In Re: Nortel Networks Corp. the Ontario Superior Court of Justice considered an application for court approval of the Bidding Procedures pertaining to the sale of Nortel’s “Layer 4-7” business, as well as approval of a “Stalking Horse” bidding process.

Prior to filing for protection under the CCAA, Nortel decided that the Layer 4-7 business should be sold. Shortly after filing, Nortel agreed to enter into an Asset Purchase Agreement with Radware for the purchase of the Layer 4-7 business (the “Purchase Agreement”).

In a recent decision of the Ontario Superior Court of Justice, the Court rejected a bankrupt music composer’s argument that a security interest the composer had granted in royalty based distributions should be ineffective following his bankruptcy.

Recent changes to the Bankruptcy and Insolvency Act have given certain unpaid pension plan contributions priority over a lender’s security if the employer is bankrupt or in receivership. How can a lender monitor the debtor’s pension arrears to assess the extent of the lender’s loss of priority?

The Bankruptcy and Insolvency Act now provides that certain unpaid pension plan claims rank ahead of a lender’s security in bankruptcy or receivership proceedings. Effective July 7, 2008, sections 81.5 and 81.6 give super-priority status to:

Unpaid suppliers are generally unsecured in liquidation proceedings. A supplier can elevate its unsecured claim by taking security from the debtor or modifying its supply contract by inserting an effective title retention clause. The supplier may also rely on the BIA unpaid supplier provision to assert a super-priority for the return of its goods.

Earlier this year Abitibi-Consolidated Inc. (Abitibi) and various related entities proposed to enter into an arrangement with certain classes of its creditors relying on the plan of arrangement provisions in the Canada Business Corporations Act (CBCA). It is unusual to propose a corporate plan with respect to a company's debt. The CBCA plan of arrangement provision is not fundamentally an insolvency law. The procedure is most often used to restructure securityholder relationships within solvent companies and that is the primary intention.

The decision of the British Columbia Superior Court in Re Ted Leroy Trucking Ltd. was a result of an application for directions with respect to what amounts are properly covered by the Wage Earner Protection Program Act, S.C. 2005, c. 47 (the “WEPPA”), and the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”).

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.

The Wage Earner Protection Program Act, S.C. 2005, c. 47 (the “WEPPA”), came into force on July 7, 2008. This paper will set out the implications of the WEPPA on insolvency practice and provide a brief analysis of Ted LeRoy Trucking Ltd. and 383838 B.C. Ltd. (Re), 2009 BCSC 41 (“LeRoy Trucking”), the only reported decision regarding the WEPPA (as at the date of this paper) since the legislation came into force.

I. Introduction to the WEPPA

Magna Enterprises Corp. (“MEC”), a foreign bankrupt corporation, brought an application for ancillary relief pursuant to s. 18.6 of the CCAA. Section 18.6 gives the court the power to “make such orders and grant such relief as it considers appropriate to facilitate, approve or implement arrangements that will result in a co-ordination of proceedings under this Act with any foreign proceeding”.

Retention of key employees is a primary concern of any company that is seeking to survive a restructuring process as a viable operating business. The question is how to ensure that employee retention payments fairly balance the goal of retaining employees who are key to the restructuring against the financial impact on other stakeholders of the implementation of such a program. Beyond that, in the case of a cross-border restructuring, one must be aware of the difference between Canadian and US law on the issue of employee retention.