On May 28, 2025, a precedent-setting order was issued in a Companies’ Creditors Arrangement Act (“CCAA”) proceeding preventing calls on performance bonds by obligees unless the written consent of the insolvent companies and monitor is obtained, or leave is granted by a commercial court judge.[1]
This order and the underlying endorsement[2] are significant because performance bonds are mandatory under the Construction Act for some public owner contracts[3] and are often supplied to general contractors by major subcontractors and equipment suppliers. Project owners and contractors, as parties named as obligees in performance bonds, often pay the premium charged by the surety for the bond as part of the contract price and have come to rely upon this security especially when the principal becomes insolvent. The stay on performance bond calls provided for in the order made on May 28 is novel in that the authors are not aware of any other CCAA order issued in Ontario which places an obstacle in the way of making an immediate call upon a performance bond following an insolvency.