Many businesses are—or soon will be—unable to meet their obligations. Not all businesses in distress are unsuccessful; sometimes, as in the economic circumstances arising from the novel coronavirus (COVID-19) and the governmental directives tailored to address the related public health issues, even successful businesses must confront closures and steep declines in demand that could not have been anticipated, and may find it necessary or desirable to restructure their existing debt obligations.

Over the last few years, debtor-in-possession (DIP) loans have become a fixture in Canadian insolvency proceedings. Initially, in Companies’ Creditors Arrangement Act (CCAA) proceedings, courts used inherent jurisdiction to authorize DIP facilities because the statute did not expressly permit them. (Pending legislative changes will put explicit DIP provisions in the CCAA and the Bankruptcy and Insolvency Act (BIA).)