2019 was a busy year for corporate restructuring practitioners in Canada. The year saw an uptick in CCAA filings nationwide, with 38 total proceedings (up from the total of 21 filings in 2018). The Canadian restructuring landscape also some significant shake-ups, with important decisions and extensive legislative changes. The highlights are summarized below:
BIA & CCAA Amended
At long last, amendments to the Bankruptcy and Insolvency Act (BIA) and theCompanies’ Creditors Arrangement Act (CCAA) have come into force, providing licensees of intellectual property (IP) with some additional level of protection.
Extensive amendments to the Bankruptcy and Insolvency Act (“BIA”) and Companies’ Creditors Arrangement Act (“CCAA”) coming into force on November 1, 2019 through Bill C-97 will have a significant effect on certain aspects of insolvency proceedings commenced after that date. The wide-ranging revisions to both the BIA and CCAA will likely foster changes to the currently existing insolvency and restructuring practice in Canada.
Bill C-97 Overview
Bill C-97 amends both the BIA and CCAA to:
Given the state of the economy, it will not be a rare occurrence in the short term for a supplier to receive a request to sell and deliver further goods to a purchaser who has filed proceedings under the Companies Creditors Arrangement Act (CCAA) or Chapter 11 of the United States Bankruptcy Code — and who is already indebted for unpaid pre-filing sales.
The Québec Court of Appeal confirmed that unpaid post-filing suppliers, which had neither sought a court-ordered charge to secure their post-filing claims nor availed themselves of their right to stop supplying goods or services to the debtor, cannot claim an implicit priority on the proceeds of sales of assets in proceedings under the Companies’ Creditors Arrangement Act proceedings.
Background: going-concern sales of optometry clinics
Imagine that a critical part of your business is dependent on a software program that you license from a software supplier. This scenario is not that hard to imagine, because in fact most businesses and other organizations are indeed reliant on licensed software – it is simply a fact of life in the computer age.
In Yukon (Government of) v. Yukon Zinc Corporation, 2019 YKSC 39 (“Yukon Zinc”), the Yukon Supreme Court recently lifted a stay of proceedings imposed in proposal proceedings commenced in British Columbia by Yukon Zinc, a Vancouver-based mining company whose principal asset is the Wolverine Mine in Yukon.
On December 14, 2007, Bill C-12 was given Royal Assent. The Bill involves a comprehensive reform of Canada’s insolvency system. A key component of these reforms was the creation of the Wage Earner Protection Program (WEPP). The WEPP provides statutory wage protection for workers when a) their employer becomes bankrupt or subject to a receivership, and b) their employment is terminated as a result.
The restructuring of Sanjel Corporation and its affiliates (previously discussed here) continues to provide interesting developments on the application and interpretation of the Companies’ Creditors Arrangement Act.