Summary

On August 19, 2011, the Federal Minister of Finance released a significant package of proposed amendments to Canada’s income tax rules applicable to Canadian multinational corporations with foreign affiliates (the Proposals).  The Proposals apply to most distributions from, and reorganizations of, foreign subsidiaries of Canadian corporations and contain new rules applicable to certain loans received from foreign subsidiaries that remain outstanding for at least two years, among other significant changes.  In addition to certain important new measures, the Proposals replace numero

A nominee director of a corporation appointed by one of its creditors may encounter risk of liability where that creditor is engaged with the corporation in efforts to restructure its debt. Steps can be taken to minimize the risk of such liability.

Nominee Directors in Canada

The Ontario Court of Appeal decision in Indalex Limited (Re) has created considerable uncertainty over the priority status afforded to pension plan wind-up deficits, particularly in insolvency proceedings involving the plan sponsor.

Certain provisions of Bill C-9, last year's Budget Bill, which amended the federal Pension Benefits Standards Act (PBSA), have been proclaimed in force.

On April 7, 2011, the Ontario Court of Appeal released its long-awaited decision in Re Indalex Limited 1. In a unanimous decision, the Court of Appeal overturned the decision of the Ontario Superior Court of Justice dated February 18, 2010, and allowed the appeals of the United Steelworkers and a certain group of retired executives. The Court of Appeal ordered FTI Consulting Canada ULC (the Monitor) to pay from the reserve fund (the Reserve Fund) held by the Monitor from the sale of Indalex Limited, Indalex Holdings (B.C.) Ltd., 6326765 Canada Inc. and Novar Inc.

A recent decision of the Ontario Court of Appeal illustrates that secured creditors should address their priority position relative to all other creditors of their borrower in order to achieve a complete subordination of competing security. Failure to do so in this case resulted in circular priorities that the Court was left to resolve. In light of the Court of Appeal’s decision, secured creditors should ensure they are a party to all subordination agreements with the debtor in order to achieve their expected result.

The Facts and Agreements

A recent Supreme Court judgement has confirmed that where an individual, Mr X, acts as director of company A, and company A is the sole director of company B, that will not necessarily make Mr X a “de facto” director of company B.

The Court decided that the mere fact of acting as a director of a corporate director was not enough to render the individual a de-facto director, “something more” would be required, such as the director holding himself out in correspondence as a director of company B.

Rainy Sky SA et al v Kookmin Bank [2010] All ER (D) 255 (May) In our Spring 2010 e-news we reported on the case of Kookmin Bank which dealt with the interpretation of a refund guarantee between Kookmin Bank (the “Bank”) and the customer of an insolvent shipyard. The Bank issued a refund guarantee to secure obligations assumed by its customer Jinse Shipbuilding (the “Builder”). The agreement required the Bank to repay on demand all of the instalments paid by the buyer, Rainy Sky, on the occurrence of a default event under the refund guarantee.

Section 113 of the Housing Grants, Construction & Regeneration Act 1996 (the 1996 Act) outlaws pay when paid provisions, with one exception. It is permissible for a Contractor to use a pay when paid provision to deny payment of outstanding amounts due to its Sub-contractor where the Client at the top of the supply chain has gone bust. The general consensus is of course that this exception is unfair. It is essentially asking the Sub-contractors to act as insurers of both the main Contractor and Client insolvency.