Interim Financing Under the CCAA and “Roll-ups”

In a decision dated January 11, 2012, a New York court applied the “separate entity rule” to dismiss a judgment creditor’s special proceeding against a garnishee bank, confirming that the rule remains alive and well in New York.  Under the separate entity rule, bank branches are treated as separate legal entities for the purposes of attachment and garnishment.  Where the rule applies, a judgment creditor seeking to restrain a judgment debtor’s bank account must serve the post-judgment restraining notice upon the bank branch where the account is maintained.    

Part IV of the Companies' Creditors Arrangement Act and Chapter 15 of the U.S. Bankruptcy Code have adopted the UNCITRAL Model Law with certain modifications.

Co-authored by Pamela L.J. Huff, Blake, Cassels & Graydon LLP.

A recent decision by the Third Circuit in the Nortel Group bankruptcy reinforces the worldwide reach of the automatic stay and the narrow scope of the police power exception under section 362(b)(4) of the Bankruptcy Code.  In Nortel Networks, Inc. v. Trustee of Nortel Networks U.K. Pension Plan, No. 11-1895 (3d Cir. Dec. 29, 2011), the Third Circuit held that the automatic stay barred U.K. pension claimants from participating in U.K. proceedings meant to determine the debtors’ liability for their affiliate’s pension funding shortfalls.

Cellfor, a privately held company that bills itself as the world's first and largest commercial supplier of conifer varietal seedlings to the forest industry, has obtained a court order granting it protection under the Companies' Creditors Arrangement Act.

The initial order of Mr. Justice Harris of the Supreme Court of British Columbia grants a stay of proceedings against all actions and creditors until January 16, 2012, when a further hearing is scheduled to consider a possible extension of the stay period.

introduction

In Canada legislative authority is divided between the federal and provincial governments by subject matter. "Bankruptcy and insolvency" is a matter of federal jurisdiction, while "property and civil rights" is generally within the jurisdiction of the provinces.

INTRODUCTION

As international trade grows, financial institutions and manufacturers of equipment recognize that international sales or globalization of their business is a requirement to staying competitive.

Re Gyro-Trac (USA) Inc. (“Gyro-Trac””) is the first appellate decision to consider the centre of main interests (COMI) of a corporate group. In that case, the Quebec Court Appeal upheld the lower court’s decision to recognize proceedings under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) and to stay Canadian bankruptcy proceedings against Canadian members of a corporate group.

In the Ontario case of Re Xerium Technologies Inc., the Superior Court of Justice (the “Ontario Court”) was asked to recognize an order made by the U.S. Bankruptcy Court for the District of Delaware (the “U.S. Court”) approving a prepackaged plan of reorganization (the “Plan”) of the debtors, Xerium Technologies Inc. and its subsidiaries (collectively, “Xerium”), made under Chapter 11 of the United States Code (the “U.S. Bankruptcy Code”).

In the recent decision in Re Xerium Technologies Inc.1, the Ontario Superior Court of Justice recognized an order made by the U.S. Bankruptcy Court for the District of Delaware that confirmed the debtor’s pre-packaged Chapter 11 plan of reorganization. The decision provides useful guidance on how the Ontario Court may consider similar applications in the future. Many will take comfort from the fact that the decision revisits a number of relevant factors established in case law that pre-dates the current formulation of the cross-border provisions that make up Part IV of the CCA A.