reached 754, up 11.05% compared to the same period last year. Bankruptcies picked up lost ground from consumer proposals, and then some.
Regional weakness should be noted in these numbers. The vast majority of weakness is coming from just two provinces – Ontario and Quebec. Insolvency filings are typically a lagging indicator. If that rule applies, the two provinces might already be past the peak of their business cycles.
Like this post? Like us on Facebook for the next one in your feed.
Delay on employment numbers since seasonal adjustments push numbers higher prior to May?
US employment coming in low this morning.
https://finance.yahoo.com/news/adp-us-private-sector-employment-growth-disappoints-in-june-123658032.html
No wonder the BOC is buying bonds like crazy to suppress rates. Gotta keep the debt flowing, otherwise this whole ship sinks.
What’s interesting about insolvencies are most businesses at failure don’t need to file an insolvency. Most just wrap up, settle their bills, and move onto something bigger and better. Needing to file for insolvency means it had to happen all of a sudden.
“Most just wrap up, settle their bills, and move onto something bigger and better.”
What about humans? Because 48% of canadians are just $200 away from insolvency.
https://www.bnnbloomberg.ca/maxed-out-48-of-canadians-within-200-of-insolvency-survey-says-1.1247336
There could be legal rules to prevent fraud, or to access tax rebates for failing businesses.
But I do notice a lot of mom-and-pop businesses in Scarborough and North York closing down all of a sudden ,despite being in business for years, even decades.
Locals don’t have money to spend after they pay 90% of their income to rent a room inside a furnace room of a basement. And we call that “progress”
Everything is fine people. Canada has the solution to this. Canada will jack up immigration number to 750 000 a year with 500 000 student visa per years. Since there is not enough inflation, Trudeau will raise the carbon tax in order to raise inflation. Inflation is too low, we need to add between 10 and 20 cents to the actual price of gasoline. That should create enough inflation. Add with that the BOC buying Canada bonds. Inflation should go into in hyper drive really fast and create prosperity for all. I also forget to mention that will need to get rid of all the money laundering laws in Canada. That should attract more investor and raise inflation. This advice was give for free and Morneau does not need to mention my name.
Just watch BC insolvencies rocket one month in the not too distant future when business owners can no longer fund their business with their HELOC. That is the only reason they’re staying afloat, because the BC economy is coming unglued at a rapid pace.
https://www.cbc.ca/news/canada/saskatchewan/sask-business-people-caught-in-web-immigration-scam-1.5187940