Bringing compassion to, and an orderly way to wind down a business
As a director/owner of a business we understand the difficult choices that have to be made when considering how to restructure or wind down your business. There are many factors to contemplate that can affect which type of filing is best for your situation such as the nature of your creditors, employees, and assets, and therefore we offer several options– proposal, bankruptcy, receivership, and a proceeding under the Companies’ Creditors Arrangement Act (“C.C.A.A”).
We can help! Please call 416-785-5353 to schedule an appointment for your FREE consultation with one of our restructuring professionals.
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Corporate Proposal
A company or corporation can make a proposal to their creditors if they are able to repay a portion of their debt over an extended period of time. The Trustee will assist with the formation of the proposal and deals with the creditors, however the company continues operations and remains in control of their assets. The Trustee has to monitor operations as well as report any financial changes to the Superintendent of Bankruptcy and the Court until the proposal has been accepted or rejected by the creditors or the Court
The Trustee calls a meeting of creditors within 21 days of the date of the filing of the proposal. The creditors are then given the opportunity to either vote prior to the meeting by submitting their proof of claim and their voting letter or at the actual meeting. All classes of unsecured creditors must accept the proposal in order for it to be approved. If the creditors in any class do not accept the proposal an automatic bankruptcy can result. It is important for secured creditors to accept the proposal because if they reject it they can take possession of their assets which can affect the company from operating.
If the company needs immediate relief from creditors but also needs time to formulate the proposal, decide how much they can afford to pay back to the creditors and also determine if keeping the company in operation will provide the best financial return, they can file a Notice of Intention to Make a Proposal (“NOI”). The NOI provides the company with 30 days of protection against creditors, both secured and unsecured, otherwise known as a stay of proceedings. During this period the creditors are not able to pursue court proceedings for non-payment of debt or, in the case of a secured creditor, they are unable to retrieve their asset. The company must then file a proposal at the expiration of the 30 days or file for an extension of time up to 45 days however the total time period for the stay of proceedings cannot exceed 6 months.
We can help! Please call 416-785-5353 to schedule an appointment for your FREE consultation with one of our restructuring professionals.
Corporate Bankruptcy
A bankruptcy can be filed by a company or corporation once a resolution has been passed by the board of directors. The filing of a bankruptcy terminates the operations of the company as well as the employment of the employees. Once the company has filed a bankruptcy the Trustee will take possession of the assets and/or control and safeguard them in order to obtain the best possible selling price.
The Trustee calls a meeting of creditors within 21 days of the date of the bankruptcy filing and the meeting is advertised in a local newspaper. It is mandatory for the directors to attend but it is also open to all creditors, previous employees and interested parties. It is an information meeting to affirm the appointment of the Trustee, discuss the proposed plan of action for the assets (if the Trustee has taken possession), appoint between 1-5 inspectors, provide an opportunity for those in attendance to ask any questions they have in regards to the filing and provide directions to the Trustee regarding the administration of the file.
Secured creditors that have properly registered their security under the Personal Property Securities Act (“PPSA”) will have the ability to remove their assets from the Trustee’s possession. Funds that have been collected and generated by the sale of the assets will be distributed to the creditors based on the Scheme of Distribution outlined in the Bankruptcy and Insolvency Act.
There are also debts that are not completely erased by the company filing an assignment in bankruptcy that are still the responsibility of the former directors personally such as payroll deductions that were not submitted to the Government. The former directors will also be responsible for any debts that they personally guaranteed on behalf of the company. One of our restructuring professionals will discuss these liabilities in more detail with you at your free consultation.
We can help! Please call 416-785-5353 to schedule an appointment for your FREE consultation with one of our restructuring professionals.
Receivership
A receivership of a company/corporation can be ensued by a secured creditor who has issued a 10 day Notice of Intention to Enforce Security through a private or court appointment. This notice is issued when the company has fallen behind in their payments in regards to the debt owing and the secured creditor wants to take back their assets. A receiver cannot be appointed until the 10 day notice expires or the company consents to an earlier appointment. Only a licensed Trustee in Bankruptcy can be appointed as a Receiver. In order to have a Receiver appointed it must be outlined within the security documents between the secured creditor and the company that a receiver can be appointed in the event there is a default in the payments. A secured creditor can also apply to court to have a Receiver appointed without providing prior notice to the company.
Reports of the Receiver regarding the file are prepared at least every 6 months and are available to any creditor who requests one.
We can help! Please call 416-785-5353 to schedule an appointment for your FREE consultation with one of our restructuring professionals.
Companies’ Creditors Arrangement Act
The Companies’ Creditors Arrangement Act (commonly referred to as the “C.C.A.A.”)is a Federal Act that allows financially troubled corporations the opportunity to restructure their affairs. A procedure under the C.C.A.A is restricted to corporations that have debts in excess of $5 million. By allowing the company to restructure its financial affairs through a formal Plan of Arrangement, the C.C.A.A. presents an opportunity for the company to avoid bankruptcy and allows the creditors to receive some form of payment for amounts owing to them by the company.