Solutions

May 2017

Director's limited liability

Directors of an insolvent company: Is limited liability a myth?

We have previously discussed the director’s liability (Quebec – Ontario). But what options are available to limit their liability? Here are possible solutions for six types of responsibilities that may be placed on the director of an insolvent company. 1- Fiscal liability of directors This responsibility is a result of tax law. It includes situations in which the company fails to pay amounts owed for GST/HST, QST, and source deductions. In Quebec, amounts owed to the CNESST must also be included. In Ontario, outstanding amounts for WSIB and Employer Health Tax may also be claimed against the director of an insolvent company. 2- Receipt of a notice of personal assessment for the company’s debts The director can choose to personally contest the notice within [...]

March 2017

Inspector

Bankruptcy Inspector

In the normal course of a bankruptcy, the Licensed Insolvency Trustee (LIT) must call a meeting of creditors in order to allow examination of the affairs of the bankrupt person. The meeting of creditors must also allow for the confirmation of the LIT’s role, the appointment of inspectors and the opportunity to provide instructions to the LIT that the creditors or inspectors may consider appropriate. The inspector’s role is important although nebulous. That is why it is appropriate to clarify the work of the inspector during a bankruptcy. Appointment of Inspectors (section 116 of the Bankruptcy and Insolvency Act) At the first meeting of creditors, the Licensed Insolvency Trustee asks the creditors to suggest nominations to the board of inspectors. The appointment of [...]

January 2017

Priority claims and corporate assets

Priority claims and corporate assets

Priority claims and corporate assets When a corporation files for bankruptcy, there can be different classes of creditors making claims against the assets of the bankrupt company. Who has priority on these assets? The following are examples of the usual types of creditors involved in a bankruptcy process: Secured creditor This is a creditor who holds a mortgage, pledge, charge or lien on or against some or all of the assets or property of the debtor as guarantee of payment. To qualify for an operating loan with a lending institution, a company may have signed a general security agreement, commonly referred to as a GSA in Ontario, or a Movable Hypothec on a Universality of Movable Assets in Quebec. This means that this creditor [...]

November 2016

corporate-restructuring-options

Business restructuring – what are your options?

Even if it is viable in the long-term, a company may experience short term financial problems. For example, a temporary situation such as a reduction in clientele, the loss of a contract, or a non-profitable market segment can impact the availability of funds to repay suppliers, the government, or the bank. (more…)

September 2016

what-rights-and-recourses-do-creditors-have-when-a-client-files-for-bankruptcy

What Rights and Recourses do Creditors have in a Bankruptcy?

What rights and recourses do creditors have in a bankruptcy? The Bankruptcy and Insolvency Act (BIA) allows an honest but unlucky debtor to find a way back to financial health. Through this process, debtors can be freed of their financial burden as long as they respect their obligations under the Act. (more…)

April 2016

Resiliation of commercial leases

Company reorganization and resiliation of commercial leases

Resiliation of commercial leases with a notice of intention or settlement proposal The Bankruptcy and Insolvency Act (BIA) allows a company being restructured to resiliate one or several leases. (Subsection 65.2(1) BIA) The request for resiliation must be made between the time the notice of intention is filed and the settlement proposal is submitted. A company with several places of business can therefore resiliate leases and close non-profitable establishments that are the cause, in whole or in part, of its financial difficulties. Said requests for resiliation must be done with 30 days advance notice to the lessor and the latter can contest this request in the 15 days following the advance notice. If the lessor contests the resiliation request, the debtor (the [...]

February 2016

Unclaimed dividends

Unclaimed Dividends

In the case of a bankruptcy, dividends allocated to creditors in the estate asset distribution exercise remain at times unclaimed. Under what circumstances are dividends not distributed? This situation can occur for various reasons. The trustee may have sent the dividend payment to the creditor’s last known address who may have moved without notice of an address change. It may also occur that funds are available for distribution but that creditors may have decided not to prove their claim. However, when he closes his file, the Trustee must dispose of any unclaimed dividends. He remits them to the Office of the Superintendent of Bankruptcy Canada (OSB) which will hold them for a possible claim by those creditors for whom they are [...]

December 2015

CCAA

CCAA (the Companies’ Creditors Arrangement Act), who is it for?

The Companies’ Creditors Arrangement Act, also known as the “CCAA”, is a federal law that allows restructuring a of company. This process provides companies with more flexibility in order to honour their obligations to their creditors while benefiting from the protection of the courts. What criteria should a company meet to benefit from the CCAA? The company must have more than $5,000,000 of debt It can be a single company or several companies belonging to the same group or subsidiary The company must be incorporated under federal or provincial law or, if it is foreign, have assets in Canada The company must be insolvent, bankrupt or in the process of filing a notice of intention to make a proposal A company in the process of [...]

October 2015

Wage Earner Protection Program Act

What is the Wage Earner Protection Program Act?

The Wage Earner Protection Program Act (WEPPA) is in force since July 7th 2008. This Government of Canada program is designed to help workers whose employer went bankrupt or is subject to a receivership. It also aims to support workers who lost their job because their employer went bankrupt or became subject to a receivership after unsuccessfully trying to restructure. The Wage Earner Protection Program (WEPP) is particularly important for precarious and vulnerable workers. According to Industry Canada, most bankruptcies occur in low-wage non-unionized sectors with a dubious future. Each year, more than 60% of these bankruptcies occur in the retail, accommodation and food, and personal services sectors, as well as businesses with fewer than 10 employees who offer the most [...]

August 2015

Notice of intention

Notice Of Intention To Make A Proposal

The Bankruptcy and Insolvency Act (BIA) allows insolvent persons to benefit from a 30-day grace period to perform a financial restructuring.Known as the “notice of intention to make a proposal”, this legal procedure must be filed with a licensed trustee. Once the notice of intention has been filed, the insolvent persons initiate immediately a full analysis of their financial situation with a trustee. A plan is then set up to enable them to develop an offer of settlement for their creditors: the “proposal” as such. During this period, all proceedings against the insolvent persons are immediately suspended automatically. Apart from a few exceptions, all legal proceedings taken or contemplated by the creditors are therefore laid down. Within the first 10 days following [...]

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