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Guide to Doing Business in Canada: Bankruptcy & restructuring

Bankruptcy & restructuring

The economies of the United States (U.S.) and Canada are closely intertwined. As operations expand across the border, so too do the complexities associated with carrying on business — particularly the insolvency of a company spanning both jurisdictions. As such, understanding how to navigate the complexities of Canadian insolvency regimes is essential to successfully doing business in the country.

1. Legislation and court system

Canada, Insolvency & Restructuring, Gowling WLG, Debt, UNCITRAL
A Brief Guide to Automatic Stay Waivers, Bankruptcy Remoteness, and Bad Boy Guarantees

Key Points

USA, Banking, Insolvency & Restructuring, Litigation, Jones Day, Bankruptcy, Debtor, Waiver, Fiduciary, Federal Reporter, Bad faith, Bank of China, Ninth Circuit, US District Court for the Southern District of New York
Blocking Member Provision in LLC Agreement Designed to Prevent Bankruptcy Filing Unenforceable

A contractual waiver of an entity’s right to file for bankruptcy is generally invalid as a matter of public policy. Nonetheless, lenders sometimes attempt to prevent a borrower from seeking bankruptcy protection by conditioning financing on a covenant, bylaw, or corporate charter provision that restricts the power of the borrower’s governing body to authorize such a filing. One such restriction—a lender-designated “special member” with the power to block a bankruptcy filing—was recently invalidated by the court in In re Lake Mich.

USA, Insolvency & Restructuring, Litigation, Jones Day, Bankruptcy, Debtor, Waiver, Limited liability company, Articles of incorporation, Bank of China, Second Circuit
In re Washington Mutual, Inc.: Delaware Bankruptcy Court limits debtors’ release of third parties

In a recent decision, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware greatly limited debtors’ ability to release parties under a chapter 11 plan in the bankruptcy cases of Washington Mutual, Inc. (“WMI”), and its debtor affiliates (together with WMI, the “Debtors”). In In re Washington Mutual, Inc., Judge Walrath approved a global settlement agreement (the “Global Settlement”) reached by the Federal Deposit Insurance Corporation (“FDIC”) as receiver for Washington Mutual Bank (“WaMu Bank”); JPMorgan Chase Bank, N.A.

USA, Delaware, Banking, Insolvency & Restructuring, Litigation, Jones Day, Bankruptcy, Debtor, Security (finance), Consideration, Liability (financial accounting), Federal Deposit Insurance Corporation (USA), JPMorgan Chase, Office of Thrift Supervision, United States bankruptcy court, US District Court for District of Delaware
Fifth Circuit Rules That Corporate Charter Provision Requiring Shareholder Consent for Bankruptcy Filing Is Enforceable but Declines to Rule on Validity of "Golden Shares"

In a highly anticipated decision, the U.S. Court of Appeals for the Fifth Circuit recently affirmed a bankruptcy court order dismissing a chapter 11 case filed by a corporation without obtaining—as required by its corporate charter—the consent of a preferred shareholder that was also controlled by a creditor of the corporation. In Franchise Services of North America, Inc. v. Macquarie Capital (USA), Inc. (In re Franchise Services of North America, Inc.), 891 F.3d 198 (5th Cir.

USA, Franchising, Insolvency & Restructuring, Litigation, Jones Day, Private equity