The bankruptcy and insolvency reforms passed by Parliament in 2005 and 2007 will at last come into force today, September 18th, 2009. While a small initial round of reforms dealing with employee wages were implemented in July 2008, today marks a more radical shift in Canadian insolvency law as the remaining amendments come into effect. The reforms will be applicable to any bankruptcy or insolvency proceedings started on or after today’s date. Key elements of the reforms will include:

Interim Financing, Administrative and D&O Charges

Implementation of the Bankruptcy and Diligence etc (Scotland) Act 2007 continues apace. 22 April 2009 saw the most recent instalment with the passing of Commencement Order NO.4 including Parts 5 and 10 of the Act: namely the parts relating to inhibition, arrestments in execution and actions of furthcoming.

Part 5 - Inhibition

In theMatter of Forest and Marine Financial Corporation (2009) BCCA 319, the British Columbia Court of Appeal was called upon to consider whether a limited partnership qualifies for protection under the Companies Creditors’ Arrangement Act (“CCAA”). The Court also considered whether, in the circumstances of the case, a stay of proceedings should have been issued with respect to the limited partnership.

On May 8, 2009, the Honourable Madam Justice Hoy of the Ontario Superior Court of Justice (Commercial List) granted an Initial Order under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C36, as amended (the “CCAA”) in respect of Gandi Innovations Limited (“Gandi Canada”), Gandi Innovations Holdings LLC (“Gandi Holdings”) and Gandi Innovations LLC (“Gandi Texas”) (collectively, the “Gandi Group”).

A. THE PROBLEM

Many charities and associations have cash flow challenges, particularly in the current economic situation. They usually budget to break even financially. If some funding does not materialize as expected, they may be forced to close down. Their directors may be at financial risk as a result.

With ever increasing numbers of corporate insolvencies, it is likely that the courts will see an increase in litigation raised by insolvency practitioners and creditors arising out of restructuring arrangements entered into by companies in an attempt to stave off insolvency.

While debt restructurings must always remain a significant part of the corporate recovery toolkit, all stakeholders must be aware of the underlying rules relating to the challengeability of transactions in the run up to insolvencies.

There are two main challengeable areas in Scots law:

The Calman Commission on Scottish Devolution was tasked with recommending changes to the present constitutional arrangements for Scotland. The Commission has now reported and has proposed that the UK Insolvency Service should have responsibility for lawmaking in respect of all elements of Scottish corporate insolvency with "appropriate input from the relevant department(s) of the Scottish Government".

The Pensions Regulator recently became involved in the current controversies attaching to pre-pack arrangements.

Company Voluntary Arrangements ("CVAs") have been in the news recently for all of the right reasons. The CVA proposal advanced by JJB Sports was approved by an overwhelming majority of creditors. This has allowed the survival of JJB Sports (JJB) in its current form and allayed fears that the company would be forced into administration or liquidation with consequent job losses and further detriment to creditors.

In the Budget, the Government announced two consultation processes aimed at breathing new life into the rescue culture.

The Insolvency Service intends to consult on the desirability of super-priority status for funding to companies that are in administration or that are subject to a company voluntary arrangement. Such a super-priority would allow lenders to participate in the restructuring and recovery of such companies to a greater degree.