Abstract

Restructuring of Insolvent Corporations in Canada

Highlights

  • This paper gives a very general outline of the formal restructuring of insolvent corporations in Canada

  • For a South African audience, it is important to understand that in Canada a distinction is made between an "insolvent person" and a "bankrupt"

  • An "insolvent person" means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors amount to $1 000, and who is for any reason unable to meet his obligations as they generally become due, or who has ceased to pay his 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 his obligations, due and accruing due

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Summary

Introduction

This paper gives a very general outline of the formal restructuring of insolvent corporations in Canada. It was anticipated that the proposal provisions of the BIA would become the primary means for restructuring financially distressed enterprises, the CCAA continued to be employed to restructure corporations and primarily large enterprises. This has given rise to the existence of dual commercial restructuring regimes, a highly distinctive feature of Canadian insolvency law. The rule-based approach of the BIA was viewed as being more suitable for small and medium-sized enterprises, where fewer court applications reduced the cost of restructuring These reforms continued to adhere to the policy of convergence under which differences between the two regimes were to be minimised. Many significant differences continue to exist between the two

The objectives of restructuring law
Commencing restructuring proceedings
Eligibility under the CCAA
Eligibility under the BIA
Commencing proceedings under the CCAA
Commencing proceedings under the BIA
Switching restructuring regimes
Stay of proceedings
Stay of proceedings under the CCAA
Stay of proceedings under the BIA
Lifting the stay of proceedings
Terminating restructuring proceedings
Termination under the CCAA
Termination under the BIA
Grounds for terminating restructuring proceedings
Interim financing
Governance and supervision
The role of the debtor
The role of the monitor and the trustee
The role of the courts
The role of the creditors
Developing and approving the plan
Developing the plan
Mandatory features of the plan
Approval by the creditors
Unaffected creditors
Classification of creditors
Objecting to the classification scheme
The treatment of shareholder claims
Approval by the court
The legal effect of approval or rejection
Conclusion
Register of cases
Full Text
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