Tag: Bankruptcy and Insolvency Act

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PENSIONS IN BANKRUPTCY: FEDERAL CONSERVATIVE PARTY PROMISE MASSIVE CANADIAN WORKER PENSION PROTECT1ON

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

 

Pension & Bankruptcy in Canada

Underfunding is a major concern for traditional, defined-benefit pension plans. In other words, do they have enough pension assets and therefore enough money to meet their projected future pension obligations? Inadequate actuarial assumptions, poor investment returns, and mismanagement can lead to pension plan underfunding. In the case of corporate insolvency of a large employer with a defined-benefit pension plan, this issue always arises. Underfunded pensions in bankruptcy wind up hurting retirees.

The Sears Canada court-supervised liquidation forced us to again focus on the treatment of pensioners in corporate bankruptcies under the Bankruptcy and Insolvency Act (Canada) (BIA) or restructurings and liquidations under the Companies’ Creditors Arrangement Act (CCAA). It was widely reported that representative for 17,000 Sears Canada retirees says insolvency laws are unjust when it comes to underfunded pensions.

PM Justin Trudeau is the only person who wants this election right now. Erin O’Toole, leader of the Conservative Party, promised to prioritize pensioners ahead of companies and creditors during bankruptcy and restructuring proceedings if he were elected.

This Brandon Blog discusses the issue of pensions in bankruptcy and how the Liberals had several opportunities to fix it but did not.

Pensions in bankruptcy: Pension and benefits issues in bankruptcy and restructuring

Pensioners suffer pension losses and ultimately pension income losses when a company is insolvent and its defined benefit pension fund plan is underfunded. In practice, the pensioners’ rights are weak and highly inadequate, especially when pension plans are underfunded. Although provincial and federal government pension legislation purports to offer some protection for amounts owing to an underfunded pension plan, insolvency legislation does not preserve that protection for the majority of those amounts. The insolvency protection of pensioners and pensions in bankruptcy is thus largely illusory.

Founder and Director of the National Centre for Business Law, Dr. Janis Sarra teaches law at Peter A. Allard School of Law. Canadian pensioners and employees, she believes, are among the worst protected pensions in bankruptcy and/or in insolvency among 60 countries.

In every Canadian province and territory, pensioners are protected by law in connection with pension deficits and pension payments. Specifically, every jurisdiction grants a deemed trust to protect employee pensions earned on employer assets owed to pension plans. The Pension Benefits Standards Act, which governs federally regulated pension plans, specifies the amounts that must be held separately from the employer’s funds, for example. Funds held in trust for active and retired pension plan members are not considered a part of the employer’s estate in liquidation or bankruptcy.

Under the Pension Benefits Act in Ontario, employers are required to hold all amounts owing to the pension plan in trust on behalf of their employees. According to the Supreme Court of Canada, the Ontario Pension Benefits Act creates a deemed trust over the entire wind-up deficit, subject only to the doctrine of paramountcy. Therefore, Ontario’s pension legislation expressly recognizes that the deemed trust is covered by all amounts of the employer owing to the pension plan.

The pension legislation in Quebec confers a deemed trust on special payments due in the year of insolvency. The special payments already due are deemed to be in trust, and the amount owing to the pension plan for unpaid special payments is deemed to be in trust based on Quebec’s pension law.

Due to other judicial decisions not giving effect to these deemed trusts in BIA and CCAA proceedings, the federal and provincial pension legislation has been hindered. In the meantime, to the extent that the BIA and CCAA protect pensions, the protection is negligible in practice. In Ontario (and every other province), provincial law protections are subject to the doctrine of paramountcy.

Paramountcy says that in the conflict between federal and provincial laws, federal law takes precedence. Both the BIA and CCAA are federal laws. The Supreme Court of Canada has held that provincial deemed trusts are not applicable to bankruptcy cases unless the BIA expressly permits them. There have even been successful attacks on federal pension law.

In accordance with existing regulations, the secured creditors may receive funds that would otherwise go to employees’ pension plans. Therefore, there really isn’t much protection for pensions in bankruptcy.

pensions in bankruptcy
pensions in bankruptcy

Pensions in bankruptcy: PM Justin Trudeau had his chance to fix this problem

Erin O’Toole doesn’t seem to be bringing up a new subject. The Liberal federal government had at least three chances to fix this pension issue for Canadian workers whose employers become financially troubled and have to liquidate or file for bankruptcy. A brief look at the recent history follows.

Let’s look at some history of attempts to protect pensions in bankruptcy. The Canadian Association for Retired Persons, a nationwide not-for-profit group, lobbied politicians on Parliament Hill about legislation changes. According to Wanda Morris, vice-president of CARP, the unfunded pension liability should be given priority so that it is handled first.

There is no priority for retirees when it comes to dividing up assets in bankruptcy, and Morris wants to protect underfunded defined benefit pensions when the company goes through restructuring or bankruptcy.

CARP estimates that roughly 1.3 million Canadians, aside from the retired Sears employees, may be at risk due to defined benefit pension plans. The closure of Sears Canada stores made the plight of retirees a top priority for CARP.

Marilène Gill, Bloc Québécois MP, introduced a member’s BILL C-372, on Oct. 17, 2017. It was intended to change the BIA and the CCAA. The change seeks to correct the injustice faced by retired workers whose pension and insurance policy benefits are not secured when their company declares bankruptcy or undergoes restructuring. As a result of Sears Canada closing locations, the changes were related to the employees’ and retirees’ treatment.

On October 17, 2017, Bill C-372 passed First Reading. The House rarely passes private member’s bills like this one. The Liberal Party did not support taking it further and allowed it to die.

Hamilton Mountain NDP MP Scott Duvall asked for leave to introduce Bill C-384 in the House of Commons on November 6, 2017. He proposed amending Canada’s insolvency laws so that companies must bring any pension fund to 100% before paying any other secured creditors. Additionally, it requires companies to pay termination or severance pay owing before paying secured creditors. Similarly, this bill passed first reading and then died.

Lastly, Senator Art Eggleton, P.C., proposed BILL S-253 shortly before his retirement to amend the insolvency legislation in Canada. After First Reading passed on September 18, 2018, Second Reading followed on September 25. By introducing this bill, the BIA and CCAA would be amended. The plan proposed to give priority to claims for unfunded obligations or solvency deficiencies of pensions. This is applicable to both solvent companies as well as companies that might become insolvent if certain shareholder payments were made.

The proposed legislation would also amend the Pension Benefits Standards Act as well as the Pension Benefits Standards Regulations in order to enable the Superintendent of Financial Institutions to identify when a pension plan’s funding is impaired and to recommend to the employer the necessary steps to fix it. It is not surprising that the Liberal federal government did not carry forward this bill.

Pensions in bankruptcy: Erin O’Toole vows to force bankrupt firms to pay pensions over executive bonuses

The Hon. Erin O’Toole announced on August 24, 2021, that if he wins the election he plans to protect workers’ pensions. In bankruptcy and restructuring proceedings, he pledges to give priority to pensioners over the corporations and most other creditors.

According to him, as part of Canada’s Recovery Plan, a Conservative government will change the law to ensure that workers come first in cases of bankruptcy and reorganization.

The Conservative Party of Canada will also improve pension security by:

  • Preventing executives from receiving bonuses during a time of restructuring unless the pension plan is fully funded.
  • Unlike in the past, underfunded pension plans will no longer be forced to convert to annuities, a practice that involves financial assets being disposed of and replaced with an insurance contract to reduce risks, as well as offer pensioners, fixed payments. The practice of companies failing during a recession when markets are depressed usually locks in losses and means workers receive less money.
  • By mandating that companies report the funding status of their pension plans to their employees, they can provide their employees with greater transparency.

No further details were given. At least the Conservative Party is focused on this issue of when an employer is insolvent and there are pensions in bankruptcy.

pensions in bankruptcy
pensions in bankruptcy

Pensions in bankruptcy: Summary

We will have to wait to see the results of this election to know if anything might change when it comes to pensions in bankruptcy of the employer.

I hope that you found this pensions in bankruptcy Brandon Blog informative. An unexpected situation, such as your employer having financial trouble and entering liquidation or bankruptcy proceedings, by their very nature, are not pleasant and could have the effect of making your debt load now impossible to service. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

pensions in bankruptcy
pensions in bankruptcy
Categories
Brandon Blog Post

TENANTS IN COMMON VS JOINT TENANCY IN ONTARIO: THE MODERN RULES OF A 1 CO-OWNER UNHAPPY BANKRUPTCY

tenants in common vs joint tenancy

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tenants in common vs joint tenancy in Ontario: Shared ownership of property

There are two different types of property joint ownership: tenants in common vs joint tenancy. Whether you’re married or not, you still face the same problems. Having a co-owned home raises the issue of how the title should be held; tenants in common vs joint tenancy. Both are equally good. The answer really depends on the relationship between the co-owners and their estate planning needs.

A bankruptcy filing by one of the co-owners complicates matters further. A recent bankruptcy case decision in Ontario where only one of the joint owners filed for bankruptcy, highlights the problem, especially for non-bankrupt co-owner. This Brandon Blog discusses the recent bankruptcy case and what it means for both the bankrupt co-owner and the non-bankrupt co-owner regardless of the ownership choices between tenants in common vs joint tenancy.

Home ownership in Ontario: tenants in common vs joint tenants as co-owners

The word “tenants” is normally thought of with property rental. But both joint tenancy and tenants in common reference to a type of shared property ownership. As tenants in common, the ownership rights and all areas of an entire property are owned equally by all members of the group.

When one of the joint tenants dies, the deceased owner‘s share of the property passes to the surviving owner without going through the probate process. With tenants in common, in the event of death, this is not the case.. For asset protection and estate planning purposes, many married couples who want to hold title to the real property in a co-ownership structure, do so as joint tenants to avoid the probate process. Each joint tenant owns a 50% share ownership stake in the property.

Tenants in common may freely decide what ownership percentage of the property each owns. Each tenant in common does not need to own an equal percentage of the property; unequal ownership is fine as long as all co-owners agree on the ownership arrangements of unequal shares. The tenants in common can also transfer their share of the property through a Will, a real estate transfer, or even an arm’s length sale. Tenants in common are well advised to have a signed co-ownership agreement that spells everything out.

This is the primary difference between tenants in common vs joint tenancy in Ontario for the joint ownership of real property.

tenants in common vs joint tenancy
tenants in common vs joint tenancy

Property ownership part 2: tenants in common vs joint tenants in Ontario and the bankruptcy of 1 co-owner

When a co-owner becomes bankrupt, what happens? The Brandon Blog faithful knows that I have previously explained that upon bankruptcy of a person, the non-exempt assets of the bankrupt should be vested in the licensed insolvency trustee, subject to secured creditors‘ rights. For real estate ownership, the answer does not change whether title is held in tenants in common vs joint tenancy.

There is an exemption in Ontario for equity in one’s home of not more than $10,783. It is not an exemption for the first $10K, but rather if the total equity is below that amount. Therefore, we can consider the equity in a bankrupt person’s ownership interest in their home to belong to the Trustee for all practical purposes.

If the bankrupt has a 50% ownership stake due to a joint tenancy agreement, then it is the bankrupt’s equity in half the home. If the bankrupt’s ownership stake is under a tenants in common co-ownership agreement, then it is the equity in only the bankrupt’s co-ownership share. In either scenario, the ownership interest of the non-bankrupt owners are not directly affected. However, the other co-owners’ are affected one way or the other by the bankruptcy of a co-owner. The legal case I am about to tell you about is no exception.

Land Owner Transparency Registry: A Public Database

Upon the person’s bankruptcy, the bankrupt must disclose all assets to the Trustee. With computerization and the internet, it is easy for a Trustee to determine if the bankrupt has an ownership interest in the real estate where they reside. This is whether or not the bankrupt has disclosed such ownership interest.

The decision of the Honourable Justice Pattillo of the Ontario Superior Court of Justice in Bankruptcy and Insolvency dated July 28, 2021, in Re Johansen Bankruptcy, 2021 ONSC 5241 (CanLII) highlights the issues in the bankruptcy of a co-owner of real estate. In December 2016, Mr. Johansen filed a voluntary bankruptcy assignment. In his sworn statement of affairs, he listed no realizable assets and liabilities of $73,968 (unsecured) and $14,950 (secured). No mention is made of any ownership in real estate.

The Trustee learned of the bankrupt’s interest in the home he lived in with his mother in March 2017. In the period from April 2017 to October 2020, the Trustee wrote to the bankrupt and Mrs. Johansen as well as spoke to the bankrupt several times about his interest in the home and why it hadn’t been disclosed. The bankrupt did not provide any information other than denying interest in the property, and his mother did not respond.

A FedEx courier envelope containing a one-page statutory declaration purportedly signed by Mrs. Johansen on October 18, 2018, arrived at the Trustee on October 16, 2020. Her declaration stated, in part, that putting the 20% in the bankrupt’s name was intended to provide her son with an interest in her Estate over and above any other entitlements under her Will. According to her, the 20% was a gift to be realized only after her death.

In the Trustee’s view, the bankrupt and his mother are playing games with each other. The Trustee applied to the court for a declaration that the bankrupt held a 20% interest in the home at the time of bankruptcy, and that he could partition and sell it. Despite the Trustee having a lawyer, the bankrupt represented himself. It would have been better if he had gotten legal advice and been represented in court.

tenants in common vs joint tenancy
tenants in common vs joint tenancy

Tenants In Common vs Joint Tenancy: Can your 90-year-old mother be thrown out of her house?

The Judge determined that the bankrupt owned a 20% interest in the property based on the legal title, and hence, that 20% interest vested in the Trustee pursuant to s. 71 of the Bankruptcy and Insolvency Act (Canada) (BIA).

Mrs. Johansen’s statutory declaration to the effect that the bankrupt did not own the real estate and that the 20% was a gift that only passes to him on her death was not accepted by the Judge. The declaration was signed some two years after the bankruptcy when the Trustee’s ownership interest was well known. Despite repeated requests from the Trustee for information, it was not produced for another two years. In addition to what was noted by the Judge, his main concern was the way she characterized the bankrupt’s interest, given the evidence concerning the property they owned before this home, which Mrs. Johansen failed to mention.

Mrs. Johansen and the former marriage of the bankrupt’s wife, as well as the bankrupt, were the three parties on title to the home they purchased on January 30, 2007. They obtained a mortgage from TD Bank on January 30, 2007, which was discharged on February 21, 2007. Due to a marital split, the bankrupt’s wife was removed from the legal title on October 17, 2008, leaving just his mother Mrs. Johansen and himself as parties on the legal title. The bankrupt admitted that his ex-wife was paid for her interest in that home. On June 28, 2012, the bankrupt and his mother sold that home for $567,000, and the same day purchased the current home for $450,000.

The home was purchased in 2012. The title documents recorded at the time, its ownership is divided between 20% owned by the bankrupt and 80% owned by Mrs. Johansen. Mrs. Johansen and the bankrupt both signed the Land Transfer Tax affidavit showing as between tenants in common vs joint tenancy they chose to own the home as tenants in common. There are no mortgages recorded on the title.

All title searches, including a current title search, did not reveal the nature of the interests of each of Mrs. Johansen, the bankrupt or his ex-wife held in that previous home. However, it did show that each of them had an interest in it. The Judge determined that when Mrs. Johansen and the bankrupt bought the current home, it is a reasonable conclusion that the bankrupt had a 20% ownership interest in it. It was not intended to only pass on Mrs. Johansen’s death.

Justice Pattillo did not accept the bankrupt’s evidence that he has no interest in the property and had no knowledge that he was one of the parties on title. Given the history and the fact that he signed the affidavit of Land Transfer Tax at the time of purchase, Justice Pattillo held that the bankrupt was aware he had an interest in the legal title in the property.

Justice Pattillo found that the Trustee had the standing to bring the application for partition or sale of the property since he is a person with an interest in it. The Judge noted that Mrs. Johansen is 90 years old and does not wish to sell her home. Based on the evidence, however, he did not consider that to be of sufficient hardship to warrant refusing the requested remedy.

Tenants in common vs joint tenancy: The bankruptcy of 1 co-owner will affect the others

The Judge stayed his order for three months. He encouraged the bankrupt and through him his mother to seek professional advice so that this issue can be resolved with the Trustee before the sale process begins. The order will take effect if a resolution is not reached within that timeframe.

Now that the prospect of the sale of the entire home, not just the bankrupt’s co-ownership interest, was a reality, the bankrupt and his mother needed professional guidance. Their professional advice would be that the Trustee is only entitled to 20% of the bankrupt’s equity interest. So, if the mother from her own funds, or by getting a mortgage, can come up with the value of the 20% interest and pay it to the Trustee, then the house will not get sold. She will have bought the bankrupt son’s 20% interest, and the Trustee will have all the money he is entitled to.

If one co-owner goes bankrupt, the other co-owners are affected as well. It is the Trustee’s responsibility to convert the bankrupt’s equity into cash. One or more of the remaining co-owners are the natural buyers of the bankrupt co-owner’s interest. Sometimes non-bankrupt co-owners must sell, as is the case for Johansen if the mother cannot purchase the son’s equity from the Trustee, but most often someone will purchase the Trustee’s equity to maintain the status quo.

Had the choice of ownership interest as between tenants in common vs joint tenancy, this would not have changed the outcome of this case.

tenants in common vs joint tenancy
tenants in common vs joint tenancy

A lawyer can help you understand tenants in common vs joint tenancy in Ontario

I hope that you found the tenants in common vs joint tenancy Brandon Blog interesting. Problems will arise when you or your company are in financial distress, cash-starved and cannot repay debts. There are several insolvency processes available to a company or a person with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

tenants in common vs joint tenancy
tenants in common vs joint tenancy
Categories
Brandon Blog Post

REVERSE VESTING ORDER: 1 REMARKABLE CREATIVE WAY TO DO FINANCIAL RESTRUCTURING

reverse vesting order

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Vesting order and reverse vesting order

In a corporate insolvency case, a court may grant a vesting order, which authorizes the sale of a company’s assets to the buyer once the purchase price is paid. A vesting order vests ownership in the purchaser as a result of this court order. This is proof that the purchaser is entitled to transfer the assets into its name. No matter what insolvency process is used, this is the use of a vesting order.

In the past year or so, a new trend has emerged regarding the sale of the assets of insolvent companies as part of a restructuring under the Companies’ Creditors Arrangement Act (CCAA). That new trend is the use of a reverse vesting order.

In this Brandon Blog, I explain what a reverse vesting order is and why I believe its use will be a significant feature of Canadian firm restructurings in 2021 and beyond.

Reverse vesting order – A powerful tool for maximizing recovery in complex insolvencies

A reverse vesting order can be very useful in complex insolvencies. A timely recovery can benefit creditors, and the process can maximize recoveries for all parties. Reverse vesting orders are a good solution for an insolvent debtor corporation when:

  • there are a large number of secured creditors, unsecured creditors and assets;
  • all of the assets do not have an immediate buyer;
  • the company is insolvent; and
  • the company must deal with unwanted assets and a group of creditors in a particular way.

It is best used in a large-scale CCAA corporate restructuring but is not limited to that.

reverse vesting order

Reverse vesting order as a third restructuring tool

There have traditionally been two insolvency processes available to licensed insolvency trustees, insolvency lawyers, and company stakeholders. The two are (i) liquidating assets; and (ii) reorganizing companies. In general, assets are liquidated through either receivership or bankruptcy. Incorporated companies can restructure either under the provisions of the Bankruptcy and Insolvency Act (Canada) (BIA) or, for larger and more complex restructurings, under the CCAA. It is obvious that assets must be sold in order to liquidate them.

Sometimes, as part of a corporate restructuring, there are redundant and unwanted assets that can be sold to raise cash. The question is, what if the real value, especially a going-concern value of a company in a commercial insolvency case is not in its tangible assets. Rather, its real value lies in:

  • the ability to operate in a specific industry and such licenses cannot be sold by their very nature and wording – think of the cannabis and nursing home industries as two examples;
  • tax losses and tax attributes that can be monetized if the licensed insolvency trustee is also able to take over the shares; or
  • being listed on the stock exchange and thus as a public company having a greater market value than a private corporation.

As a result, it is extremely difficult to realize any value from such assets.

What is the importance of the reverse vesting order? How a reverse vesting order works will tell you all you need to know about why it is important as a third restructuring tool. Under a reverse vesting order, a newly incorporated residual corporation is added as a party to the CCAA proceedings.

As part of the CCAA restructuring, the operating debtor company transfers undesirable assets and liabilities to the newly incorporated non-operating company. With its assets and liabilities selected by the purchaser, the debtor company holds only the desirable assets and liabilities, which means its common shares can be sold rather than the company’s assets. As a result, valuable permits, contracts, tax losses, and statutory authority are preserved, which can otherwise be lost in a disposition of assets.

Why is reverse vesting order important?

A reverse vesting order is an alternative to the traditional CCAA plans of arrangement, particularly for companies operating in highly regulated environments or when there is no value remaining after the realization of secured debt and the parties intend to continue the running of the debtor company.

A reverse vesting order is an alternative to the traditional CCAA plans of arrangement, particularly for companies operating in highly regulated environments or when there is no value remaining after the realization of secured debt and the parties plan to continue operating the debtor company.

By using a reverse vesting order, existing corporations, which have been streamlined to become solvent through an innovative solution, are transferred to new investors instead of desirable assets being sold through a court-approved sale. The debtor corporation that initially filed for bankruptcy protection under the CCAA can now be removed from the restructuring proceedings. There are certain unwanted assets and unwanted liabilities that are transferred to the newly incorporated residual corporation. There can then be asset sales allowing for some sort of distribution to creditors (either in a plan of arrangement or in bankruptcy) in order to allow some creditor recovery.

A reverse vesting order may prove to be the most efficient approach to facilitate a going concern operation transfer through restructuring proceedings, letting businesses emerge from CCAA proceedings quickly without having filed a plan of arrangement, while preserving key attributes of the corporate entity and its existing corporate structure.

Legal challenges to the use of reverse vesting orders have been unsuccessful. I would like to discuss the case of Nemaska Lithium Inc.reverse vesting order

Reverse vesting order issued by Québec Superior Court after first contested hearing

In December 2019, Nemaska Lithium Inc. and related companies (Nemaska Lithium or the Nemaska entities) commenced CCAA proceedings. A lithium mining project was developed in Quebec by them. A CCAA judge approved an uncontested sale or investment solicitation process (SISP) in January 2020 that led to the acceptance of a bid that was subject to the condition that a reverse vesting order is issued.

A proposed reverse vesting order provides that Nemaska entities will be acquired by the bidder free of the claims of the unsecured creditors, which will be transferred as part of a pre-closing reorganization to a newly incorporated non-operating company.

The reverse vesting order will allow the purchaser to continue to operate the Nemaska entities in a highly regulated environment by maintaining their existing permits, licences, authorizations, essential contracts, and fiscal attributes. In essence, it is a credit bid in which the shares of the Nemaska entities are acquired in exchange for the assumption of the secured debt.

A shareholder (who was also an alleged creditor) filed motions opposing the reverse vesting order issuance on multiple grounds, including:

  • a vesting order cannot be granted for anything other than a sale or disposition of assets through a vesting order for sales of assets;
  • the reverse vesting order is not permissible under the CCAA because it allows the Nemaska entities to exit CCAA protection outside of a plan of arrangement or plan of compromise;
  • this reverse vesting order contemplated a corporate reorganization that is not permitted by securities laws; and
  • in light of the proposed transaction, the directors and officers of Nemaska Lithium Inc. should not be released.

The Honourable Justice Gouin, J.S.C., reviewed and assessed:

  • the SISP process which led to the offer;
  • the lack of alternatives to the offer;
  • the potential harm to Nemaska Lithium‘s stakeholders, including its employees, creditors, suppliers, and the Cree community;
  • stopping the restructuring process to relaunch a SISP in the future following what was already a thorough examination of the market or, alternatively,
  • bankrupting the Nemaska entities.

In light of all these factors, the judge approved the reverse vesting order on October 15, 2020. Limiting the remedies available under the CCAA would unnecessarily hinder the development of innovative solutions for more complex commercial and social issues in Canadian insolvency matters.

The decision and formal recognition of reverse vesting order by the Court of Appeal

Leave to appeal the CCAA judge‘s decision was sought by the parties who objected to the reverse vesting order being made. The Appellate Court carefully considered the judge’s decision-making process and particularly that the Québec Superior Court judge relied extensively on the principles set out by the Supreme Court of Canada in the matter of 9354-9186 Quebec inc. c. Callidus Capital Corp., namely the:

  • development of CCAA proceedings and the role of the CCAA supervising judge;
  • remedial objectives of Canadian insolvency laws to provide timely, efficient, and impartial resolution of a debtor’s insolvency, secure fair and equitable treatment of creditors’ claims against a debtor, protect the public interest, and balance the costs and benefits of restructuring or liquidating the debtor company’s assets;
  • CCAA‘s goal of preventing social and economic losses from liquidating insolvent companies by facilitating their reorganization and survival as a going concern; and
  • CCAA judge‘s broad discretion under s. 11 of the CCAA in an effort to advance the CCAA’s remedial objectives while taking into account three fundamental factors that the debtor company application must prove: (1) the requested order is appropriate in the circumstances, and (2) good faith on the part of the applicant, and (3) the applicant has been acting with due diligence.

It was determined by the Court of Appeal judge that the risk of potential harm to stakeholders outweighed any legal merits of any arguments raised by the opposing parties. Therefore, the Quebec Court of Appeal denied the leave to appeal the decision of the CCAA judge.

Canada’s Supreme Court has denied leave to appeal. Having now established reverse vesting as an option for CCAA restructurings, the law is now set in stone.

The Nemaska case is the first reverse vesting order transaction to withstand judicial scrutiny in Canada and reaffirms the flexibility of CCAA proceedings for distressed M&A transactions of distressed businesses.reverse vesting order

Reverse vesting order and distressed M&A opportunities

I hope that you found this reverse vesting order Brandon Blog interesting. Problems will arise when you or your company are in business distress, cash-starved and cannot repay debts. There are several insolvency processes available to a company or a person with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

DIFFERENCE BETWEEN CONSUMER PROPOSAL AND BANKRUPTCY: THE PROVEN CANADIAN WAY TO GET DEBT FREE

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.

Difference between consumer proposal and bankruptcy: Know your options

Regular readers of my Brandon Blog know that there are a lot of steps you need to go through to financially reorganize your life. I have written before different blogs on various aspects of both consumer proposals and bankruptcy. The purpose of this Brandon blog is to discuss in one place, the difference between consumer proposal and bankruptcy.

Many people opt for one of these options because life has thrown them a curveball, they no longer have the cash flow to pay off their debts and want to start fresh. There are some great benefits to filing bankruptcy. They include eliminating creditors and debts, getting control over your personal finances, and having a stress-free life, Starting Over, Starting Now. But if you’re considering a first-time bankruptcy, or the bankruptcy option even if you are familiar with the Canadian bankruptcy process from a prior time, you should consider the pros and cons of a consumer proposal, the only government-approved debt settlement plan in Canada. It will be good for you to know the options that I explain below.

Consolidation loans vs consumer proposals

What’s the distinction between a consumer proposal and a debt consolidation loan? The consumer proposal process is an insolvency procedure that allows you to resolve all the amounts you owe to your unsecured creditors via an arrangement with your creditors. It does this without needing you to file bankruptcy. A consumer proposal can only be carried out by a licensed insolvency trustee. A consumer proposal allows you to get rid of all the amount owed by repaying only a part of your financial obligations over time.

A consolidation loan means that you still have sufficient assets and income and a good enough credit score, in order to borrow the total amount you owe. The loan must carry an interest rate lower, and hopefully much lower, than the average interest rate of your combined total debt. You use the loan proceeds to repay 100% of your debts. You now have only one loan with a monthly payment you can afford. Taking out a consolidation loan is not an insolvency process.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

The main difference between consumer proposal and bankruptcy

The consumer proposal is a fundamental part of our personal insolvency system. It is an insolvency procedure controlled by the Bankruptcy and Insolvency Act (Canada) (BIA) that allows individuals who owe $250,000 or less (not including any financial debts secured against their principal home). It permits you to pay a portion of your financial debts with time, yet eliminate all of them if fully executed. It is an alternative to declaring bankruptcy. It is an alternative to bankruptcy.

Bankruptcy is also a fundamental part of our insolvency system under the BIA. However, rather than restructuring, in personal bankruptcy, the person surrenders all of their non-exempt assets to the licensed insolvency trustee for the benefit of the person’s creditors. Once the bankrupt person has fulfilled all of their duties, they are entitled to receive a discharge from bankruptcy, subject to the Trustee or a creditor opposing it.

Personal bankruptcy involves the liquidation of the bankrupt’s assets in return for the eventual elimination of their unsecured debts. It is not considered a restructuring like a consumer proposal is.

Difference between consumer proposal and bankruptcy: The process of filing a consumer proposal vs bankruptcy

You start by talking to a Trustee who will provide you basic guidance on both a consumer proposal and also bankruptcy. The Trustee will likewise inform you specifically just how each process functions. If at the end of that discussion you inform the licensed bankruptcy trustee that you really feel good in wanting to take the next steps with them, the Trustee will provide you with their intake form. When the form is completed, you send it to the Trustee, including supplying any kind of backup documents asked for, the Trustee can then provide you advice for your unique financial difficulties.

If you choose a consumer proposal, the licensed insolvency trustee will prepare the necessary filing documents for you to sign. This includes assisting you with preparing the best possible proposal that works for both you and your creditors. You then meet with the Trustee to sign the documents. The Trustee then files the documents electronically with the Office of the Superintendent of Bankruptcy (OSB). The OSB then issues the Certificate evidencing the filing and the formal process begins.

After seeing your completed intake sheet, the Trustee will advise on whether or not a consumer proposal would work for you, or if your best or only option is filing for bankruptcy. Similarly, in bankruptcy filings, the Trustee prepares all the required filing documents for your signature. The Trustee explains all of them to you, you sign them and the Trustee then electronically files the filing documents with the OSB. The OSB then issues its Certificate evidencing the bankruptcy and that formal process begins.

You initially meet with the licensed bankruptcy trustee, in-person, by video or phone, to share details of your personal situation, and working together, you determine whether a consumer proposal, an alternative to filing bankruptcy, or personal bankruptcy is the best option for you. With COVID-19, we have been holding all of our no-cost consultations and meetings by phone and video. We can do the sign-up process by video and email. We have found this is very convenient for our clients as they are not required to take the time to attend our office in person.

As you can see, the process of filing a consumer proposal vs bankruptcy is not that different. For filing, there is not really a difference between consumer proposal and bankruptcy.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

Major difference between consumer proposal and bankruptcy

Is there a major difference between consumer proposals and bankruptcy? Yes. So far in this discussion, there have not really been major differences. But there really are as the consumer proposal is akin to filing for bankruptcy protection while the other is bankruptcy. Both provide legal protection from creditors. But a consumer proposal gives a person what the media calls filing for bankruptcy protection. When you file for bankruptcy, that calls for the liquidation of non-exempt assets.

Both bankruptcy and a consumer proposal can be excellent options for somebody who is experiencing a challenging financial position. A consumer proposal is an excellent choice for individuals who have the ability to make monthly payments to their creditors totalling less than the amount they owe, yet eliminating all their debts, while keeping the equity they have in assets they wish to keep. Bankruptcy is an excellent choice for those who are bewildered by their financial obligations, and who don’t have a consistent income, making it actually hard or impossible to manage making payments at any level to their creditors.

While both bankruptcy, as well as a consumer proposal, can supply a financial clean slate, there are a few vital distinctions.

In a consumer proposal, you normally get to keep all of your assets. In a bankruptcy, if you have equity in assets that you want to keep, you or someone friendly to you has to pay that equity to your Trustee for the benefit of your creditors. Otherwise, you need to surrender all non-exempt assets to the Trustee for the Trustee to sell them and then put the cash towards the claims of your creditors. The assets covered by your bankruptcy exemptions do not need to be surrendered.

In bankruptcy, you also have the issue of needing to obtain your bankruptcy discharge. If either the Trustee or one or more creditors object to your discharge, then you will not get your automatic bankruptcy discharge and you will have a discharge hearing in Court. You may also be subject to surplus income payments in a bankruptcy, which you will need to make to your Trustee (21 months for a first time bankrupt, 36 months for a second time or more bankruptcy).

The amount to offer your creditors in a consumer proposal has to be a better amount than they would receive from your bankruptcy. After doing the calculations I spoke about above, including any surplus income obligation, you will better understand what amount needs to be offered to your creditors.

Another difference between consumer proposal and bankruptcy is that there is a benefit of a consumer proposal in that you can spread the monthly payments for the amount determined over a term of up to 60 months, interest-free. In a bankruptcy, you are typically required to make any required payments over the term of your bankruptcy, which is much shorter than in a proposal. Therefore the consumer proposal allows you to term out a slightly higher settlement over a longer period of time. This makes the monthly repayment less complicated on your cash flow as well as your budget plan.

Once your consumer proposal is (deemed) accepted by the creditors and (deemed) approved by the Court, you just need to make your promised monthly payments to the Trustee. The Trustee handles making payments at regular intervals to your creditors. Once you have completed the payment promised under the consumer proposal, you receive your Certificate from the Trustee showing that you completed the consumer proposal. That is it. No discharge hearing can be opposed and no extra surplus income payments. It is already accounted for in the amount offered to your creditors in your consumer proposal.

The cost difference between consumer proposal and bankruptcy

When doing a consumer proposal, the fee of the licensed insolvency trustee is included in the payment you negotiate with your creditors. As I mentioned above, the calculation of what to offer in a consumer proposal does not include what the fee and costs are. Rather, it is compared to what the unsecured creditors can expect in bankruptcy.

However, if you were to file bankruptcy, the fee is based on the surplus income you may have to pay (based upon a criterion that includes income and family size) and also any assets that you are required to assign over to the Trustee. You might also have to make month-to-month contributions to cover the fee and costs if your income and non-exempt assets are insufficient to pay for the bankruptcy proceedings.

If there is no surplus income or assets, you, or someone on your behalf, will need to pay the bankruptcy fee which will be approximately $1,800 plus HST.

difference between consumer proposal and bankruptcy
difference between consumer proposal and bankruptcy

Difference between consumer proposal and bankruptcy: What’s worse? Credit rating impact of a bankruptcy vs consumer proposal

Both a consumer proposal and bankruptcy are insolvency proceedings under the BIA. Therefore both will negatively affect your credit rating. In a consumer proposal, your credit rating will show as an R9 on your credit report while you are making payments. Once you have completed your consumer proposal, your credit rating will be an R7 for 3 years after completion.

For a first-time bankrupt, if you were to file for bankruptcy, your credit report will show an R9 rating for 6-7 years after being discharged.

The difference between consumer proposal and bankruptcy summary

I hope that you found this difference between consumer proposal and bankruptcy Brandon Blog interesting. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

BANKRUPTCY LAWYER IN TORONTO VS. BANKRUPTCY TRUSTEE IN TORONTO: WE EXPLORE AND EXPLAIN COMPLETELY THE DIFFERENCES FOR YOU

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to an audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Bankruptcy lawyer in Toronto introduction

Canada is recognized for its cultural diversity, but it can be a battle to locate trustworthy information on the nation’s laws. Bankruptcy is a difficult topic to learn about; both learning the technical side and dealing with the emotional one.

If you or your company are thinking about bankruptcy, you might think you need a bankruptcy lawyer in Toronto. However, you do not necessarily require one. A licensed insolvency trustee in Toronto (formerly called a bankruptcy trustee in Toronto) can help you pick the perfect insolvency process for you and make certain that you survive it as best as possible.

In this Brandon Blog, I discuss the roles of a bankruptcy lawyer in Toronto and a licensed insolvency trustee. Sometimes they can overlap and many times they do not. We will take a detailed look at a bankruptcy lawyer in Toronto vs a licensed insolvency trustee. We will discuss the differences between the two and exactly how they can each help you.

Bankruptcy lawyer in Toronto – Do you need one to file personal bankruptcy?

Whether it is personal bankruptcy proceedings, or one of the formal alternatives to bankruptcy such as a consumer proposal or a Division I Proposal that are being contemplated, a bankruptcy lawyer in Toronto or elsewhere is not involved in the actual bankruptcy filing. or the Canada – restructuring & insolvency filing. That is what trustees in bankruptcy do.

When a person or company is contemplating an insolvency process, they can get a no-cost consultation with any one of the bankruptcy trustees they choose to meet with. During the consultation, information is gathered by the Trustee, analyzed and possible solutions are discussed.

Trustees must always be careful to not tread into areas that could possibly give them a conflict in providing their financial services. People wanting advice on asset transfers, asset protection, or preferring one or more creditors over others are areas that Trustees should not wade into.

In situations like that, I always advise potential bankruptcy clients that as there is no privilege in our discussions and we should not talk about those things so that I will not be conflicted. Rather, the person should get advice from a bankruptcy lawyer in Toronto or elsewhere where the discussions and the legal advice are protected by solicitor-client privilege.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Do You Need a personal bankruptcy lawyer in Toronto to get your bankruptcy discharge?

As I have written before in several Brandon Blogs, there are 6 possible outcomes in a bankrupt’s application for discharge. This depends on whether the discharge is being opposed by either the Trustee and/or one or more creditors. The possible bankruptcy discharge outcomes are:

  • Automatic – This discharge is absolute and is given by the Trustee at the earliest possible time the bankrupt person is entitled to a discharge. It means that the bankruptcy has performed all of his or her duties, has fully cooperated with the Trustee and nobody has opposed the discharge.
  • Absolute – An absolute discharge is obtained when the Trustee issues the automatic discharge. it is also possible to obtain an absolute discharge when a creditor opposes the bankrupt’s discharge, the matter goes to court for a hearing, but the court does not believe the evidence presented by the opposing creditor is persuasive and the court orders an absolute discharge.
  • Conditional – In this type of discharge, there was opposition to the bankruptcy receiving an absolute discharge. The court considered the evidence and concluded that the bankrupt must fulfill one or more conditions before being entitled to a discharge from bankruptcy. More often than not, a conditional discharge includes a certain amount of money the bankrupt must pay to the Trustee for the general benefit of the creditors.
  • Suspended – A suspended discharge is given when there is opposition to the bankrupt’s discharge and the matter goes to court for a discharge hearing. Based on the evidence, the court believes that the bankrupt, either before or during the bankruptcy estate file administration, has conducted himself or herself in such a way that although a discharge will be given, it should be delayed. The suspension acts to delay the discharge and can be combined with conditions.
  • Refused – The bankrupt’s discharge is opposed probably by at least the Trustee and probably one or more creditors. There is sufficient evidence before the court that the bankrupt has not lived up to his or her duties and has probably failed to fully cooperate and provide full disclosure to the Trustee. The court, based on the evidence, refuses to consider the bankrupt’s application for discharge until such time as the bankrupt performs all duties and discloses all information.
  • No order – This is not an actual discharge type, but can be the outcome of a discharge hearing. The court can issue a “no order” instead of a refusal. The facts are probably similar to when the court can issue a refusal. However, in a “no order” situation, the bankrupt remains in bankruptcy but the Trustee is then free to pursue its discharge. Once the Trustee gets its discharge, the bankrupt lose the protection offered by the stay of proceedings. Creditors are then free to pursue all of their rights and remedies against the bankrupt in the enforcement of their trying to collect their respective debts.

When the time comes for the bankrupt to get his or her discharge from bankruptcy, if the Trustee or a creditor opposes, the bankrupt would be well advised to consult with a bankruptcy lawyer in Toronto or elsewhere. The Trustee cannot give an automatic discharge and the matter is going to court for a trial. The bankrupt should get the benefit of legal advice and probably will need to retain the lawyer to provide legal services in representing the bankrupt in court. That is not the job of the Trustee.

Corporate Bankruptcy in Canada – Corporate bankruptcy lawyer in Toronto, Canada – Do you need one to file corporate bankruptcy?

As I will explain, every Canadian corporate insolvency file requires probably several, not just one bankruptcy lawyer in Toronto or elsewhere. Insolvency law is complex and lawyers will help all the parties involved.

The current economic climate in Canada is going to be challenging for Canadian businesses and I expect there will be many financial difficulties. Government COVID-19 support programs are scheduled to end soon. Companies have been tapped out while shut down just trying to stay alive with little or no revenue being earned. Companies will need cash now that it is time to start everything up again. No doubt there will be business casualties.

However, not all businesses are created equal. Some will be able to restructure, some will file for bankruptcy and others will merely shut their doors and fade away.

Among the keystones of a restructuring proceeding under either the Companies’ Creditors Arrangement Act or the Bankruptcy and Insolvency Act is the debt workout. The restructuring is designed to maintain the debtor’s business and negotiate a financial debt repayment strategy with its creditors. The aim is to save jobs, allow the company to continue while avoiding bankruptcy liquidation.

Key components of a debt workout normally include debtor-in-possession lending (DIP lending) while the company is reorganizing, new capital for the company coming out of its restructuring and getting unsecured creditors, and possibly secured creditors, to agree to accept less than they are owed. In the very large corporate restructuring files, there are normally lending syndicates due to large and complex lending arrangements. They too will need lawyers to help them with the insolvency law.

If a restructuring proceeding is not possible or does not succeed, then either the company’s secured creditor will begin receivership enforcement proceedings or the company will file an assignment in bankruptcy or a creditor will launch a bankruptcy application to put the company into bankruptcy.

In every corporate insolvency file, legal services are required by all the stakeholders. Canadian counsel plays an important part in providing advice. In the larger files, a large team of lawyers will be needed for both the company and its main creditors. The Board of Directors will need their own independent legal team. The bankruptcy trustee in Toronto will also need a dedicated team of lawyers to help navigate through the formal restructuring in court or help in a court-appointed receivership, private receivership or bankruptcy.

As you can see, in pretty well every corporate file, a bankruptcy lawyer in Toronto or elsewhere is pretty well a must-have requirement. Lawyers will be able to help the company, its Board of Directors, its creditors and the insolvency professional create effective solutions. The best ones will also make sure that they are also practical solutions.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Other situations where you could need a bankruptcy lawyer in Toronto, Barrie, GTA, or elsewhere

When looking for a bankruptcy lawyer in Toronto, Barrie, GTA and elsewhere, you want to find one that has substantial experience. Depending on the situation you or your company are involved in, the experience could be in one or more of:

  • financial reorganizations;
  • debt reorganizations and debt restructurings;
  • debtor legal rights and creditor rights;
  • security enforcement;
  • forbearance/standstill arrangements;
  • lender liability suits;
  • receivership and related matters for banks or other secured lenders, court and privately appointed receivers;
  • insolvency and bankruptcy litigation or other complex matters; and
  • acting for receivers and Trustees, debtors, secured creditors, unsecured creditors or any other stakeholder in an insolvency process.

Take Your First Step Towards A Debt Free Life

I hope that you found this bankruptcy lawyer in Toronto Brandon Blog interesting and that you now have a better appreciation for when getting bankruptcy legal advice is necessary. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline and practical financial advice. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

bankruptcy lawyer in toronto
bankruptcy lawyer in toronto

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION

trustee in bankruptcy
trustee in bankruptcy

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

Trustee in Bankruptcy: No action against Trustees without leave of court

Canadian insolvency laws say that there cannot be any legal action against trustees in bankruptcy (now called a licensed insolvency trustee) without the prior leave of the court. The leave application, more often than not, would be brought before a Bankruptcy Judge. However, as you will see below, any Judge of the Ontario Superior Court of Justice could hear such an application involving a trustee in bankruptcy.

Section 215 of the Bankruptcy and Insolvency Act (Canada) (BIA) protects the Canadian bankruptcy laws for all officials in the bankruptcy process, including the bankruptcy trustee:

“215 Except by leave of the court, no action lies against the Superintendent, an official receiver, an interim receiver or a trustee with respect to any report made under, or any action taken pursuant to, this Act.”

In my January 9, 2019, Brandon Blog, PRIVACY BREACH LAWSUIT AGAINST LICENSED INSOLVENCY TRUSTEE FAILS, I described one attempt that failed to obtain leave of the court to begin litigation against a trustee in bankruptcy.

Our bankruptcy and insolvency courts believe that the test to determine whether a court should use its discretion to give leave for litigation to be commenced against either a trustee in bankruptcy or a court-appointed receiver was not a tough test. The protection is only to ensure that the receiver or trustee in bankruptcy is protected against senseless or burdensome actions that have no basis.

In this Brandon Blog, I describe a recent Ontario court decision that further clarifies a basis for when the court will exercise its discretion and allow litigation against a licensed trustee in bankruptcy. As the Motions Judge used the old terminology, I will stick with it in this blog.

Action against the trustee in bankruptcy background

The Motion Judge‘s Endorsement was released on May 31, 2021. The Endorsement was from a motion by the plaintiff for a determination as to whether or not leave of the court under S.215 of the BIA was required. The plaintiff’s position was that it was not, but if it was, such leave should be granted. The defendant trustee in bankruptcy’s position was that leave was required and should not be granted.

The plaintiff, Mr. Flight, ended up filing bankruptcy proceedings 4 times over a 13 year period of time! He filed the same type of bankruptcy over and over again! He claims his financial situation is the fault of the defendant trustee in bankruptcy. He used the same trustee in bankruptcy for all of his bankruptcies! It is not clear in this motion how the trustee is responsible for his having to file personal bankruptcy all those times.

Mr. Flight brings on litigation against the trustee in bankruptcy claiming negligence, fraud, breach of fiduciary duty, unjust enrichment and conversion. The complainant claims the accused failed to identify and take suitable action relating to a fraud perpetrated by the bookkeeper for Mr. Flight’s sole proprietorship business.

The plaintiff’s amended claim seeks a declaration the defendant engaged in misfeasance, negligence, fraud and breach of fiduciary duty in his personal capacity, and that the defendant was unjustly enriched.

trustee in bankruptcy
trustee in bankruptcy

The plaintiff’s claim against the trustee in bankruptcy

The main subject matter of the claim alleges the bookkeeper’s theft caused the plaintiff’s repeated bankruptcies and that the defendant trustee in bankruptcy ought to have detected this fraud in the administration of the four bankruptcies.

The plaintiff maintains that the trustee in bankruptcy then failed to take any meaningful action to address the alleged fraud and its impact on the fourth bankruptcy after its discovery. In particular, the plaintiff claims the trustee failed to diligently commence an action against the former bookkeeper, failed to investigate the fraud, failed to adjust the plaintiff’s surplus income, failed to recommend debt relief options or financial options, and certainly no other possible insolvency process such as a consumer proposal alternative to bankruptcy and failed to have the plaintiff promptly discharged from his fourth bankruptcy.

The defendant’s alleged “grand failure to act” caused Mr. Flight damages of $10 million from loss of business, loss of profit, loss of income and pain and suffering.

The court’s analysis

As I mentioned above, the threshold issue under Canadian insolvency legislation is whether the plaintiff required leave to commence this action. If it is determined that leave is required, the analysis then moves to whether the claim meets the test for leave.

The Motion Judge stated that there is authority to support the plaintiff’s position that the insolvency laws state that leave is not required where the trustee in bankruptcy is being sued in its personal capacity.

More particularly, the Supreme Court of Canada held that the leave provision under the BIA is not to be interpreted as though it applied to any action arising out of the administration of the estate. That is not the way section 215 is worded. To allege that the trustee in bankruptcy made an act of omission is a claim that is not concerning a report made under or any action taken according to the BIA.

trustee in bankruptcy
trustee in bankruptcy

Trustee in bankruptcy: The court’s decision

The plaintiff alleges causes of action against the trustee in bankruptcy in his personal capacity in their amended statement of claim and affidavit materials for negligence, fraud, breach of fiduciary duty, unjust enrichment and conversion starting with the confidential consultation and with each bankruptcy assignment. The Motion Judge concluded that the plaintiff does not require leave under s. 215 of the BIA to commence this action. Based on this conclusion, the Motion Judge did not need to consider anything further.

You will observe as I previously stated, none of the court’s evaluation had anything to do with whether the claims had a possibility of success in its litigation legal process. The Motion Judge, who was not a Bankruptcy Judge but rather a Motion Judge felt the accusations were such that they were not purposeless or burdensome actions that have no basis.

As the main action will now proceed, I will follow the case to find out the exact details and the various bankruptcy claims that Mr. Flight is making regarding the conduct of trustees involved. As the case is reported, I will report to you.

Finding a good, Licensed Insolvency Trustee (Trustee In Bankruptcy) Near You

I hope that you found this trustee in bankruptcy Brandon Blog interesting. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

4 PILLARS LAWSUIT GETS GIGANTIC APPROVAL TO PROCEED FROM COURT OF APPEAL FOR BRITISH COLUMBIA

NOTE: On January 13, 2022, three settlement agreements were approved by the Honourable Justice Mayer of the British Columbia Supreme Court on January 29, 2021, and November 15, 2021. As a compromise of disputed claims, these settlements are not an admission or finding of liability by the settling Defendants. You can read all about the Settlement Administration Plan and how to file a claim by CLICKING HERE to read our latest 4 Pillars blog.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

4 pillars lawsuit
4 pillars lawsuit

The 4 Pillars lawsuit class-action

In my November 25, 2019, Brandon Blog titled “HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE“ I wrote about the litigation involving 4 Pillars Debt and Credit Restructuring Company, 4 Pillars Consulting Group Inc. and other entities (4 Pillars or the 4 Pillars lawsuit), Pearce v 4 Pillars Consulting Group Inc., 2019 BCSC 1851.

Mr. Pearce is suing for damages for the fees billed by 4 Pillars to all persons that paid fees to it in British Columbia in connection with: (i) a consumer proposal under the Bankruptcy and Insolvency Act (Canada) (BIA); or (ii) an informal debt settlement negotiation proposal with the individual’s creditors, all after April 1, 2016.

Mr. Pearce claims that it is appropriate for the refunding fees paid, damages for alleged losses stemming from breaches of the provincial Business Practices and Consumer Protection Act (BPCPA) and BIA, and damages based upon the claim that the fees billed were unscrupulous under section 8 of the BPCPA.

In this Brandon Blog, I describe what the 4 Pillars lawsuit is all about and why the Court of Appeal for British Columbia has allowed it to proceed as a class action proceeding, dismissing the 4 Pillars objections.

4 Pillars lawsuit: What is a class action proceeding?

As part of that litigation, Mr. Pearce applied to the BC Court to have his litigation turned into a class action proceeding. The Court ruled that there were enough grounds for his legal action to move forward as a class-action claim. As can be expected, 4 Pillars objected to that motion. They also unsuccessfully argued that certain sections of the claim should be stricken.

4 Pillars appealed that decision to the Court of Appeal for British Columbia. On May 17, 2021, the Court of Appeal for British Columbia released its decision. In this Brandon Blog, I discuss the appeal, what the appeal court had to say and what it decided in the 4 Pillars lawsuit appeal.

4 pillars lawsuit
4 pillars lawsuit

Debtor Warning – Debt Consultants Sometimes Not What They Appear

What 4 Pillars say their organization’s role is

4 Pillars states that they are professionals who provide a variety of services specific to individuals in debt. They say they outline the choices readily available and also walk people through the procedure. They say that your financial debt settlement will likely be one of the following, which they will manage on your behalf:

  • informal debt settlement
  • consumer proposals
  • bankruptcy

They also say they will work with the person on their aftercare. They also say that their role ranges from providing individual debt settlements on behalf of debtors with collection agencies and their creditors to negotiating with Licensed Insolvency Trustees (individually a Trustee, Bankruptcy Trustee or LIT) on behalf of a debtor in determining the terms of a consumer proposal.

What the Court of Appeal for British Columbia says about the role of 4 Pillars

The Court of Appeal described them this way:

  • 4 Pillars sell their debt restructuring services as debt advisors to individuals on the brink of insolvency who are seeking debt restructuring. They are unlicensed and charge fees above those professionals who are licensed and regulated.
  • Their debt consulting business is not licensed or registered, and they charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Their debt consulting services are:
    • to meet and work with consumers who are struggling with debt;
    • to help them draft a consumer proposal to present to a LIT:
    • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • All of these services are provided with the goal that the LIT will then present the consumer proposal to the debtor’s creditors.
  • 4 Pillars may then provide input, on the debtor’s behalf, on any response or request from the creditors.

4 Pillars lawsuit: What do the 4 Pillars debt consultant’s services actually involve?

Just to remind you, this is what the lower BC Court and the Court of Appeal for British Columbia found the 4 Pillars services to be:

  • to meet and work with consumers who are struggling with debt;
  • to help them draft a consumer proposal to present to a LIT:
  • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • Provide input, on the debtor’s behalf, on any response or request from the creditors.
  • They charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Charge fees above those professionals who are licensed and regulated.

This is very common amongst all the debt restructuring businesses. It is questionable what value they provide if any at all. Their business model preys on people’s fears of getting advice straight from Licensed Insolvency Trustees.

The services described above a LIT provides at no additional cost above and beyond what the government-approved tariff fee is. The reality is that you do not need the 4 Pillars Consulting Group Inc.

As a LIT, I provide financial advice regarding your unmanageable debt and if you are a candidate for informal debt settlement, I will tell you exactly what to do in our no-cost initial consultation. If you have too much personal debt and are not a candidate for an informal settlement, I have many times prepared consumer proposals that work. As part of that process, I also act as a licensed credit counsellor.

4 pillars lawsuit
4 pillars lawsuit

Is Debt Settlement Really Worth It?

Debt settlement is really worth it. Going to one of these unscrupulous debt settlement companies, instead of a licensed insolvency trustee for debt settlement is NOT.

If you’ve been struggling with debt, it’s time to consider debt settlement through a consumer proposal with the services of a LIT. It likely won’t sound appealing at first, and you may feel that you are taking a gamble, but the process of debt settlement can be incredibly beneficial to you. Keep in mind that even 4 Pillars introduce you to a LIT in order for you to relieve yourself of your debts, hopefully through a consumer proposal process.

A consumer proposal is the only government-approved debt relief program. A LIT can get you a true debt settlement, without having to pay extra unnecessary fees to any of the debt relief companies.

Now let’s see what the Court of Appeal for British Columbia had to say about this 4 Pillars Consulting debt restructuring services business’s appeal from the lower court decision.

Class action waiver not effective to resist class action certification

The Court of Appeal of British Columbia believes the class action waiver clause is unenforceable as being contrary to public policy. The class action waiver significantly interferes with the administration of justice. It would have the effect of precluding class action lawsuits.

It has the impact of precluding Mr. Pearce, and class participants, from having access to justice and to a dispute resolution procedure in accordance with the law for claims developing from the connection between these parties. Therefore, the class action certification was upheld.

4 pillars lawsuitOther grounds of appeal in the 4 Pillars lawsuit

Having reviewed the evidence filed in respect of 4 Pillars’ applications for summary dismissal and after considering their arguments, the lower court judge was not satisfied that Mr. Pearce’s arguments in the 4 Pillars lawsuit, that 4 Pillars was acting for, or representing, a debtor in arrangements or negotiations with their creditors is bound to fail.

The evidence suggested that 4 Pillars had a role in the negotiations between a debtor and their creditors regarding a consumer proposal – even if they were not directly engaged with creditors.

The lower court’s view was there is a genuine issue to be decided at trial on a full evidentiary record. Accordingly, the judge dismissed the 4 Pillars attempt to strike the portions of the pleadings in respect of the Plaintiffs’ claims under the BPCPA.

The Court of Appeal for British Columbia agreed that it will be necessary to have a trial to figure out if claims can occur from offences of the BIA. Therefore, 4 Pillars was likewise unsuccessful in getting this issue stricken from the 4 Pillars lawsuit.

Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

It will be very interesting to see how this class action 4 Pillars lawsuit winds its way through the BC court. Absent an appeal to the Supreme Court of Canada, it is now game on. Mr. Pearce and all members of the class have the green light to continue the litigation. If successful, it goes to the heart of the 4 Pillars business model. Every franchisee across Canada needs to worry.

I hope you found this 4 Pillars lawsuit Brandon Blog informative.

Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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NRA IN THE NEWS UPDATE: MY CANADIAN VIEW OF THE DECEPTIVE NRA BANKRUPTCY CASE DISMISSAL

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

NRA In The News: Why did the NRA file for bankruptcy?

The National Rifle Association (NRA) is America’s gun advocacy organization being the gun rights champion of Second Amendment rights. This independent organization promotes the right to bear arms. Last January 15 it filed for bankruptcy. The bankruptcy declaration did not expose that it was in a financial mess. The NRA, which is known for its aggressive efforts to lobby against gun control laws, filed not because of its financial condition, but for a different reason.

In my January 20, 2021 blog titled: NATIONAL RIFLE ASSOCIATION FILES FOR BANKRUPTCY ANNOUNCES PLAN TO MOVE TO TEXAS FOR FREEDOM, I described why it made its voluntary petition bankruptcy filing under Chapter 11 of the United States Federal Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas in Dallas.

In that Brandon Blog, I described why New York Attorney General Letitia James filed a lawsuit looking to dissolve the National Rifle Association, the largest most significant pro-gun organization in the USA. Attorney General James claims the organization with financial misconduct and unlawful conduct including financial abuses, spending millions of dollars on things like personal expenses, personal trips and other questionable expenditures. The purpose of the NRA bankruptcy filing was to dissolve itself in New York State while evading prosecution. It then planned to reincorporate in the State of Texas.

Recently, NRA in the news arose again. This time it was because a federal Bankruptcy Judge dismissed the NRA bankruptcy case. This permits New York to proceed in its initiative to dissolve the gun-rights group for alleged fraud and abuse.

In this Brandon Blog, I describe the NRA in the news bankruptcy filing case and its dismissal and what would happen in a similar Canadian insolvency case.

NRA in the news: How might bankruptcy help the NRA reincorporate?

When a person or company makes insolvency filing, that generally stops actual or pending litigation while giving more time to analyze exactly how to manage the financial difficulties. In Canada, the stoppage of lawsuits is called a “stay of proceedings”. However, in Canada, the stay of proceedings just relates to lawsuits for the collection of a debt.

Litigation, such as the pending lawsuit of the New York attorney general against the NRA, has nothing to do with proving or collecting on a debt. Rather, it is to prove that laws have been broken. My view is that in Canada, if the insolvency filing was not thrown out entirely, such as it was in this case, for sure the government would be able to get leave of the court to either begin or continue its litigation.

So the powerful gun-rights group thought that if it filed its voluntary Chapter 11 bankruptcy petition for bankruptcy protection, it could buy itself the time it needed to dissolve, stop the New York State legal action and then reincorporate in the gun-friendly state of Texas.

nra in the news
NRA in the news

NRA in the news: Is bankruptcy justified?

Concurrent with its bankruptcy filing, the NRA stupidly made a public statement that it isn’t insolvent or bankrupt saying it is in “its strongest financial condition in years.” This was not a very smart thing to do, as the US Bankruptcy Code is to help insolvent people and companies. That is just begging for a bankruptcy dismissal.

In Canada, in order to do a traditional bankruptcy filing under the Bankruptcy and Insolvency Act (Canada) (BIA), the debtor must be insolvent. The BIA defines an insolvent person as an individual or company who:

  • is not bankrupt;
  • who lives, carries on business or has assets in Canada;
  • whose debts owing to creditors that are provable claims total at least one thousand dollars, and also:
    • for any type of reason unable to pay their debts when due;
    • has stopped paying liabilities in the regular course as they usually come due; or
    • the aggregate of the property is not, at a fair assessment, enough, if sold at a properly conducted sale, to pay off all debts currently or about to become due.

A licensed insolvency trustee should not accept an assignment in bankruptcy from anyone filing bankruptcy from a party whose Statement of Affairs shows they are not insolvent and if accepted, should not be allowed by the Office of the Superintendent of Bankruptcy. A court would certainly not make a Bankruptcy Order in such a situation.

Since the NRA stated that it was not insolvent, which is a condition precedent to file under the US Bankruptcy Code, you can see why NRA in the news for its voluntary bankruptcy petition in the face of the New York Attorney General litigation was very controversial. That is what US bankruptcy experts thought as they predicted that under US bankruptcy law, the court would agree with the opposition by the Justice Department to the NRA bankruptcy plan.

However, there are times when bankruptcy proceedings are appropriate. First, you need to start with the basic premise that the individual, business or company is insolvent. Bankruptcy is one of the more drastic ways people can address their financial problems. It’s a complex topic, and you need to know that there are options other than bankruptcy that can address your situation.

A licensed insolvency trustee can advise you of your options. Some of the factors that may influence whether you should file for bankruptcy or one of the debt settlement options available under the BIA include:

  • How much you owe;
  • How long you owe;
  • The terms of your loan and other debts;
  • Your ability to repay;
  • The presence of co-signers;
  • What are your assets and liabilities;
  • Steady employment or self-employment income;
  • How you’ve previously handled your debts;
  • Your age and employment situation; and
  • Your future plans.

This list is by no means exhaustive, but it is a good start. The Canadian insolvency system is designed to give the honest but unfortunate debtor a fresh start in life.

NRA in the news: Judge Dismisses NRA Bankruptcy Case, Heightening Risk For Dissolution Of Group

Given the Justice Department’s legal challenge to the NRA filing, there needed to be a bankruptcy trial. The controversial NRA has had a rough few years in the media, with everything from their pro-guns stance to their lack of concern about the deaths of American schoolchildren being brought up. However, it seems their woes are not over yet.

NRA in the news arose yet again. Federal Judge Harlin Hale dismisses the NRA Chapter 11 bankruptcy case due to the fact that he viewed the bankruptcy as not filed in good faith. Judge Harlin stated that he believed the NRA’s objective in filing bankruptcy is much less like a typical bankruptcy case in which a debtor is faced with financial problems, such as a judgment that it cannot pay off. Rather, it was filed in bad faith like instances in which courts have discovered bankruptcy was filed for gaining an unfair advantage in litigation or to avoid a regulatory scheme.

The ruling followed a lengthy 12-day bankruptcy trial in Dallas, Texas. NRA president, Wayne LaPierre, acknowledged keeping the NRA into Chapter 11 bankruptcy filing secret without the understanding or acceptance of the majority of the group’s 76-member board of directors as well as various other top officers.

Could this happen in Canada? Definitely. When a filing is made or a Bankruptcy Order made under the BIA either by/against a person or company and it is shown that the filing/Bankruptcy Order ought not to have been made, the court has the authority to either annul the bankruptcy, set aside a Bankruptcy Order or otherwise terminate the proceedings.

Each situation will rest on its own unique set of factors. In general, if it can be shown that the debtor was not insolvent but the filing was done for some other purpose, such as in the NRA Chapter 11 bankruptcy, the court can annul the bankruptcy filing. The same is true if it is shown that the filing was not made in good faith or that the debtor was attempting to commit fraud on the creditors.

nra in the news
NRA in the news

NRA in the news: NRA Bankruptcy Case Is Dismissed. What Happens Next?

With the bankruptcy case of the NRA dismissed, the NRA says it plans to re-file the case in September. The NRA says that the documents filed in court do not reflect the true financials of the association and that the organization has fallen victim to an anti-gun group that is bent on destroying it. The NRA now claims the Chapter 11 filing was to get out from under its debts that it could not pay.

We shall see what transpires next. In the meantime, New York Attorney General Letitia James is free to pursue the NRA. No doubt we will see NRA in the news soon again.

NRA in the news summary

I hope you enjoyed the NRA in the news Brandon Blog post. A bad faith insolvency filing is luckily rare in Canada. However, something like the NRA filing could happen. Canadian courts have the ability to either annul or set aside a filing by a non-insolvent debtor filed for a fraudulent purpose or to misuse the Canadian insolvency system.

Are you worried because you just lost your job through no fault of your own? Is your business dealing with substantial debt challenges and financial problems due to your largest customer failing to perform and pay your company? Do you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

nra in the news
nra in the news
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LICENSED INSOLVENCY TRUSTEE FOR BANKRUPTCY SIMPLE STEPS ON HOW TO AVOID BANKRUPTCY AND SAVE YOUR BUSINESS

licensed insolvency trustee for bankruptcy

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Licensed Insolvency Trustee for bankruptcy on why businesses go bankrupt

In my last Brandon Blog, Business Bankruptcy In Canada: Discover The Causes Of Business Insolvency And Bankruptcy, I described the causes of business insolvency, the types of business entities normally found in Canada and tips on how to pull your business around back from insolvency.

Numerous businesses are battling to survive today, not to mention stay lucrative. They are scaling down or just closing their doors. They are accessing the available government support money for a business. Most entrepreneurs hesitate to seek the advice of a licensed insolvency trustee due to the fact that they are afraid all the licensed insolvency trustee (formerly called a bankruptcy trustee or a trustee in bankruptcy) wants to do is be a trustee for bankruptcy.

In this Brandon blog post, I want to continue from the suggestions from my last blog, to show you exactly how that the last point I push for is to be a trustee for bankruptcy. I first look to reorganize your business. If your business or company remains in danger because of the effect of the COVID-19 pandemic, it will certainly be advantageous for you and also your organization to do so.

I will also show how sometimes, a trustee for bankruptcy or receivership, can actually help save parts of your business. The only other alternative could be to let all the business parts fail, which is the worst possible outcome.

The role of a debtor in bankruptcy or insolvency

Remember, I previously defined insolvency as a financial condition, where bankruptcy is a legal condition and a legal process. You will also recall that in my last Brandon Blog, I described the three common types of business structures in Canada; proprietorship, partnership and corporation. Just as these three business structures are different in form, they are also treated differently in insolvency vs bankruptcy. Here is how I differentiate the role of each debtor.

Proprietorship – Sole proprietorships are a type of business structure in which one individual is the sole owner of the business, which gives that person control over everything related to the business. This includes the business’ name, structure, accounting, legal obligations and tax responsibilities.

As I described last week, in Canada, the person, the sole proprietor, is carrying on business in their personal name, operating as the business name. You can register a sole proprietorship with the provincial government by completing an application form.

A sole proprietorship is the simplest kind of business structure. It permits an individual to sell goods or run a service with complete control of it on their own. Nonetheless, a sole proprietorship is not considered a separate legal entity from the owner. This means that any liabilities incurred by the business are also personal financial obligations of the owner.

So in an insolvency situation, all of the sole proprietor’s assets come into play as do all of his or her debts. It is not just the business assets and business liabilities. It is everything. This is the worst-case scenario for an entrepreneur.

So if the business is viable, and the personal assets and liabilities lead to the sole proprietor being in the situation where they can do a debt settlement plan, they can choose one of two options to restructure their entire personal financial situation. This assumes they cannot resolve their financial issues informally to bring their financial situation back to being solvent.

Partnership – A terrific way to begin a new business is teaming up with one or more people. All of you should enhance the group’s abilities as well as energy. Nonetheless, you also wish to be with people that are trustworthy, industrious and have a certain expertise that will help the business grow. Just like the way a proprietorship is one person, a partnership is made up of two or more people.

A partnership agreement is crucial. This is an agreement between the partners, describing the rights as well as obligations of each partner in the business. The same way a sole proprietor is personally responsible for the debts of the business and is putting all of their personal and business assets at risk, the same is true for partners in a business partnership. The partners are each liable for 100% of the business debts in case of insolvency. The partners cannot limit their liability to only their partnership share of the business.

Corporation – When you incorporate a business, it is a corporation. The company is a different legal entity from its owner shareholders. Shareholders are not responsible for the unpaid debts owed to financial institutions (normally a secured creditor), suppliers to the firm (normally an unsecured creditor) or the government. There are only two exceptions: (i) certain government liabilities that are a personal liability of a Director; and (ii) if the entrepreneur directly guarantees a financial debt of the company, such as a company loan, then that individual will have a liability with respect to such debt.

If the company’s financial future becomes bleak because it is insolvent, there are options. In my last blog, I talked about self-help remedies senior management of a company whose business is viable can try to informally bring the company back to a healthy financial state. You can re-read that blog to see the options available. If the self-help remedies do not work yet then we must look at more formal proceedings.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy

Licensed InsolvencyTrustee for bankruptcy: Settle with creditors and debt collectors without bankruptcy

In a proprietorship or partnership, if the underlying business is viable, then there are a variety of options to try to turn the business around yourself. You would use the self-help methods I described in my last blog. If the self-help options do not work, there are debt settlement options available to the individual(s) under the Bankruptcy and Insolvency Act (Canada) (BIA). They would be the only government-sanctioned debt settlement plan available in Canada. Either a consumer proposal or a Division I Proposal. You can read about how each one works by clicking on the following links:

In a successfully completed debt settlement program, the bankruptcy trustee would not be a trustee for bankruptcy. Rather, the trustee in bankruptcy would be an Administrator under a consumer proposal or a Proposal Trustee in the Division I Proposal.

If the business is not viable or the circumstances are such that a debt settlement plan is not feasible, then personal bankruptcy would be the only other option. You can read about how personal bankruptcy works by looking at our top 20 bankruptcy FAQs section. Upon the bankruptcy of the person, the sole proprietorship is automatically terminated.

Since a partnership is a way of carrying on business personally, then the same insolvency options available to the partners to the business debtor are also available. A restructuring is always preferred over a bankruptcy when the partnership is in financial difficulty.

For a debt settlement insolvency filing, the licensed trustee is not a trustee for bankruptcy. That is the case only if there is an actual bankruptcy assignment. Under provincial law, if a partner goes bankrupt, the partnership is automatically dissolved.

Licensed Insolvency Trustee for bankruptcy: Ask creditors to help you avoid bankruptcy of the corporation

Without wanting to sound like a broken record, you can review my prior blog to go over the self-help remedies for turning a business around, even if it is a corporation. A self-help remedy is always a great alternative to bankruptcy. If that isn’t appropriate, or just plain does not work, then you must get in touch with an insolvency trustee.

Again, if the company’s business is viable, then there are financial restructuring alternatives. these alternatives will be within a government-regulated insolvency proceeding. There are two formal restructuring statutes in Canada:

In both cases, a company should retain the services of both a licensed trustee for bankrutpcy and a bankruptcy lawyer. The lawyer acts as legal counsel to the company. The licensed trustee will be both a financial advisor and steer the company through the restructuring process. The CCAA option is for companies with $5 million or more of debt. A BIA Proposal is for a company with any amount of debt. The main difference between the two processes are:

  • In a failed BIA Proposal, the debtor is immediately deemed to have filed an assignment in bankruptcy. This is not the case in a failed CCAA Plan of Arrangement.
  • A CCAA proceeding is more costly as there are many more court appearances in that forum than in a BIA restructuring.

Using one of these two statutes to gain what is called in the media “bankruptcy protection” in order to work out a successful restructuring with your unsecured creditors is always preferable. The company will pay less than it owes while keeping its viable but insolvent business alive. Don’t underestimate the power of preserving jobs in the eyes of a court. A bankruptcy trustee can be very helpful in obtaining great results.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy

Licensed Insolvency Trustee for bankruptcy: When to consider an Assignment for the Benefit of Creditors

If the business is not viable and is insolvent, then the only thing left to consider is an assignment in bankruptcy filing. It is definitely a last resort if everything I have already spoken about in this Brandon Blog just won’t work and you have run out of options. Trustees in bankruptcy always consider the alternatives to bankruptcy, but sometimes filing bankruptcy is the only option available.

In the case of a proprietorship or partnership, it is the individual sole proprietor and one or more of the partners who will be meeting with a trustee in bankruptcy and filing for a personal type of bankruptcy. the personal bankruptcy trustee will administer the personal bankruptcy estate. Again, you can read up on personal bankruptcy by looking at our top 20 personal bankruptcy FAQs section.

In personal bankruptcies, it will be either a streamlined system called a Summary Administration and if not, it is then an ordinary administration bankruptcy. Unlike a company, a person is ultimately entitled to a bankruptcy discharge.

When it comes to the administration of bankruptcy for a corporation, it is always an ordinary administration bankruptcy. The purpose of this Brandon Blog is not to run through all the steps in a personal or corporate bankruptcy process. Above I have provided some links to read up on debt settlement restructuring and personal bankruptcy. For corporate bankruptcy, I recommend that you read our corporate website page on corporate bankruptcy.

Alternatively, you can also read my previous Brandon Blog Bankrupting a Limited Company: Canadian Corporate Bankruptcy Process.

A trustee for bankruptcy administers the bankruptcy process for the benefit of unsecured creditors. Sometimes, it is a secured creditor who needs to enforce their security. They do not necessarily need the company to meet with a trustee for bankruptcy. Rather, the secured creditor needs the appointment of trustee to act not in a bankruptcy administration, but rather, to act as a receiver or receiver-manager to enforce the secured creditor’s position by taking control of the assets subject to the security and ultimately selling them. To read the receivership process, you can read the receivership section of our corporate website.

You can also read my Brandon Blog titled What Is A Receivership? Our Complete Guide To Receivership Solutions.

Licensed Insolvency Trustee for bankruptcy: How to avoid bankruptcy and save your business from closing

I hope you enjoyed the licensed insolvency trustee for bankruptcy Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve. As you can see from this blog, we are not just a trustee for bankruptcy. We believe every person and business should first explore debt settlement to avoid bankruptcy.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

trustee for bankruptcy
licensed insolvency trustee for bankruptcy
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WHAT IS A RECEIVERSHIP? OUR COMPLETE GUIDE TO RECEIVERSHIP SOLUTIONS

what is a receivership?

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

What is a receivership?

What is a receivership is a question I am asked often. Receivership is a remedy available to secured lenders to recoup as much of their debt as possible. A secured creditor, normally a financial institution, has lent funds to the company or individual under a secured financing transaction. They did it this way so in the event the company or person defaults on its finance payments, they can enforce against the assets subject to the security.

Receivership is a different process than bankruptcy for the sale of the properties of a corporation. In Canada, the secured creditor is typically the Bank as the lender. Normally, when a borrower misses payments, they tend to be insolvent. However, it is possible to have a receivership in Ontario even if the borrower is not insolvent.

In this Brandon Blog, I am going to tell you all about receivership. What is a receivership? How it works. When it can be used? What types of receivership are there?

What is a receivership? Examples of receivership in a sentence

What is a receivership? Receivership is a legal proceeding. Either a secured creditor privately appoints the receiver by instrument or a court appoints a person or company, called a receiver, to collect and manage the assets of a person or business that is unable to manage those assets effectively.

To understand more about the receivership process, we first need to look at the types of receivership. These are:

  • Liquidating receivership – This is a type of receivership that is brought about when a company ceases operations because the management of the company is unable to make it a viable business again. If the business is not viable, then the receiver will not operate it and will find buyers for the assets.
  • Operating receivership – This form of receivership is when parts of the company are viable or must otherwise continue operating under receivership. The business assets have a great deal of value if operating, but if shut down, relatively no value. In this case, the receiver will continue operating the business and the secured creditor will agree to lend funds if the business’s cash flow is insufficient. While operating the business, the receiver will also look for buyers.

The word “receiver” originally meant “a person appointed by a court to manage the affairs of another, especially a bankrupt or insolvent“. The term is now more widely applied and refers to a person placed in temporary charge and control of another person’s assets or a business entity. A receivership is a form of governance used in a wide range of situations. It is particularly common in the fields of law and business.

What is a receivership in a sentence – A receivership is a legal process started by a secured creditor either privately appointing a receiver by instrument or making an application to the court for an order that forces a party to carry out the duties of a receiver over the assets of a company or person.

what is a receivership
what is a receivership?

In Canada, section 243(4) of the Bankruptcy and Insolvency Act (Canada) (BIA) dictates that only a licensed insolvency trustee can act as a receiver. From the above, you should now realize that there are two types of receivers: (i) privately appointed receiver; and (ii) court-appointed receiver.

What is a receivership? 10 – Day Notice of Intention to Enforce Security

Section 244 of the BIA relates to a secured creditor who intends to enforce its security against an insolvent debtor, either through private appointment or by making an application to the court. This section states that any secured creditor who intends to enforce against all, or substantially all, of the inventory, accounts receivable or other property used by the insolvent debtor in its business, must give adequate notice. The notice must be in writing by using the form prescribed by the BIA.

The BIA defines adequate as a minimum of 10 days. A secured creditor must send out the 10-day notice of intention to enforce security and cannot enforce its security until the 10 days have expired unless the debtor consents in writing to earlier enforcement. The purpose of giving the 10-day notice is to allow the insolvent debtor a chance to either negotiate some resolution with the secured creditor or otherwise attempt to reorganize its financial affairs. An example of reorganizing would be speaking with new potential lenders, consideration of assets that could be sold to repay or otherwise reduce the indebtedness to the unhappy secured creditor.

The insolvent debtor may also be considering invoking an insolvency process such as a Division I Proposal under the BIA to reorganize all of its debts to implement a financial reorganization strategy. If a proposal or a notice of intention to make a proposal under the BIA is filed by the insolvent debtor before the expiry of the 10 day period, then the enforcement action of the secured creditor has initially stayed.

That secured creditor would have to make an application to the court to show that it has lost total confidence in the insolvent debtor’s abilities and it will not support any reorganization attempt. The application is to lift the automatic stay of proceedings that happened when the insolvent debtor filed, to allow the secured creditor to enforce its security against the assets to try to recover as much of the secured debt as possible through the appointment of a receiver.

Why did 10 days become the official notice period? This was part of amendments to the BIA made in 2009. It arose as a .esult of court decisions over what is reasonable notice. The most famous case is one that insolvency practitioners refer to as Lister v. Dunlop. The case made its way all the way up to the Supreme Court of Canada. The proper name of the case is R.E. Lister Ltd. v. Dunlop Canada Ltd., [1982] 1 S.C.R. 726. The decision was released on May 31, 1982.

The case dealt with a variety of issues, including what is receivership. Another of the issues considered was a reasonable notice to be given when a secured creditor demanded repayment of its demand loan, due to one or more defaults on loan? The most common default is defaulting on making the required loan payments on time. The loan agreement and debenture securing the loan stated that it was a demand loan and that the lender must give reasonable notice when making the demand.

However, in the “old days”, there was never a definition of what reasonable notice was. In fact, in Ontario, the law at the time was that reasonable notice only came into being if the business owner asked for a time to repay the loan. What was reasonable was a matter of discussion and negotiation. In Lister v. Dunlop, it was determined that Dunlop did not provide reasonable notice, based on the specific facts in that case.

Case law evolved and eventually, in 2009, the BIA was amended as part of the new provisions to bring receivership under the BIA and receivers subject to the supervision of the Office of the Superintendent of Bankruptcy Canada. The 10 day notice period was Parliament’s way to try to codify what reasonable notice is.

Court Appointed Receivers vs. Privately Appointed Receivers

As discussed above, receivers are appointed when secured creditors want to recover on their secured loans. Receivership is a remedy for secured creditors. It is not a remedy for unsecured creditors. The intent is for the receiver to take possession of the insolvent company assets subject to the security agreement and conduct a sale of assets. The proceeds of the sale will then be distributed in accordance with the priority of the creditors under the BIA. The secured creditor should want to make sure that it is in the first place to receive the funds from the receiver, for the receivership process they are paying for!

From the above, by now, you have probably realized that a privately appointed receiver is appointed in writing by the secured creditor. The receiver gets properly retained and then is given an appointment letter by the secured creditor after the 10 day notice period has either passed or was waived by the insolvent debtor. The privately appointed receiver gets its powers from the security documents which will outline the approved steps the receiver can take.

Court-appointed receivers, as the term implies, are appointed by the court. The secured creditor properly retains the receiver and makes an application to the court for the appointment of the receiver. The secured creditor is the plaintiff in this litigation. If the court grants the order, then the court-appointed receiver begins the receivership administration. The powers and responsibilities of the court-appointed receiver come from the court order, called the Appointment Order.

The steps the receiver will take in determining what method will realize the most money possible from the sale of assets should be pretty well identical under both a court-appointed receivership and a privately appointed receivership. The analysis of how and the steps to be taken to realize the most money possible from the assets of the company in receivership should be the same, regardless of the form of appointment.

Either way, as stated above, the receiver must be a licensed insolvency trustee who is experienced in acting as a licensed insolvency practitioner.

what is a receivership
what is a receivership

What is a receivership? Duties of a receiver

Receivers are required to act honestly and in good faith. A privately appointed receiver has a duty to the secured creditor who appointed the receiver. A court-appointed receiver has a duty to act in good faith to all creditors.

The main roles of the receiver, whether private or court-appointed, can be summarized as to:

  • Secure all the assets of the insolvent debtor pledged under the security agreement or covered by the Appointment Order.
  • Make sure the receiver has control of property, the assets are conserved and properly insured.
  • Advance the rights of the debtor with the approval of either the secured creditor or the court. This could include continuing or beginning any necessary litigation.
  • Formulate the plan to maximize the realization from the sale of assets. This also involves a decision as to whether or not to operate the business of the company.
  • Offer the assets for sale in a properly advertised public sale.
  • Complete the sale and distribute the net proceeds in accordance with the provisions of the BIA.
  • Make regular reporting to the court and/or the appointing creditor
  • Obtain the approval of the secured creditor, and under a court appointment, approval of the court for all actions to be taken by the receiver.
  • In a court appointment, to obtain the approval of the court for its fee and disbursements and for those of the receiver’s legal counsel.

The Appointment Order generally will give the court-appointed receiver extensive powers.

I want to summarize the difference between company receivership and bankruptcy

I find that many times people will confuse the terms receivership and bankruptcy. What is a receivership is not the same as what is bankruptcy. I want to summarize the difference between company receivership and bankruptcy. There are important differences between bankruptcy and receivership.

The terms bankruptcy and receivership are often mistakenly used; they are not the very same thing. Bankruptcy is a legal process for unsecured creditors. The bankruptcy of a person and that person’s discharge from bankruptcy acts to discharge that person’s unsecured debt. As a company is never discharged from bankruptcy, the bankruptcy process has the effect of ending the company’s business.

What is a receivership? Receivership on the other hand, is a legal process for the benefit of secured creditors that safeguards their security if an insolvent borrower defaults on its secured debt financial obligations.

what is a receivership
what is a receivership?

What is a receivership? Is receivership the right solution for you?

I hope you enjoyed the what is a receivership Brandon Blog post. I have gone to great lengths to describe what is a receivership, the different types of receivership and that it is a remedy for secured creditors. However, many times, if properly handled, it can also assist the business owner. The entrepreneur may be very frustrated that the company can no longer pay all its debts as they come due and is looking for a way out, a way to sell the business or a way to get rid of the sick parts of the business and keep the good parts.

There may be sufficient value to take care of the secured creditor, but nothing for anyone else, including the unsecured creditors. There may be some business units that should not survive, but if cut out, the business will be viable. A receivership might very well accomplish the goals for the entrepreneur also. I have many times structured a receivership process, in order to meet the goals of the entrepreneur, while satisfying the requirements of the secured creditor.

Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

what is a receivership
what is a receivership?
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