We were approached by a company to assist with its restructuring. Our client’s biggest problem was that its largest unsecured creditor was also its main supplier. Approximately 80% of the client’s business depended on the products supplied by this supplier. This would not be a problem if the client and the supplier had an ongoing agreement to continue to supply, but there was no such agreement. The supplier could cut our client off at any time and had no legal obligation to continue to accept our client’s business.
On November 20, 2021, long-awaited amendments to the Wage Earner Protection Program (“WEPP”) came into force. The amendments are a welcome change to WEPP and will close some of the remaining gaps in the program designed to protect some of the most vulnerable stakeholders in an insolvency proceeding – employees.
The Wage Earner Protection Program
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What is a tenant or landlord to do if the tenant can no longer afford the premises they have leased?
In Gidda (Re), 2020 BCSC 121, the Supreme Court of British Columbia affirmed the Crown’s priority as a secured creditor in bankruptcy proceedings, insofar as the registration of a tax debt judgment against the bankrupt’s interests in property is made prior to the bankruptcy order or assignment. The case is an appeal from a decision by a trustee in bankruptcy, who denied the Crown’s entitlement to proceeds from the sale of the Bankrupts’ property following his voluntary assignment into bankruptcy.
On November 1, 2019, several amendments to the Bankruptcy and Insolvency Act (the BIA) and the Companies Creditors’ Arrangement Act (the CCAA) will take effect. Previously, our colleagues reported on the amendments codifying and clarifying IP rights during an insolvency proceeding and granting broader protection to IP licence-holders introduced in Bill C-86.
The Ontario Superior Court of Justice recently reviewed the indicia of a sham trust in McGoey (Re).
Gerald McGoey, an undischarged bankrupt, and his wife, Kathryn McGoey, claimed to be holding two properties in trust for their children. The Trustee in Bankruptcy brought a motion to have the properties declared assets of the Estate of Gerald McGoey, subject to realization for the benefit of his creditors.
Often, when the parties to a financing are discussing priorities or intercreditor arrangements, there tends to be a simplistic view taken of these agreements. Once the competing creditors have sorted out their respective priorities over the various pools or types of collateral, they tend to think that the terms of the agreement are essentially settled and simply need to be put into writing.
In 2016-0628741I7, CRA headquarters was asked by a CRA tax services office whether s. 143.4 would apply in respect of a debt-restructuring plan (the Plan) at a point in time before the unpaid interest owing by the taxpayer was actually settled (forgiven) under the Plan steps. CRA headquarters answered yes. The takeaway: this view can potentially result in income in the course of debt restructuring before the debt is actually settled. Here are the main points:
In its recent decision in Walchuk v Houghton, 2016 ONCA 643, the Court of Appeal for Ontario clarified the interaction between the stay provisions of the Bankruptcy and Insolvency Act (BIA) and motions for contempt of court orders.
THE AUTOMATIC STAY PROVISIONS OF THE BIA
The BIA stays proceedings against a debtor when the debtor files a notice of intention to file a proposal (s. 69) or upon the debtor's bankruptcy (s. 69.3).
Frequently a debtor’s assets are sold out of bankruptcy “free and clear” of liens and claims under §363(f). While the Bankruptcy Code imposes limits on this ability to sell assets, it does allow the sale free and clear if “such interest is in bona fide dispute” or if the price is high enough or the holder of the adverse interest “could be compelled ... to accept a money satisfaction of such interest” or if nonbankruptcy law permits such sale free and clear of such interest.