The Farm Debt Mediation Act (FDMA) received Royal Assent on April 25, 1997 and came into force on April 1, 1998. The Farm Debt Mediation Service (FDMS) was established to deliver the FDMA. The service provides a streamlined process of mediation to assist insolvent farmers and their creditors to negotiate settlement arrangements, rather than have those disputes result in costly legal proceedings for all parties. Offerors work with farmers to support them during the mediation process. Offerors will visit the farm to get an understanding of how the operation works, will collect financial information in order to prepare a financial statement, explore options and if required, will help the farmer develop a recovery plan. The Offerors will also be present at the mediation session to provide assistance to the farmer, as may be required. A Mediator is assigned to assist the farmer and creditors explore options for the successful resolution of the case.
To apply for assistance under the FDMA, an individual, corporation, partnership, cooperative or other association of persons must be "engaged in farming for commercial purposes", meaning that the production from their crops, livestock, or other eligible commodities is commercially available for sale as opposed to being grown for the personal use of the farmer or for a person related to the farmer as defined in the regulations. The applicant must also be "insolvent”, which is defined in s. 6 of the FDMA as follows:
Only farmers:
who are for any reason unable to meet their obligations as they generally become due;
who have ceased paying their current obligations in the ordinary course of business as they generally become due; or
the aggregate of whose property is not, at a fair valuation, sufficient, or if disposed of at a fairly conducted sale under legal process would not be sufficient, to enable payment of all their obligations, due and accruing due.
Under the FDMA, farmers can apply for review and mediation only or for a Stay of Proceedings, review and mediation. There are several factors to consider in deciding how to apply.
Secured creditors are obliged by the Act to serve the farmer with a Notice of Intent to Realize on Security before undertaking any action to recover debts. In this case, the farmer would usually choose the FDMS application which includes a Stay of Proceedings to prevent further action by the creditor during mediation. The farmer would also apply for a Stay when being sued for a debt by an unsecured creditor. Though unsecured creditors are not required to provide a Notice of Intent, the Stay still protects the farmer's assets during mediation. If a Notice of Intent has not been served and legal action has not been taken, the farmer may prefer to apply for review and mediation only, without applying for a Stay.
Once the administrator confirms eligibility, an Offeror is assigned to perform a detailed review of the farm's financial affairs. The Offeror, referred to as an ‘expert’ in the Act, will be required to complete a Farm Financial Statement. This will require a review of the farmer's business records, tax returns, etc. as well as account balances from creditors and information on prices from real estate agents, auctions and machinery dealerships.
Following that, the Offeror may help the farmer prepare a recovery plan that outlines what the farmer proposes to do to recover from financial difficulty. The Offeror then assists the farmer to make projections to assess the plan's feasibility. The recovery plan may be prepared by someone requested by the farmer.
The Offeror responsible for the recovery plan will attend the mediation meeting and assist the farmer as required at that meeting.
An assessment will be conducted by the FDMS office after completion of the mediation services. The assessment will evaluate the participants' satisfaction with the FDMS office, and the financial experts services and help to determine possible program changes or enhancements that may be initiated.
You can find more information about the FDMS on AAFC web site:
http://www.agr.gc.ca/index_e.php?s1=prod&s2=fdms-smme…
