MARY BUTTERY WINS IMPORTANT CASE FOR CENTURY SERVICES INC.

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.

In Century Services Inc. v. Canada (Attorney General)1, released just before Christmas 2010, the Supreme Court of Canada overturned the prevailing case law that held that the deemed trust created in favour of the Crown under the Excise Tax Act (ETA) for collected but unremitted amounts of Goods and Services Tax/Harmonized Sales Tax (GST/HST) survived in the context of a Companies' Creditors Arrangement Act (CCAA) reorganization.

In the recent decision of Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, the Supreme Court of Canada has, for the first time, interpreted key provisions of the Companies’ Creditors Arrangement Act (“CCAA”).

The judgment of the Court, which was pronounced December 16, 2010, overrules appellate authority from Ontario and British Columbia that previously conferred a priority for unremitted GST on the Crown in CCAA proceedings, and endorses the broad discretionary power of a CCAA court.

On October 30, 2009, the Supreme Court of Canada released its long-anticipated decision in Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny. At issue in this case (and two companion cases) was the legal characterization of Crown rights with respect to collected but unremitted GST and Quebec sales tax (QST) in the hands of a trustee in bankruptcy. The Supreme Court confirmed that the Crown is an ordinary unsecured creditor with respect to such amounts, subject to the rights of prior ranking security holders.

Summary of Facts

I. Key facts

What are the key facts on doing business in the UAE?

When considering doing business in a foreign jurisdiction, an investor must consider a wide range of commercial, political and capital security issues that will impact the final decision of investing in a particular country.

Over the last two decades the United Arab Emirates have proven itself to be a very attractive hub for investors to locate their business for many reasons, below are just a few of them:

The current "Great Recession," which began in late 2007 with a maelstrom in the debt capital markets, has necessitated a rethinking of the federal income tax rules governing debt restructurings. The harsh rules2 promulgated by the Internal Revenue Service (IRS) in reaction to the 1991 taxpayer-favorable decision in Cottage Savings v. Commissioner,3 have been inhibiting restructurings. Instead, rules that did not trigger adverse tax results have been needed to induce lenders and borrowers to restructure obligations that can no longer be paid according to their terms.

Business structures are often reorganized to assist in isolating liabilities, support discrete product brands and address favorable tax environments. However, in certain fact situations, unintended Tennessee excise tax consequences can result from certain reorganizations. Such was the outcome of the Tennessee Supreme Court's recent decision in Blue Bell Creameries, LP v. Richard Roberts, Commissioner of Revenue, published January 24, 2011.

The Holding

Oregon’s $29 million corporate excise tax claim against the taxpayers’ parent company was held to violate both the Due Process and Commerce Clauses of the U.S. Constitution by the U.S. Bankruptcy Court for the District of Delaware. Oregon claimed that Washington Mutual, Inc. (WMI) was liable for its subsidiaries’ tax because WMI had (as the parent corporation) filed consolidated corporate tax returns on behalf of itself and its subsidiaries and therefore could be held jointly and severally liable for the tax due.

In 2012, several judicial opinions have reminded directors, officers and “responsible persons” that personal liability may be imposed for business taxes. See our alert from June 20, 2012. Responsible persons are reminded again that not only will authorities impose liability for unpaid taxes of a business on individuals but that the imposition of such taxes may not be dischargeable in bankruptcy.