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How long do receiverships last in Canada? Introduction

In my September 2021 Brandon’s Blog, THE CANADIAN RECEIVERSHIP EASY BEGINNERS GUIDE, I provided an easy-to-understand guide to understand the receivership process. To summarize, I described that in Canada, a receivership is a legal remedy available to secured creditors to recover outstanding amounts under a secured loan if a company defaults on its loan payments. It may also be used in shareholder disputes to complete a project, liquidate assets, or sell a business.

A court may appoint a receiver to take possession of assets, oversee liquidation proceedings, and distribute the proceeds according to the applicable legal priorities as outlined in Canada’s Bankruptcy and Insolvency Act (BIA). Or, a secured creditor may issue a letter of appointment to the same effect.

It is essential to recognize that receivership and bankruptcy are distinct legal proceedings. Bankruptcy is a formal proceeding, regulated by the BIA, to provide debtors with debt relief when they are financially incapable of paying their unsecured creditors. Conversely, a receivership is a process available to secured creditors to recuperate outstanding debt arising from a secured loan or to address shareholder disputes.

The purpose of this Brandon’s Blog is to answer the question I am often asked: “how long do receiverships last in Canada?”.

how long do receiverships last

How long do receiverships last in Canada? Understanding what receivership is

There are two types of receiverships in Canada: court-appointed receiverships and private receiverships. Court-appointed receivers are appointed by a court to oversee the management and disposition of a debtor’s assets. Private receivers are appointed by secured creditors as part of a loan agreement and the security agreement between the debtor company and the creditor.to manage and sell a business debtor’s assets outside of the court system.

The receiver, regardless if it is a court-appointed receiver or privately appointed receiver, takes control of a company’s assets and business operations to repay outstanding debts to creditors. The receiver’s primary duty is to maximize the value of the assets and distribute the proceeds to the creditors according to their priority ranking. The receiver has the power to sell, manage, or liquidate the assets and may also negotiate with creditors to restructure the company’s debt.

Some key players in a receivership process are:

Borrower: The owner of the property who defaults on their loan obligations or faces financial distress.
Lender: The secured lender, normally a financial institution, who initiates the receivership action to protect their interest in the property and recover their debt.
Receiver: The neutral third party who is a licensed insolvency trustee (formerly called bankruptcy trustees) and is appointed either privately or by the court to take charge of the property and manage it toward a sale or resolution.
Court: The judicial authority that grants or denies the receivership request, sets the terms and conditions for the receiver’s appointment and oversees the receivership process.
Law firm: The lawyers who are acting for the lender, the borrower and the court-appointed receiver.

The powers and duties of a receiver can vary depending on the nature of the assets or the court order appointing them. Generally, it includes taking control of the assets, managing them in a financially responsible manner, and reporting to the court and parties involved in the dispute.

The duration of receiverships in Canada can vary depending on the specific circumstances of the case, but it typically lasts for a few months to over a year.

how long do receiverships last

How long do receiverships last in Canada?

Several factors will affect the duration of receivership in Canada, including:

the complexity of the case;
the number and nature of the assets involved;
the cooperation of the parties involved; and
the efficiency of the court system.

Other factors may include the availability of qualified professionals to manage and sell the assets, the level of creditor involvement and negotiation, and the overall economic and market conditions at the time. Ultimately, the length of receivership will depend on the specific circumstances of each case.

Court supervision is the oversight provided by a court in a court-appointed receivership. The purpose of court supervision is to appoint the receiver, to allow for the receiver to obtain the approval of the court to decisions and actions the court-appointed receiver wishes to take, to ensure that the receiver acts in the best interest of all parties involved and follows the court’s orders and to allow a forum for any aggrieved party to bring their dispute to the court for adjudication.

Termination of a receivership occurs when the court is satisfied that the receiver has fulfilled their duties and objectives or when the receiver’s appointment is no longer necessary. The court terminates a receivership by court order after approving the receiver’s final report and accounts.

how long do receiverships last

How long do receiverships last in Canada? Frequently asked questions (FAQs)

Navigating receiverships can be a tricky and complex situation. Asking questions like “how long do receiverships last in Canada?” is essential to any company dealing with financial hardship. Here I will cover some of the common FAQs associated with receiverships in Canada, and provide an in-depth look at the timeline of these proceedings. It is essential to have a thorough comprehension of receiverships to successfully manage this situation.

What are the differences between bankruptcy vs. receivership?

Receivership is a process to secure the rights of secured creditors, allowing for the control and eventual sale of the assets of a distressed company. Bankruptcy, on the other hand, is a legal process which allows a company in financial difficulty to reorganize its affairs or liquidate its assets under the guidance of an insolvency trustee – providing a safety net to unsecured creditors.

What happens during a receivership process in Canada?

As part of the receivership process in Canada, a receiver is appointed to handle a company’s assets and activities, facilitating the sale of these to settle the company’s debt to creditors.

How does a receiver sell a business or assets?

To sell a business or assets, a receiver has many options available. A receiver can:

advertise the assets for sale by running a tender bid sales process;
a tender bid sales process could be stand-alone or could be combined with a stalking horse sales process;
the assets could be liquidated through a public auction using the services of an auctioneer;
the receiver could hand all the assets over to a liquidator in order to sell the assets in an online auction;
in certain circumstances, the receiver may wish to hire a professional business broker experienced in that particular industry or assets the receiver took possession of; or
for retail store assets, the receiver may sell the entire package of assets and will then run a retail sale to the public.

Regardless of the process chosen, the receiver’s aim is to market and sell the assets or business and obtain the best price for the assets or business under the circumstances.

How does a creditor apply for receivership in Canada?

Secured lenders can apply for receivership in Canada by filing an application to the court under a federal or provincial statute or enforcing their security rights by appointing a receiver privately through a security instrument by way of an appointment letter. A receivership is a remedy that allows a secured creditor to take control of and sell the debtor’s property and assets to collect their secured debt through a private or court appointment process.

Can a receivership be stopped or avoided?

Receivership can sometimes be stopped or avoided through negotiation with the secured creditor(s), restructuring or refinancing of debts, or by finding alternative sources of funding. However, whether or not it can be stopped or avoided depends on the specific circumstances of each case. The cessation of receivership will not be easy unless the secured creditor is being paid out.

how long do receiverships last

How does a creditor enforce a secured loan in Canada?

In Canada, a creditor can enforce a secured loan by appointing a receiver under a private contract or through the court process. Upon appointment, the receiver will seize and sell the secured assets or the assets set out in the court order to recover the amount owed.

However, before being able to appoint the Receiver, there have to be one or more events of default as described in the loan agreement. Then, the lender must be reasonable in allowing the company borrower to cure the default. If the company in default does not remedy the default(s) and the lender has lost confidence, the lender can then make a written demand on the company to repay the entire loan, plus interest and costs and also serve the necessary statutory form on the defaulting borrower.

The lender must give the borrower a reasonable period of time to repay the secured lender’s debt. Reasonable time will vary depending on the unique circumstances of the situation. In Canada, the minimum amount of time that has to be given is 10 days, unless the borrower acknowledges in writing that they can never repay the debt and is waiving the notice period.

What are the legal options available to recover outstanding loan payments?

Legal options available to recover outstanding loan payments may include sending demand letters, filing a lawsuit, obtaining a judgment and using collection methods such as wage garnishment or asset seizure.

How long does the bankruptcy process take in Canada?

The timeline of a corporate bankruptcy process depends on the uniqueness and complexity of each individual situation. There is no typical timeline, but, it could be a year or more from the start of the bankruptcy until the licensed insolvency trustee is discharged.

How do I liquidate assets in Canada?

When seeking to divest yourself of some assets you have a plethora of choices – in the case of an asset like real estate, you can list it on the public market. Alternatively, you can try to find the right buyer on your own. Or, if you’d like some professional assistance, enlist the help of a savvy broker or financial adviser.

What are the consequences of not paying off secured loans in Canada?

In Canada, if you don’t pay back a secured loan, the lender may reclaim the collateral you put up, personal property like a car or real property such as a house. Don’t let your possessions be taken away! Be sure to make all loan payments in a timely manner.

how long do receiverships last

How long do receiverships last in Canada? Conclusion

So I hope that you now have a good appreciation for receiverships in Canada including the answer to the question “how long do receiverships last in Canada?”. If your company or business is under financial pressure and your secured creditor is about to demand full repayment of all loans, you need immediate professional advice.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

**A receiver appointed by court: What is a receiver in Canada?**

In the event that a company has financial difficulties, a Receiver may be appointed to take over its assets and manage them until its assets can be sold. The receivers are third parties appointed to supervise the liquidation process and remit the proceeds in accordance with legal priorities. A judge appoints a court-appointed receiver, and a secured creditor appoints a privately appointed receiver under a simple appointment letter. In Canada, for a court-appointed receivership, a receiver appointed by court must be a licensed insolvency trustee (formerly known as a bankruptcy trustee).

In this Brandon Blog, I focus on the factors to be considered by the Court when determining an application for a receiver appointed by court.

receiver appointed by court

**The receiver appointed by court: What happens when a receiver is appointed?**

The licensed trustee acting as receiver’s first duty is to take possession and control of the assets covered by the secured creditor’s security, or of all the assets identified in the court order in a court appointment. The receiver can decide if it can sell the assets for a higher price if it operates the business.

Senior management and the Board of Directors lose most of their decision-making authority when the company goes into receivership. Their advice and assistance are only needed if requested by the receiver.

The source of authority for the receiver appointed by court is appointed in Ontario under two statutes:

Section 101 of the provincial Ontario Courts of Justice Act; and
Section 243(1) of the federal Bankruptcy and Insolvency Act (Canada).

The receiver appointed privately has a duty of care to only the appointing secured creditor. Court-appointed receivers are responsible to all creditors.

receiver appointed by court

Receiver appointed by court: When can a court appoint a receiver?

Under Section 101 of the Courts of Justice Act (Ontario), the court considers whether the appointment “is just or convenient” under the circumstances. When deciding the origin of authority on whether or not to appoint a receiver as the court-appointed officer, the court must consider a variety of factors. Among them leading to the authority for decision making when there is an application for authorization for the appointment of a receiver are:

in spite of not having to prove it, will there be irreparable harm if the court does not appoint a receiver?;
the risk to a secured creditor and the equity the company owns in the assets, while litigation continues;
types of assets that would be subject to possession with respect to the receiver’ acts in its appointment;
it is necessary to balance the interests of the parties and to consider their rights;the preservation and protection of the property through the receivership proceeding pending judicial determination;
under its security, the creditor has the right to appoint a receiver;
when a creditor expects that the debtor will resist the enforcement of its security agreement;
it is an extreme measure which should be authorized sparingly, but less so if the applicant is a secured creditor who has that right under its security document;
in order to allow the receiver to perform its duties more effectively, a court appointment is necessary;
effects of the receivership order on the various parties;
actions taken by the parties and the litigation against properties;
duration of the Court-Approved receivership;
the costs incurred by each party;
it is likely that the receiver appointed by the court will maximize the return to the parties when the assets are sold under a receivership asset purchase agreement with the purchaser of assets;
facilitating the receiver’s duties and activities for its asset plan by a court order; and
a secured creditor’s good faith, the commercial reasonableness of the proposed Court-Appointed receivership and any equity questions.

A decision will usually turn on whether it is necessary to incur the expense and formalities of naming the third party to exercise neutral, transparent, and accountable stewardship of the debtor’s assets, while interested parties argue about the merits of the dispute and the receiver, attempts to maximize the recovery under an asset purchase agreement.

The court will usually intervene if the parties’ dispute puts the business assets at risk or where realizing the debtor’s assets or indemnifying a private receiver could impair the secured creditor’s recovery options. Often, simple default on the secured debt will be sufficient to attract a receivership where the risk to the business is implicit in the nature of the business or the dispute between the creditor(s) and the debtor(s). However, as with all equitable remedies, context is everything and each case turns on its own facts.

receiver appointed by court

**A receiver appointed by court summary**

I hope you found this receiver appointed by court Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you or your company in a way to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.