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
Unremitted source deductions are subject to a deemed trust in favour of the Crown under Section 227 of the Income Tax Act (the “ITA”), Section 86 of theEmployment Insurance Act (the “EIA”) and Section 23 of the Canada Pension Plan (the “CPP”). Subsection 227(4) of the ITA creates the trust for income tax deductions and Subsection 227(4.1) creates a super-priority lien in favour of the Crown, in the amount of the trust, over all the debtor’s assets.
Bill 68 – An Act to promote Ontario as open for business by amending or repealing
certain Acts (the “Open for Business Act”)1 received Royal Assent on October 25,
2010. It is an omnibus Act which contains more than 100 amendments to existing
legislation spread out across 10 ministries.
introduction
In a client update released earlier this month, we discussed the recent decision of the Ontario Court of Appeal in the CCAA proceedings of Indalex Limited. In that case, the Court decided that Indalex’s pension plan wind-up deficiency claims had priority over Indalex’s CCAA secured lender in the context of that case. Of concern is the "chill" that decision may have on secured lending in Ontario to borrowers that sponsor defined benefit pension plans.
One of the primary objectives of the Bankruptcy and Insolvency Act (“BIA”) is to provide the bankrupt with an opportunity to stay existing creditors and establish a financial “clean slate”. The stay imposed on existing creditors includes creditors with causes of action existing at the time the bankruptcy is initiated. As a result, bankrupts can cause a halt to any existing or potential litigation by assigning themselves into bankruptcy.
Lenders should be aware that a broad definition of “wages” owing to employees of a borrower/customer in bankruptcy or receivership can take priority over what a lender might otherwise believe is its “first ranking charge” against the borrower.
Fairbanx Corp v Royal Bank of Canada, 2010 ONCA 385 (Ont CA), on appeal from 2009 CanLII 55376 (Ont SC)
Fairbanx factored accounts for the debtor, Friction Tecnology Consultants Inc. Fairbanx made its Ontario PPSA registration misspelling the name as Technology, with an “H”. Two years later, the debtor obtained a line of credit from the Bank, which correctly named the debtor in its Ontario PPSA registration.
Ontario Court Stays Retaliatory Action brought against Bank
Financial institutions seeking to enforce a debt or guarantee through bankruptcy or other court proceedings are sometimes faced with meritless retaliatory court actions brought by debtors attempting to frustrate or further delay payment. In general, Ontario courts will not compel parties to litigate the same dispute on multiple fronts. Instead, one proceeding will be temporarily stayed pending resolution of the other where the same core issues are raised in both.
On October 13, 2009, a U.S. Bankruptcy Court in Florida issued an opinion invalidating, under U.S. fraudulent conveyance law, guaranties and security interests given by certain subsidiaries to secure the $200 million first lien and $300 million second lien credit facilities made to the subsidiaries’ parent corporation, TOUSA, Inc. (In re TOUSA, Inc., 2009 WL 3519403, at *1 (Bankr. S.D. Fla. 2009).