Charles Cahan, Secretary of State of Canada, said at the bill's first reading, it was necessary “because of the prevailing commercial and industrial depression.”[3] The provinces of Quebec and Ontario disputed the constitutionality of the Act, as they believed it intruded into provincial jurisdiction with respect to property and civil rights.

Accordingly, the federal government posed the following reference question to the Supreme Court of Canada: Is The Companies’ Creditors Arrangement Act, 1933, 23-24 Geo.

V, chapter 36, ultra vires of the Parliament of Canada, either in whole or in part, and, if so, in what particular or particulars, or to what extent?The Court unanimously ruled that the Act was intra vires the Parliament of Canada, as it dealt with matters falling within "bankruptcy and insolvency" under s. 91(21) of the British North America Act, 1867.

Legislation in respect of compositions and arrangements is a natural and ordinary component of a system of bankruptcy and insolvency law, and provisions similar to the CCAA had already been passed before and after Confederation.

Therefore, the Act enables arrangements to be made with respect to an insolvent company, under judicial authority which, otherwise, might not be valid prior to the initiation of proceedings in bankruptcy.