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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 liquidating and restructuring under the terms of the Companies’ Creditors Arrangement Act is also eligible
  • The company must have committed an act of bankruptcy within the meaning of the Act – generally, stop paying its debts as they become due to

However, not all companies can take advantage of the CCAA. This is particularly the case for: railway companies1, banks, life insurance companies, trust and loan companies.

The CCAA can also help a Canadian company which seeks to enforce a Canadian procedure in another country insofar as the protection abroad is compatible with the standards and rules of each affected country.

The filing of the procedure is done in the province or where the head office or principal place of business is located. If the company is foreign, filing can be made in one of the provinces where the assets of the company are located.

CCAA advantages for compagnies

  • A controller holding a trustee licence will be appointed by the Court to administer the procedure
  • Once obtained, the protection of the courts is valid throughout Canada
  • It is also possible to obtain protection abroad, subject to permission granted by the Court
  • The CCAA permits a foreign court to issue a judgment to recover amounts in other countries
  • It provides the possibility of obtaining a temporary funding order, which will have the effect of a charge on assets from a new lender
  • It enables the termination of contracts
  • The Court may designate a supplier as being ‘’essential’’, thus forcing it to maintain supply to the insolvent company notwithstanding overdue accounts
  • Possibility of compensation for the administrators’ responsibilities with the agreement of creditors
  • Greater flexibility exists in time limitations for the creditors’ meeting compared to the Bankruptcy and Insolvency Act (BIA)

In addition to these numerous benefits, it is important to emphasize that the rejection of the proposed arrangement plan does not automatically lead to the bankruptcy of the company.

Finally, courts have wider legal authority in respect of decisions while the BIA is more detailed and more restrictive.

Certain things to be considered by companies

  • The debtor company makes an initial application to the Court for protection under the CCAA, which may or may not be granted
  • Recourse to the courts is common during the procedure which can lead to costs
  • The arrangement plan must provide for the payment to employees of equal or higher amounts than what they would receive within a bankruptcy context
  • It must also provide for payment of late contributions to pension plans unless there is agreement between the parties
  • Late deductions at source must be paid within 6 months of the plan approval by the Court

CCAA’s many advantages make it a good solution

Thanks to the many benefits that we just went over, the CCAA is an excellent vehicle for debt settlement for any company that meets the criteria. For more details, contact a Ginsberg Gingras licensed insolvency trustee or find an office near you.

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