Bankruptcy - Corporate Services
What is corporate bankruptcy?
Corporate bankruptcy is a formal legal state of a corporate entity that cannot meet their financial obligations as they come due and whose assets are assigned to a licensed insolvency trustee by operation of the Bankruptcy and Insolvency Act of Canada (BIA), voluntarily or by court order. The assets are assigned to the trustee to liquidate and the money raised from the liquidation of those assets is used to pay creditors. You may have heard or read much about "Chapter 7" or "Chapter 11" , however these are part of the U.S. Bankruptcy Code and not applicable in Canada. Although the term corporate bankruptcy is very straightforward confusion arises because many people interchange the words bankruptcy and insolvency, when in fact they are very different.
What is corporate insolvency?
Unlike bankruptcy, insolvency is not a formal legal status. The Bankruptcy and Insolvency Act of Canada (BIA) describes an insolvent person (corporate entity or an individual) as someone:
- who is for any reason unable to meet his obligations as they generally become due
- who has ceased paying his current obligations in the ordinary course of business as they generally become due
Bankruptcy does not necessarily follow insolvency. There are many alternatives to bankruptcy. In fact according to Industry Canada only a small proportion of companies end up filing for bankruptcy. On average over the last 20 years there have been approximately 11,000 business bankruptcies per year in Canada. Since their peak in the late 1990s, business bankruptcies have been on the decline.
Is your company experiencing financial difficulties? Contact Ira Smith Trustee & Receiver Inc. today for help with corporate insolvency, corporate bankruptcy and alternatives to bankruptcy. We can helpStarting Over, Starting now you can live a debt free life.