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.<\/p>\n
Many solutions are available to help you clearly plan a company restructuring.<\/strong><\/p>\n To find the best solution, the source of the problem must be identified. A Licensed Insolvency Trustee (LIT) guides business owners in this process and analyzes many aspects, including:<\/p>\n Once an analysis of the workforce, the commercial lease, the suppliers, and the clients is completed, the LIT can guide the business owner in assessing the company cash flow liquidity to obtain a provisional cash-flow statement. The resulting report will be an essential work tool to manage the company\u2019s operations, and will allow the company to fulfill its long-term obligations.<\/strong><\/p>\n Business owners can expect the following options to achieve a restructuring. The LIT\u2019s role is to support the business owner throughout the process.<\/p>\n This agreement is termed as being informal because it is not filed pursuant to the Bankruptcy and Insolvency Act (BIA), and because it involves a payment agreement negotiated with each of your creditors according to acceptable terms and which can be met.<\/p>\n It is very likely that creditors will not be inclined to reduce the amount owing and that nearly the whole debt will have to be paid. Creditors may request that interest be paid in accordance with a new agreement.<\/p>\n The payment agreement must be negotiated with each supplier. In addition, while respecting the agreement, your company will not benefit from a stay of proceedings from lawsuits launched by the creditors. This means you will not be protected against eventual legal action, seizure, or others recourses.<\/p>\n Furthermore, you must ensure that the terms of payment can be respected and that your company has the required funds.<\/p>\n It is also appropriate to negotiate a moratorium on the repayment of capital or interest with the principal lenders.<\/p>\n A forbearance agreement can also be negotiated if creditors holding securities have commenced to enforce them.<\/p>\n Filing a notice of intent allows a company to obtain protection from its creditors, through a stay of proceedings, pursuant to the BIA. A minimum of 30 days are granted to work on a restructuring plan with the help of an LIT, resulting in the filing of a proposal, which is an offer to pay creditors pursuant to the BIA.<\/p>\n The proposed plan may allow monthly payments, liquidation of surplus assets for the creditors\u2019 benefit, or even the conversion of debt into shares which would allow creditors to realize funds.<\/p>\n The proposal may:<\/p>\n The creditors will vote on the terms of the proposal and, in the event of its acceptance, will all have to conform to the provisions laid out in the proposal, regardless of their position. Thus, all creditors will be required to respect the will of the majority. The Court will be required to ratify the proposal.<\/p>\n Filing a restructuring plan pursuant to the CCAA is available to a company owing at least $5 million. It is required in the case of more complex reorganizations.<\/p>\n By adopting a CCAA procedure, the company can obtain an initial stay of proceedings, granted by the court. This stay will be granted for a period of not more than 30 days, but can be extended by the court based on the company\u2019s specific needs. The goal is to allow the company to present a viable plan to its creditors to settle its debts.<\/p>\n The LIT intervenes as a monitor appointed by the court, and will administer the proceedings.<\/p>\n Proceedings under the CCAA agreement provide considerable flexibility. Among other things, this process allows for the formulation of various court orders that could include the following:<\/p>\n However, the flexibility afforded by the CCAA requires a number of court interventions which will generate more costs that must be planned for during restructuring. It should be noted that, contrary to a proposal pursuant to the BIA, the creditors\u2019 rejection of an arrangement plan pursuant to the CCAA will not cause presumed bankruptcy, though in practice it is usually the only remaining option.<\/p>\n As part of business restructuring, the LIT\u2019s role is to objectively and impartially assist the company\u2019s executives to make a financial diagnosis, identify possible solutions, and fulfill their obligations established by the engagement letter or by the BIA or CCAA based on the solution. This is to encourage an agreement suitable to all parties and ensures that the company continues its operations.<\/p>\n We have attempted to summarize in simple terms the different solutions available for company restructuring. However, this domain is vast and changes constantly. We cannot claim to have covered the full range of possible subjects, so we invite you to consult an LIT at Ginsberg Gingras if you need to know more about these options.<\/p>\n","protected":false},"excerpt":{"rendered":" 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.<\/p>\n","protected":false},"author":40,"featured_media":4906,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[667],"tags":[751,748,774,746,745,755],"class_list":["post-5281","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-business","tag-companies-creditors-arrangement-act","tag-licensed-insolvency-trustee","tag-notice-of-intention","tag-proposal","tag-restructuring"],"acf":[],"yoast_head":"\n\n
1- Negotiation of an informal agreement<\/h2>\n
2- Notice of intent followed by a proposal<\/h2>\n
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3- The Companies\u2019 Creditors Arrangement Act (CCAA)<\/h2>\n
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Conclusion<\/h2>\n