In the current recession, some North American businesses facing difficulty in meeting their debt obligations may consider the implications of restructuring their debt in Canada or the US. The rules in the two jurisdictions have some similarities, but also some significant differences that should be examined in any such restructuring.

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.

Often, when creditors start to take action against a debtor, the debtor will seek relief through the Bankruptcy and Insolvency Act(i). Some Trustees in bankruptcy even advertise that the bankruptcy process can be an important step on the road to “financial well being”. Creditors, upon receiving notice of their Debtor’s bankruptcy, may feel that the chance of any recovery all but disappears with the assignment into bankruptcy.

On July 21, 2009, Quebecor World Inc. and its affiliated debtors announced that they emerged from creditor protection under the CCAA and Chapter 11 of the U.S. Bankruptcy Code. Quebecor announced that it had completed its Canadian and U.S. reorganization plans, closed a US $800 million exit financing facility and had drawn down approximately US $540 million with which it repaid its debtor in possession (DIP) facility.

In Vento and Others v Westminster Hope & Turnberry, Ltd (unreported, 25 November 2015) The Honourable Anthony Smellie, C.J., sitting in the Financial Services Division of the Grand Court clarified the grounds on which judgment creditors may seek to use charging orders to enforce judgment debts. Readers will note that typically charging orders are made in respect of immoveable property (eg.

Over the past two or three years, we have seen an increasing number of cases where a client holds and wishes to sell or transfer shares in a Cayman Islands company which is in liquidation, or is seeking to purchase shares in such a company from another party.  In those circumstances, the transfer of the shares would be void absent the validation of the Grand Court of the Cayman Islands, as a result of section 99 of the Companies Law (2013 Revision) ("Section 99").  Section 99 is in the following terms:

When a corporate borrower faces financial difficulties, there are a variety of enforcement, restructuring and insolvency options available to creditors. From a creditor’s perspective, the choice of procedure will depend on whether the borrower has granted security. If security has been granted over the shares or the assets and undertakings of a Cayman Islands incorporated company pursuant to a Cayman Islands law governed security document, the most appropriate enforcement choice for any secured creditor may be receivership.

The drafting changes just discussed are primarily intended to ensure that funds do not become embroiled in contractual disputes, but in a global recession more and more funds are finding themselves in disputes that threaten to end up, and sometimes do end up, before the courts. In this chapter we analyse the legal issues surrounding key matters in the current litigious environment and cover the following:  

New tax rules relating to the tax treatment of certain corporate restructuring transactions are expected to be finalized soon by the PRC Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”).

In a situation where the survival of a German company depends on restructuring measures by third parties (mainly lenders) who fear that the shareholders may use their hold-out position in a potential subsequent exit by sale of the shares, it is an option for the lenders to demand from the shareholders that the shares are transferred to a trustee to be held in a “double-sided trust” (doppelnützige Treuhand).