Nortel Networks (“Nortel”) brought a motion seeking approval of the sale of various Nortel assets to Nokia Siemens (“Asset Sale Agreement”), and for approval of a Sale Agreement and Bidding Procedures, advanced by Nortel for the purpose of conducting a “stalking horse” bidding process in respect of its Code Division Multiple Access (“CDMA”) and Long-Term Evolution Access (“LTE”) assets. As of the date of the motion, Nortel had yet to propose a formal plan of compromise or arrangement.

In the recent case of Re Masonite International Inc., the Ontario Superior Court approved a plan of arrangement under the Canada Business Corporations Act (“CBCA”), notwithstanding that certain insolvent entities were involved. This was a short but complex cross-border restructuring which commenced and was principally completed prior to the recent Canadian insolvency legislation amendments coming into force.

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 Re Intertan Canada Ltd. (2009), WL 181688 (Ont. S.C.J. [Commercial]), 2009 CarswellOnt 324 [Re Intertan], Morawetz J denied the approval of an amended DIP financing agreement under CCAA proceedings which was granted under the Chapter 11 proceedings in the United States.

Both of Canada’s primary insolvency statutes, the Bankruptcy and Insolvency Act (“BIA”) and the Companies’ Creditors Arrangement Act (“CCAA”) provide for an automatic stay of all legal proceedings when an insolvent debtor files for or seeks insolvency protection. The purpose of the stay is to provide breathing space to a debtor attempting to restructure its business so as to avoid “death by a thousand cuts” and also to ensure similarly situated creditors are treated equally.

On April 7, 2011, in the context of a liquidating CCAA that achieved a going concern sale of the debtor’s business, the Ontario Court of Appeal held that:

On December 16, 2010, the Supreme Court of Canada ( SCC) released its decision in Re Ted Leroy Trucking Ltd. In its decision, the SCC affirmed the importance of the Companies’ Creditors Arrangement Act (CCAA) as a flexible restructuring tool, and clarified the source and limits of the Court’s authority during CCAA proceedings. Furthermore, the Court overruled the judgment of the B.C.

On 15 August 2008, the British Columbia Court of Appeal released its reasons for judgment in Cliffs Over Maple Bay Investments Ltd. v. Fisgard Capital Corp. (CA036261). Tysoe J.A., for the court, said that a CCAA stay of proceedings “should not be granted or continued if the debtor company does not intend to propose a compromise or arrangement to its creditors.” CCAA filings designed to permit a debtor company to carry on business and to run a sales process for the sale of all or a substantial portion of the debtor company’s business is relatively common.

Ontario Courts are routinely faced with requests for Approval and Vesting Orders in connection with asset acquisitions made in the context of receivership proceedings or proceedings under the Companies’ Creditors Arrangement Act ("CCAA"). Purchasers’ counsel who routinely seek these Orders for their clients seek to insulate their clients from claims made by third parties arising from the purchasers’ acquisition of the assets through the insolvency proceedings.

In Her Majesty the Queen v. Canada North Group Inc., the Supreme Court of Canada (the Court) held that lower courts can permit the grant of court ordered charges under the Companies’ Creditors Arrangement Act, RSC 1985, c C-36 (the CCAA), including the interim lender’s charge, in priority to the Minister of National Revenue’s (the Minister) statutory deemed trust claims under the Income Tax Act, RSC 1985 c 1 (the ITA).