This is an extract from Financier Worldwide's August online publication entitled "Pension challenges in bankruptcy and restructuring processes."

REFLECTING ON THE LAST FEW YEARS, HOW WOULD YOU DESCRIBE OVERALL PENSION CHALLENGES ARISING FOR COMPANIES FACING BANKRUPTCY / INSOLVENCY AND RESTRUCTURING PROCESS? WHAT MAJOR TRENDS HAVE DEFINED THIS SPACE?

The Ontario Court of Appeal recently addressed the issue of pension deficits in the context of a restructuring under the Companies' Creditors Arrangement Act (the "CCAA"). However, unlike past decisions, in Re Indalex the Court held that such deficits may have priority against monies advanced under interim debtor-in-possession ("DIP") financing agreements authorized by a CCAA judge. This apparent departure from the conventional understanding of the priority of pension deficit claims and related issues should raise concerns for lenders, employers, and plan administrators.

The decision of the Ontario Court of Appeal earlier this year in Slater Steel* exposed 10 directors, officers and employees to possible personal liability of $20 million with no meaningful recourse against the insolvent Slater Steel or its assets. This is a reminder that failure to recognize and fulfill fiduciary obligations for a pension plan can expose you to substantial personal liability.