One of the most powerful tools a chapter 11 debtor has is the ability to assume or reject executory contracts under section 365 of the Bankruptcy Code.  In bankruptcy parlance, when a debtor “rejects” an executory contract, it is considered as though the debtor breached the agreement as of the date it filed for bankruptcy and sheds the debtor’s obligation to perform under the rejected contract.  The non-debtor party receives a claim for damages arising from the debtor’s breach; however, in many cases, it will be worth only pennies on the dollar.  The converse of rejection is

Companies restructuring under the Companies’ Creditors Arrangement Act (“CCAA”) depend on a supply of critical products and services in order to continue operations during the proceedings. An interruption in the supply of such goods and services would likely be fatal to any restructuring. Prior to 2009, the CCAA was silent about how the post-filing supply of such goods and services was to be obtained. The CCAA provided only that a supplier could not be forced to supply on credit.

On March 3, 2012, the Ontario Superior Court of Justice released its decision in Dodd v. Prime Restaurants of Canada Inc. (2012 ONSC 1578). The decision acts as a caution to franchisors to ensure their franchisees are fully informed and properly advised prior to entering into settlement agreements. Without such steps, franchisors may find releases rendered ineffective against subsequent statutory claims by the application of section 11 of the Arthur Wishart Act (the Act).

Background

The law in Canada concerning priorities between the statutory deemed trusts relating to pension plan contributions and certain pension fund shortfalls on the one hand, and court ordered charges in favour of DIP lenders on the other hand has been in a state of flux ever since the decision of the Ontario Court of Appeal (the “OCA”) in Re Indalex.

In a recent decision authored by Chief Judge Easterbrook, the United States Court of Appeals for the Seventh Circuit (Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, Docket No. 11-3920 (7th Cir. July 9, 2012)) held that the licensee of a trademark does not necessarily lose the right to use the licensed marks when a debtor-licensor rejects the underlying license agreement in its bankruptcy case.  In so holding, the Court rejected a contrary decision reached by the United States Court of Appeals for the Fourth Circuit in Lubrizol Enterprises, Inc. v.

In Re LightSquared LP, the Ontario Court of Superior Justice [Commercial List] (the “Canadian Court”) refined the test for determining the location of a debtor’s center of main interest (“COMI”) under Part IV of the Companies’ Creditors Arrangement Act (the “CCAA”), which is the Canadian equivalent of Chapter 15 of the U.S. Bankruptcy Code.

In Ontario, a debtor-in-possession (“DIP”) lender is usually granted a charge by the Ontario Superior Court of Justice (Commercial List) (the “Court”) over the assets of the debtor which is under the protection of the Companies’ Creditors Arrangement Act (the “CCAA”) to secure the repayment of the DIP loan.  The priority of the charge is set out in the order granting the charge.  Most such orders provide that prior to exercising its rights and remedies against the debtor after an event of default, the DIP lender must appl

In Re Crystallex, 2012 ONCA 404, the Ontario Court of Appeal unanimously upheld unusually broad DIP financing arrangements granted pursuant to section 11.2 of the Canadian Companies' Creditors Arrangement Act (CCAA) despite the vociferous objections of substantially all of Crystallex’s creditors.  By dismissing the appeal, the Court endorsed the supervising CCAA judge’s approval of:

On Tuesday, June 5, 2012 the Supreme Court of Canada heard an appeal of the Ontario Court of Appeal’s decision in Re IndalexLimited (“Indalex”). The Indalex decision concerned, among other things, the priority of a deemed trust for certain unpaid pension amounts over the super-priority charge granted in favour of a DIP Lender.

In Re Crystallex, the Ontario Court of Appeal (“Court of Appeal”) unanimously upheld three orders of the Ontario Superior Court of Justice (“OSCJ”) that (1) authorized bridge financing, (2) authorized interim financing