Tag: bankruptcy protection

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HOW HERTZ TEACHES US MODERN AND RISKY RULES OF BUSINESS BANKRUPTCY IN CANADA AND THE USA

business bankruptcy in canada
business bankruptcy in canada

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If you would prefer to listen to the audio version of this business bankruptcy in Canada and the USA Brandon’s Blog, please scroll to the bottom and click play on the podcast.

Business bankruptcy in Canada Introduction

Late in the day on Friday, May 22, 2020, Hertz Global Holdings Inc. (Hertz) filed for Chapter 11 bankruptcy in Delaware. The filing gives Hertz some breathing room to operate its business. During this time, Hertz also needs to come up with a business turnaround plan and a debt restructuring plan that creditors can support. The movement of Hertz stock last week teaches us some modern and risky rules of business bankruptcy in Canada and the United States.

Corporate bankruptcies and the Hertz investors

Hertz stock closed on the NASDAQ exchange on May 22 at US$2.84. It dipped to a low of US$0.40 on May 26. Legendary investor Carl Icahn sold all of his Hertz shares at an average price of $0.72. He dumped his 39% stake in Hertz at a loss of nearly $2 billion. Last Friday Hertz shares closed at US$2.57 per share. This morning, the trading touched US$3.40 per share.

So Hertz is up handsomely since May 26. Hertz has filed for bankruptcy protection. It doesn’t make sense that investors should be pushing the stock up. Hertz is selling off its fleet and further depressing the used car market. So far there is no indication that a business plan and debt reduction plan has been developed, let alone accepted by the creditors.

As far as assets, they have locations and a database of customers. But every major rental car company also has locations and a database. Whenever business and leisure travel resumes to pre-COVID-19 levels, if you can’t rent a car from Hertz you will rent it from a different company. So what are the non-fleet assets worth?

So on the surface, the investor money finding a home in Hertz stock and pushing up the stock price doesn’t make sense. So, are there savvy investors getting into Hertz or are they all just following the herd and will all end up losers?

Why Hertz filed for Chapter 11 bankruptcy protection

Since 2014, Hertz has had four different CEOs. It is difficult to develop and implement a cohesive business strategy with such turmoil in the senior management ranks. As the coronavirus pandemic brought travelling to a sudden halt, Hertz suffered dramatically as a mass of its revenue depended on business travellers and vacationers renting vehicles when arriving at their destination airport. Nobody knows how long it will take until travel gets back to where it was and what Hertz needs it to be.

Hertz’s debt has been increasing as it invested heavily in its vehicle fleet. They may have also missed the mark in the mix of vehicles consumers want, requiring it to take on even more debt to make further fleet purchases. Hertz could no longer afford to make the interest payments on its debt load. At the time of its bankruptcy filing, Hertz had US$1 billion of cash and US$13 billion of debt.

The $13 billion in financing Hertz made use of to acquire its fleet of 500,000 automobiles. The financing was done via what is known as asset-backed securities. These are connected straight to the value of the vehicles. When the value of the cars drops, Hertz must make up the difference in cash within about three months, unless values rebound before that time.

However, with the coronavirus pounding the brakes on the economy and eliminating employment for so many, the drop in the value of used vehicles is expected to remain that way for a long time. Hertz knew that it could not make up the difference to its lenders when they made a demand, which was their right. Hence the bankruptcy filing.

The modern risky rules of investing in business bankruptcy in Canada and the USA

Normally, in a public company restructuring, it is not only the creditors that take a hit. Shareholders usually get a good drubbing. Share values fall and new shares are issued to raise capital. This further dilutes the holdings and value of those holdings for shareholders. But investors must believe that Hertz will come back. How else can you explain the surge in the share price?

Before this year, the company had ten consecutive quarters of positive growth. They were still losing money, just not as much. Investors must believe that Hertz will be able to survive. They must believe that the company although leaner and smaller, this is the time to jump on an opportunity to make money.

I am not a financial advisor, I am not saying whether this is a good or bad investment. It certainly is a very risky one. All I am saying is that as a licensed insolvency trustee (formerly called a trustee in bankruptcy) administering business bankruptcy in Canada, this does not make any sense to me.

I guess only time will tell if these investors pushing up the stock price are insightful risk-takers or losers. Carl Icahn doesn’t believe it.

Business bankruptcy in Canada and the USA summary

I hope you have found this business bankruptcy in Canada and the USA Brandon’s Blog helpful.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

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Brandon Blog Post

CONSUMER PROPOSALS IN ONTARIO UNFORTUNATELY TEST POSITIVE SADLY FOR COVID-19

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

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Consumer proposal in Ontario: Introduction

The Superintendent of Bankruptcy (OSB) went to Court in Toronto on April 24, 2020, to see if consumer proposals in Ontario tested positive for the coronavirus. The Honourable Chief Justice Morawetz issued his decision on Monday, April 27. He put it to the test and it came out testing positive. The OSB is making similar applications in all the different provinces to obtain the same relief. In this Brandon’s Blog, I explain everything.

Consumer proposals in Ontario: The issue

In Ontario, an emergency was proclaimed on March 17, 2020, and the Courts were closed, except for proven emergency situations. This emergency status was extended from April 14 until May 12, 2020, subject to further review. The clock on any provincial limitation period for any proceeding in Ontario was stopped, retroactive to March 16, 2020 (Suspension Period). Ontario is not unique in this. All other provinces have taken similar action.

The closure of the Courts was to assist in slowing the spread of COVID-19. Emergency applications are being held only by conference calls either by telephone or online video. This unprecedented action has created delays in every Court hearing that is not an emergency. This included most insolvency or bankruptcy court cases.

All licensed insolvency trustees (formerly called bankruptcy trustees) (Trustee) started to review all of their cases to see which files were affected. It was not just what cases were scheduled for a court hearing. It actually had more to do with stipulated timelines in the Bankruptcy and Insolvency Act (Canada) (BIA). Various sections of the BIA layout time frames by which certain actions need to be taken.

The emergency situation created by COVID-19 and its containment procedures is impeding the ability of insolvency specialists, borrowers, financial institutions and other stakeholders to meet the timelines of the BIA. This is especially true of all the people in Ontario who chose to avoid bankruptcy by filing consumer proposals in Ontario.

The most important thing that allows someone to perform a successful personal debt restructuring plan is the fact that they are employed. They put their best foot forward and file for personal bankruptcy protection by making a personal debt settlement offer to their creditors. The creditors accept it and the person is making his or her monthly payments on time. Now because of COVID-19 they are laid off and don’t have their salary or wages they have been relying upon both to live and to fund their consumer proposal.

Although there are many timelines in the BIA, such as when a meeting of creditors needs to be held after bankruptcy or debt restructuring filing. However, the OSB helped alleviate certain of the impediments caused by the coronavirus pandemic by allowing Trustees to hold meetings by either telephone or online video meetings.

One timeline that could not be fixed by a telephone call or video chat is an insolvent debtor, either a person or company, making the debt restructuring payments on time. With no job, no income or not much corporate revenue for a business that had to shut down, those debtors were at serious risk of defaulting on its debt restructuring plan caused by these never before experienced issues facing all of us.

Trustees across Canada, both individually and through the two professional organizations, brought the issues forward to the OSB to seek clarification and a solution. That led to the OSB’s Court application. Of particular concern is the section of the BIA that states that a consumer proposal goes into default once three payments are missed.

consumer proposals in ontario
consumer proposals in ontario

Although the Court was asked to consider various issues, I am focussing on the necessity to keep up the monthly payments under a consumer proposal (or a Division I proposal).

Effect of COVID-19 on consumer proposals in Ontario

The OSB’s position was that COVID-19 associated interruptions have both increased economic pressures on consumer debtors and made adhering to legal demands for creditor protection more difficult. When consumer debtors fail to pay in accordance with their consumer proposal, it can be considered annulled under the BIA.

In that case, the consumer debtor then loses the bankruptcy protection from his or her creditors. Upon default and annullment, the legal rights of creditors get revived. While the Courts are closed, this may only result in harassing phone calls from collection agencies. However, when the Courts inevitably reopen, then the lawsuits can either continue or start flying. Remember, the Suspension Period halted the time clock, so, no one loses their rights because of the passage of time.

More importantly, because of the default, the consumer debtor is banned from filing another consumer proposal without court approval. If the person is bankrupt and is trying their best to annul their bankruptcy through a BIA debt settlement proposal, the default causing the debt restructuring plan to be eliminated as if it never happened, keeps the person in bankruptcy.

The OSB also submitted evidence to the Court that lots of people who filed consumer proposals in Ontario were already in arrears in their payments before COVID-19. It further stated that it expects that the defaults in payments are set to rise significantly because of this unique situation..

Consumer proposals in Ontario: The Court’s analysis and decision

Mr. Justice Morawetz went through a very detailed analysis of both the submissions and the law. He noted that what he was being asked to approve was “extraordinary”. He agreed with the OSB that these are unusual times.

The Court first defined two specific terms:

  1. The “Period of the Emergency” starts on March 13, 2020, and ends on June 30, 2020.
  2. The “Suspension Period” begins on the date of the Court’s Order, being April 27, 2020, and ends on June 30, 2020.

The Court then went on to say that its Order applies to:

  1. All active Division I Proposals are those filed with the OSB up to the end of the Period of the Emergency.
  2. All active consumer proposals in Ontario (Division II proposals) are the ones filed with the OSB or revived by the BIA up to the end of the Period of the Emergency. They exclude all those that were already deemed annulled, annulled or that were completely performed on or prior to April 27, 2020.
  3. All active bankruptcies are defined as all bankruptcies filed with the OSB up to the end of the Period of the Emergency. For further clarification, all bankruptcies where the bankrupt received his or her discharge before April 27, 2020, are not included. This makes sense because a discharged bankrupt is no longer subject to laws for undischarged bankrupts. The only party left to abide by timelines is the Trustee.

The Court then ordered the following concerning Commercial Proposals, consumer proposals and bankruptcies:

  • Division I or Commercial Proposals – the time for holding the meeting of creditors that is to take place during the Period of the Emergency, is expanded by the time of the Suspension Duration.
  • Consumer proposals in Ontario –
    • the time for holding the meeting of creditors that needs to be held during the Period of the Emergency is extended by the time of the Suspension Period.
    • an active consumer proposal will not be regarded as annulled unless the consumer debtor remains in default of:
      • When payments are to be made on a regular monthly basis or faster, the day on which the consumer debtor is equal to more than the amount of three payments and an extra amount equal to up to another three payments for defaults that occurred during the period of March 13, 2020, to December 31, 2020.
      • For payments are to be earned less often than on a regular monthly basis, the day that is 3 months after the day on which the consumer debtor is in default in regard of any type of payment except for those due between March 13, 2020, to December 31, 2020, will be the day that is 6 months after the day on which the consumer debtor defaulted.
  • Active bankruptcy matters –
    • The Trustee’s commitment to applying for a court hearing in the Period of the Emergency is to be extended by the time of the Suspension Period.
    • The time for the holding of the meeting of creditors scheduled to take place during the Period of the Emergency is expanded by the time of the Suspension Period.
    • The period fo time for setting up a mediation appointment that needs to happen during the Period of the Emergency is lengthened by the time of the Suspension Period.

      consumer proposals in ontario
      consumer proposals in ontario

Consumer proposals in Ontario: What about the major creditors in an insolvency filing?

In most personal insolvency filings, Canada Revenue Agency (CRA) is a creditor. In fact, it is quite normal for CRA to be the majority creditor. In order for consumer proposals in Ontario to be successful, the first step is to get the support of your major creditor.

Debtors have suffered a loss of employment or a reduction of earnings as a result of the COVID-19 outbreak. People are scared that they will default on their proposals. So the CRA is taking an approach consistent with the position of the OSB. It wishes to make sure that all Canadians are supported if they are experiencing economic challenges due to the COVID-19 pandemic.

So where the CRA is the majority creditor and the debtor is suffering financial hardship, CRA has advised that:

  • For Commercial Proposals, the CRA is providing a waiver of the default and providing a deferment of payments to September 1, 2020. The waiver and extension also apply to amounts owing to unremitted source deductions.
  • For consumer proposals in Ontario, the CRA supports the approval of an amended proposal that requires a deferment of settlements up to September 1, 2020.

Ideally, this will offer debtors the time to concentrate on other facets of their lives and wellbeing without having to go bankrupt. The September 1, 2020 date ties into other COVID-19 programs the government is running to help Canadian taxpayers during this crisis. For example, HST and income tax payments which would otherwise come due between March and July 2020 also have an extended payment program to this same September date.

Consumer proposals in Ontario: Summary

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

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

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

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

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

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

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

consumer proposals in ontario
consumer proposals in ontario

Stay healthy and safe everybody.

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Brandon Blog Post

BOY SCOUTS OF AMERICA BANKRUPTCY: THE EXTREME SIDE RARELY SEEN

Boy Scouts of AmericaIf you would prefer to listen to an audio version of this Boy Scouts Of America Brandon’s Blog, please scroll to the bottom of this page and click on the podcast.

Introduction

The Boy Scouts of America has filed for Chapter 11 bankruptcy protection, according to court files in Delaware bankruptcy court. The filing was done early on Tuesday, February 18, 2020. All of it began with one man in 2010.

The purpose of this Brandon’s Blog is to define the issues that caused this insolvency filing and to answer whether there ever was a similar type of bankruptcy protection filing under the Canadian insolvency system.

It all started with Kerry Lewis

In 2010, Kerry Lewis, a Portland Oregon man, won a lawsuit against Boy Scouts of America. Lewis was a sexual abuse victim. A jury found the Boy Scouts of America must pay $18.5 million in punitive damages for the abuse he experienced in being continuously molested by a Scout leader in the 1980s. Because of the bankruptcy protection filing, rather than potentially having their day in court, plaintiffs with unpaid judgements, and also alleged victims who have pending legal actions, will now need to file claims bankruptcy court.

The Boy Scouts of America have applied for bankruptcy protection, after being barraged by hundreds of sex-abuse lawsuits. Over 12,000 children are believed to have been sexually abused by Boy Scouts volunteers.

The Boy Scouts of America is the largest scouting organization and one of the largest youth organizations in the United States, with about 2.3 million youth participants and about one million adult volunteers. They have actually been encountering decreasing membership as well as thousands of lawsuits, with many more prospective legal actions yet to be filed. They are now dealing with new claims of sexual abuse from about 800 men throughout the country, according to attorneys representing them.

Why the Boy Scouts of America filed for bankruptcy protection

The Boy Scouts of America invested massive amounts of time as well as cash on litigation rather than protecting the children– with virtually 3,000 hidden child molesters only the Scouts know about. In a statement to National Public Radio, the Boy Scouts of America said it is working with experts and explored all options available. They think this insolvency filing will certainly be the best way they can meet their social and moral obligations to equitably treat victims who experienced abuse throughout their time in Scouting.

They went on to say that their strategy will also make certain that it will allow them to continue to perform their goal to serve young people, families and regional communities through their programs.

The issue of troop leaders sexually assaulting Scouts has tormented the Boy Scouts of America for decades. It is just now that the weight of the newer accusations and lawsuits has ended up being too much to deal with without the Chapter 11 filing.

The national organization of the Boy Scouts of America is the only entity involved in the Chapter 11 filing. The national company has created a method that intends to safeguard its local scouting councils and also the billions of dollars in properties they hold. They believe that maintaining those assets out of the reach of sexual-abuse claims is the only method to make certain that Scouting will be able to proceed in America.

That is a crucial concern. Will the Boy Scouts of America be able to shield the assets of the regional councils, which possess camps and properties in prime real estate throughout the nation. Many are claiming the Boy Scouts of America cannot be changed. Under the Chapter 11 filing, they will be able to continue its operations, and all the current claims will be put on hold.

The bankruptcy protection plan

The Boy Scouts of America are urging victims to come forward after the 110-year-old organization filed for bankruptcy protection in the first step toward dealing with a barrage of sexual abuse lawsuits. They are creating a plan, so they can capture all lawsuits yet to be filed and be able to afford to pay off thousands of still-uncompensated sex abuse victims. The filing is also an effort to stop thousands of sexual abuse claims ending up being litigated in court.

I do not think that this legal maneuver will stop survivors from stepping forward and beaming light on the criminals as well as the terrible actions of the abusers concealed by the organization. Nonetheless, sufferers will now only have access to a pool of funds to be assigned for that objective. At the initial bankruptcy hearing, the Boy Scouts of America still have actually not shared the names of the perpetrators with the general public in spite of laying out a four-point strategy with transparency as the first point!

Jeff Anderson, whose law firm has represented Scout abuse survivors for decades believes the Boy Scouts of America is using the filing to keep the names of predators a secret. “I don’t believe that this legal maneuver by the Boy Scouts of America will stop survivors from coming forward and shining a light on the perpetrators and perilous practices hidden by the organization,…” said Anderson.

The Boy Scouts of America have filed for bankruptcy protection in hopes of working out a possibly massive victim payment plan for sex abuse victims. Across the country, they have already mortgaged major properties to get a line of credit. Specifically, the national organization of the Boy Scouts of America has initiated a voluntary financial restructuring to ensure they can equitably compensate all victims of past abuse in our programs, through a proposed Victims Compensation Trust.

Public tax records show the Boy Scouts of America has more than $1 billion in assets, not including the balance sheets of local chapters. They have yet to disclose what size the Victims Compensation Trust will be.

The effect of the filing

Speculation swirled over whether the Boy Scouts of America will continue to exist in its existing organization or whether smaller teams will be formed to carry on its mission. They are establishing an approach, so they can catch all claims yet to be submitted and likewise have the ability to settle thousands of still-uncompensated sex abuse sufferers. The bankruptcy protection filing is also an approach to stop countless sexual abuse claims winding up being prosecuted in court.

The Mormon church, a long supporter of the Boy Scouts of America, has already announced that they are ending their connection, after more than 100 years of a close relationship. If successful, the plan will ensure that they will be able to continue to carry out their mission to serve youth, families and local communities through their programs.

The intriguing question is, will attorneys for victims try to pierce through the national organization and claim that all the local councils are not really independent. Or, is the independence on paper only? Is it truly a vertically integrated company that exercises considerable impact over the local councils? Only time will tell if any of the abuse victim lawyers pursue this path to attempt to increase the size of the Victims Compensation Trust.

So, the Boy Scouts of America’s insolvency strategy is the same as USA Gymnastics and the Catholic diocese. Can victims of such sexual abuse ever really be compensated? The organization in some form will move on, but sufferers will live with their pain and their scars probably forever. They will certainly most likely lose their personal voice in their search for justice because of the bankruptcy filing. This will rob sufferers of an important part of the healing process.

Is there a Canadian statue to restructure like this?

The answer is yes. Although there are two federal insolvency regimes in Canada, the only one that should be used for a very large corporate restructuring like this one is the Companies’ Creditors Arrangement Act (CCAA). The CCAA is the Canadian equivalent to Chapter 11 of the US Bankruptcy Code. It is a Canadian federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs.

The closest Canadian example where the CCAA was used to compensate victims that I can think of is the CCAA filing of the Canadian Red Cross Society. It needed to restructure as a result of some $8 billion of tort claims being asserted against it (and others, including governments and hospitals). The claims were by a large number of people who suffered tragic harm from diseases contracted as a result of a blood contamination problem that has haunted the Canadian blood system since at least the early 1980s.

Summary

I hope you have found this explanation of the Boy Scouts of America issues informative. The Ira Smith team is available to help you at any time. We offer sound advice and a solid plan for Starting Over Starting Now so that you’ll be well on your way to a debt-free life in no time. For more information on a no-cost basis please visit our website or call us.

Does your company have many lawsuits filed against it? Will the cost of all that litigation, let alone the amount of any judgements issued against your company, too much for your company to survive? Those costs and the massive debt cries out for a debt restructuring? Would not it be great if you could do a turn-around?

The Ira Smith Team understands how to do a debt restructuring. More notably, we understand the requirements of the business owner or the person who has too much individual debt. Because you are dealing with these stressful financial issues, you are anxious.

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

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

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will get you or your business back on the roadway to healthy and balanced worry-free operations and end the pain points in your life, Starting Over, Starting Now.

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Brandon Blog Post

BUSINESS TURNAROUND STRATEGY STEPS DON’T HAVE TO BE ONLY UPHILL

business turnaround strategy stepsIntroduction

Business turnaround strategy steps are all around us. The retail industry is a prime example of many companies trying to make their businesses profitable. In Canada, Hudson’s Bay Company has been trying to find the right turnaround formula. In the United States, Bed Bath & Beyond has been trying to turn themselves around.

Corporate restructuring, of course, is not limited by industry type. The retail industry is merely a high profile business sector that has been in the news for years now with the struggles of brick and mortar retailers.

The purpose of this Brandon’s Blog is to provide an introductory view of the world of business restructuring. I will discuss 3 main areas:

  • What is a turnaround strategy?
  • How do I turnaround a failing business?
  • What does a turnaround specialist do?

What is a turnaround strategy in business?

Business turnaround strategy steps involve the practice of taking an ailing company, bringing in experienced and knowledgeable external support and enacting a recovery plan to put the firm back on the straight and narrow. A business turnaround is when an organization needs to drastically improve its financial results in order to survive.

Regardless of what kind of business needs a turnaround strategy, urgency is almost always a factor. There is always a finite time limit for achieving the results of the business turnaround strategy steps. A business turnaround is one of the most difficult maneuvers a business owner will ever make.

If your business has failed to pay accounts on time, or even if rumour and counter-rumour of any business turnaround have reached a supplier before you have discussed it with them, it may lead to the supplier imposing draconian payment terms that most probably would jeopardize the success of any turnaround recovery plan.

Therefore, you must get out ahead of the issues when you first recognize that business restructuring is necessary. Only in that way will the business owner and management remain in control of the turnaround process.

How do I turnaround a failing business?

Before a successful business turnaround can be implemented, it is crucial to understand what got the company where it is now. This is accomplished by first doing a comprehensive study of where the company has been. Many of the questions that must be asked are:

  • What are its strengths, opportunities and weaknesses?
  • What has led to the continued poor financial results?
  • Are all the product lines appropriate?
  • Is there one or more new products that the turnaround is going to be based upon?
  • What operational changes must take place to streamline the business and make it more efficient?
  • What cost-cutting needs to take place?
  • What key investments need to be made for the company’s future success?
  • How does the company’s balance sheet need to be restructured so that once it comes out of the restructuring there is not too much debt?
  • Is there adequate financing available to effect the business turnaround?

Assessing the situation is essential before a successful business turnaround strategy steps plan can be implemented. It is crucial to first understand what got the company where it is now. Ultimately, it is this comprehensive business review that will reveal what the company requires.

Business turnaround strategy steps are more complicated than just consolidating debt. The heavy debt load is the result of all the business problems and losses. A successful restructuring requires fixing all the underlying issues that have created the financial losses and heavy debt load. The business turnaround plan will certainly focus on rigorous cost reduction across all categories and functions will take time to complete it. The results of a successful restructuring will be well worth the effort.

Summarizing the most important business turnaround strategy steps

In my opinion, the most important steps in any company restructuring process are:

  • Take control of your cash flow. If the business is hemorrhaging cash money, take action to stop it as quickly as is possible.
  • Make certain you have the right group in place.
  • Change your company strategy.
  • Right size your costs.
  • Make certain you have the money to finance your organization’s turnaround.
  • Share your plan with crucial stakeholders.

What does a turnaround specialist do?

Business turnaround strategy steps can be completed solely by management. However, my experience shows that seeking expert advice from legal and financial professionals should be strongly considered. It is essential for the company wishing to restructure to retain the services of a turnaround specialist.

Since the business may need to invoke a “time out” to protect itself against enforcement actions by creditors, formal insolvency proceedings may very well be required. More often than not, business restructuring is implemented under a bankruptcy protection filing. If a business turnaround is a possibility, this type of bankruptcy filing makes the most sense.

So, not surprisingly, a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee), is the turnaround specialist. In most cases where a business turnaround can be effected, the most important thing is for the owners to take professional advice at the earliest possible point in time.

The Trustee becomes the “traffic cop”. The Trustee makes sure that scarce resources are properly implemented. That the various operational problems identified in the comprehensive study are being addressed and corrected. The Trustee must also communicate and negotiate with all stakeholders.

One of the keys to achieving all business turnaround strategy steps is not only having the alignment of senior management but also having clear alignment and commitment from middle management. Another key factor in a business turnaround is the need for the Trustee to promote a paradigm shift in thinking, behaviour and approach from within the company. Continuing to do the same thing will lead to the company’s death.

The Trustee must encourage discussion and debate. Achieving the results of the business turnaround strategy steps is more art than a science. There are always different perspectives that are worthy of consideration. Companies in need of a financial business turnaround can benefit from the expertise offered by the Trustee. The Trustee is independent of past decisions and therefore is unbiased as to what must be done to save the business. Corporate restructuring and the business turnaround strategy steps are complex. The Trustee must make sure that all the moving parts are being dealt with properly, while management and non-management personnel alike must focus on their individual areas and tasks.

Nowadays, a turnaround is less likely to be completed only domestically, and often times international issues such as having an overseas manufacturing base and business partners are of key importance. In the domestic business segment, business turnaround is the need of the hour and management must work with renewed focus and energy to improve market share, reduce the costs, streamline the supply chain and ensure the launch of products on time. Overall, while streamlining the operations, the focus on the customer cannot be lost.

Combining the experience of the CEO, senior management and non-execs in the business turnaround strategy steps can help steady the ship, identify the blind spots as well as opportunities from the outset. By involving all levels, the entire company personnel will understand what needs fixing, will identify the best solutions and all work together in the business turnaround.

Many times, a turnaround calls for:

  • leadership changes;
  • improved change management skills;
  • ratcheted up customer service, and:
  • the introduction of new initiatives.

Trying to push through such significant changes can feel like an uphill struggle. One of the roles of the Trustee is to keep everyone focussed and all new initiatives and necessary changes moving forward and that the implementation is being done on a timely basis.

A company turnaround is a tremendous learning experience. No business turnaround is complete unless you’ve taken time to sit back as a team and think about what you’ve just been through. Reflecting on what went wrong, how it was corrected and the work that still needs to be done on implementing and monitoring the new business plan and the business results is very therapeutic and necessary.

Summary

Completing all the business turnaround strategy steps on time will lead to successful corporate restructuring. A successful company restructuring will result in a healthy operation and a valuable saleable asset. Does your company have too much debt and in need of corporate restructuring? Wouldn’t it be beautiful, though, if you could do a turnaround for your organization?

The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

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Brandon Blog Post

CANADA INSOLVENCY CHANGES: FEDS PRESS RELEASE OFFERS FEW DETAILS

canada insolvency

If you would like to listen to the audio version of this Canada insolvency Brandon’s Blog, scroll to the bottom and click on the podcast

Introduction

On September 4, 2019, the Government of Canada department of Innovation, Science and Economic Development, issued a press release. They announced that there would be changes coming to the Canada insolvency legislation.

I have previously written about the fallout from the Sears Canada insolvency. Specifically, about the plight of retired employees seeing their medical benefits eliminated and their pension entitlement slashed. After that, there have been several private member bills trying to fix the Canada insolvency laws.

Budget 2019

As I have written in previous Brandon’s Blogs, the concern is for retired people (and present employees) when a company enters into an insolvency proceeding. Like in the Sears case, the worry is associated with the staff member’s health benefits plan which could be gutted for retirees. An equally important concern, are underfunded pension plans when a firm enters into bankruptcy protection.

Insolvent employers have placed a moratorium on reimbursements to workers and especially retirees on valid medical claims. Also, the staff member pension plan payments can be cut for retirees because the insolvent firm has not made the called for contributions. The retirees are in the weakest position as they can never make up for what they are now losing.

Pension payments are postponed income. In an insolvency filing, there is generally absolutely nothing left for current (other than perhaps their WEPPA claim in bankruptcy or receivership) and retired employees.

The reality is that all politicians currently acknowledge simply exactly how unsecure pension plans and health plans may be in the case of insolvency, restructuring or bankruptcy.

The Liberals acknowledge that this is a significant issue. Nonetheless, in this budget, they chose to ignore the problem.

What the press release said

The Government of Canada said that it is dedicated to far better safeguarding the rights of pensioners, employees and others during insolvency procedures. They say they can guarantee all Canadians can have satisfaction when it pertains to retirement. They say they can do this while maintaining laws that continue to support growth, advancement and also great jobs in Canada.

The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development Canada said, that beginning November 1, 2019, reforms to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA) announced in Budget 2019 will be enacted. He said that this will be done to enhance retired life security by making the insolvency procedure fairer, much more clear and also easily accessible.

So what is being planned?

The press release was consistent with the wording in Budget 2019. The press release went on to say that the BIA and CCAA modifications pertaining to boosting retirement protection will:

  • call for participants in an insolvency process to act in good faith (isn’t that already enshrined in our legislation and enforced by our Courts?);
  • offer the possibility of court-ordered disclosure of a creditor’s real financial interest in an insolvent business (how does this help retirees?);
  • enforce director obligations in suitable cases for senior management compensation settlements in the lead-up to an insolvency proceeding (whatever appropriate means);
  • limit the choices that can be taken initially in a CCAA administration to measures necessary to avoid the immediate liquidation of an insolvent company, thus boosting participation of all players (does this mean the government plans to outlaw a liquidating CCAA?);
  • exclude assets held in registered disability savings plans from creditors’ claims in bankruptcy;
  • reforms to the BIA and CCAA to guarantee the safeguarding of intellectual property user rights in insolvency, announced in Budget 2018, will also be enacted for November 1.

The devil is in the details

The Minister stated:

“It is unacceptable that some pensioners face hardship because of their employer’s insolvency and underfunded pension plans. Our government believes that after a lifetime of hard work, Canadians deserve a secure and dignified retirement. With these reforms, we are protecting Canadians’ retirement security and the ability of businesses to invest, grow and create more good jobs.”

This sounds great, but what does it mean? I don’t see anything in Budget 2019 or this recent press release that actually provides specifics on how retirees will be helped. There are no words talking about the super-priority of the amount of underfunding of pension plans. There is also no language on directors’ liability for such underfunding when the company continues to pay dividends to shareholders or bonuses to executives while the pension plan is underfunded.

We will have to wait to see how the proposed legislation actually reads. The other issue is our upcoming Federal election. Insolvency legislation is not a hot topic that gets votes. Perhaps real protection for retirees does. The government had a chance to really lay out how they will protect retirees, but they failed to do so. They talk about many issues in the press release. However, I don’t see anything directly related to retiree protection.

So I hope that the current federal government will follow through with legislation that has real teeth to protect retirees. But the 2019 Canadian federal election is scheduled to happen on or before October 21, 2019. That means that campaigning will have to begin very soon. So when will there be time to introduce the required legislation to be effective on November 1?

The federal government must have a plan otherwise they would not have put out the November 1 date in the press release. So let us wait and see and cross our fingers that retiree protection will be for real.

Canada insolvency summary

Are you nearing retirement with too much debt? Is your employer’s employee pension plan underfunded? Are you worried about how you will make ends meet in retirement?

The stress you are under because of your money challenges is huge. I understand your pain. At no cost to you, I will look at your whole set of circumstances and develop a plan that is as special as your issues. I know that I can help you through this.

There is no “one solution fits all” approach with the Ira Smith Team. That is why I can develop a debt settlement plan for you as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

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Brandon Blog Post

SOMETIMES EVEN A BONA FIDE SHARK NEEDS BANKRUPTCY AND INSOLVENCY HELP

bankruptcy and insolvency
bankruptcy and insolvency

If you would prefer to listen to the audio version of this bankruptcy and insolvency Brandon’s Blog, please scroll to the bottom and click on the podcast.

Bankruptcy and insolvency: Introduction

Not every innovation that is seen on The Shark Tank is bound to be one of the very best. Among the winners, Fizzics is a machine that makes use of sound waves that improve the taste and quality of a beer. Not even a Shark can stop its company from being driven to bankruptcy and insolvency Chapter 11 bankruptcy protection. This proves that often an ingenious and fantastic invention being marketed with the assistance of a Shark might not truly interest people.

bankruptcy and insolvency
bankruptcy and insolvency

Fizzics was seen on the season 8 première of The Shark Tank. The judges, in spite of the early skepticism, accepted this pitch. It currently seems to be backfiring in a huge way. The idea of making a bottle of beer taste better, just like a draft beer from the tap, isn’t a silly way to invest your time. But a better tasting beer is a big luxury. Many people may check out is the brand-new shiny plaything on the block. It is something wacky and cute but not completely effective or needed.

What is difference between bankruptcy and insolvency in Canada?

What is insolvency? – Individuals are considered to be insolvent when they are not able to pay the financial debts they owe their creditors on their respective due dates. If you become insolvent, you might choose to declare bankruptcy, or you could handle your financial debts with other options such as a consolidation loan or a debt settlement consumer proposal.

Insolvency and bankruptcy are 2 terms that are often very closely associated when discussing debt. However, they have very different meanings. Insolvency describes an economic state. It is when you cannot afford to pay your debts when due. If you liquidated all of your assets, there would not be enough money to pay off all your debts in full.

What is bankruptcy? – Bankruptcy is a legal process. It means that a creditor has gone to court and obtained a Bankruptcy Order to place a person or company into the legal status of bankruptcy. Or, the person or company has filed an Assignment in Bankruptcy. The Bankruptcy and Insolvency Act (BIA) is the Canadian bankruptcy law legislation regulating all administrations of the BIA in Canada.

The various kinds of insolvency proceedings under the BIA are:

Canadian BIA insolvency proceedings and bankruptcy proceedings can only be administered by licensed insolvency trustees (formerly called trustees in bankruptcy). The short form for a trustee in bankruptcy is now LIT, licensed insolvency trustee (Trustee). Trustees are licensed and supervised by the Office of the Superintendent of Bankruptcy (Canada) (OSB) which is part of Industry Canada. The OSB is responsible for the administration of bankruptcies in Canada.

Bankruptcy and Insolvency: Does the consumer really need it?

Eventually, these types of ideas are those that often tend to seem like the most effective thing since sliced bread. Their shiny brand-new finish tends to subside promptly given the expense of creating them. Even tougher, is finding a large enough market of people who truly intend to quit the dependable and old ways to carry out something. The uniqueness will swiftly wear away. The equipment will then come to be a chunk of scrap that is most likely to rest on the counter and seldom gets used. That might seem unkind, however, usefulness and need to at some point seem to divide the wheat (or barley) from the chaff!

So Fizzics, for all that it is able to do, turned out to be not the sort of device that has the ability to make a great deal of sense in a business setting. It is just for home-usage. In a bar, people go to consume alcohol and socialize. They are not there to wait on a number of sound waves to make their drink preference taste and look better. If they want a draft beer, they will order from the tap. If they want a bottled beer, that is what they will order.

For home usage, it is an excellent novelty. Everyone has their favourite beer. People anticipate it to taste the way they know it too – straight out of the bottle or can.

The Fizzics Business: The Sharks bit and invested money

Philip Petracca and his partner, David McDonald, made it to ABC’s “Shark Tank” in 2016, offering beer to a hesitant panel. They eventually turned most of the judges into followers. Lori Greiner and fellow Shark Mark Cuban agreed to spend $2 million into Fizzics for a consolidated 16.67 percent equity. Fizzics attained its objective of expanding its selling networks.

With the help of the Sharks, Fizzics entered Target, Best Buy, Brookstone, on Amazon, and several other areas– including Bed, Bath & Beyond. They have been reviewed in many renowned publications, and on several websites such as Yahoo! Tech as well as CNet. The Fizzics beer-making device was called absolutely nothing short of a wonder.

bankruptcy and insolvency
bankruptcy and insolvency

They increased their patented modern technology and generated a much more portable item called the Fizzics Waytap. Beer fanatics were still going crazy about the original dispenser in magazines.

On March 12, 2019, Fizzics Group, Inc. applied for Chapter 11 bankruptcy in Delaware under the United States insolvency and bankruptcy code. It reported assets of between $100,000 as well as $500,000 and debts of between $1 million and $10 million (based on contingencies and disputed claims). Time will tell if the business can be reorganized and saved, or if the remaining product inventory will end up in the clearance area!

Bankruptcy and insolvency: Do you need help?

I hope you enjoyed this Fizzics Shark Tank bankruptcy and insolvency blog. Do you or your business have excessive debt? Are you having an issue making your month-to-month expenses? Is your company handling its financial obstacles something you simply can’t figure the way out of? Are you looking for a business restructuring plan or an individual debt negotiation plan?

If so, call the Ira Smith Team today. We have years and generations of experience helping people and companies seeking financial restructuring or a debt settlement strategy. As a licensed insolvency trustee, we are the only specialists recognized, accredited and supervised by the Federal government to give insolvency advice and remedies to assist you and to prevent bankruptcy.

Call the Ira Smith Team today so you can end the stress and anxiety financial problems create. With the special roadmap, we will develop with and special to you, we will promptly return you right into a healthy, balanced hassle-free life.

You can have a no-cost appointment to assist you so we can fix your debt troubles. Call the Ira Smith Team today. This will certainly allow you to make a fresh start, Starting Over Starting Now.

 

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Brandon Blog Post

BUSINESS DEBT ADVICE CANADA: TROUBLE SHOOTING DEBT STRAPPED COMPANIES

business debt advice canada

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Business debt advice Canada: Introduction

When it involves money, timing is everything. Your business is getting closer to the top of its banking line and your banker is asking for more information than usual. This is where your heart starts pounding faster and your stress level increases. This is the moment you can seize to right size your business or else it very well may fail. The purpose of my blog is to give you business debt advice Canada.

Business debt advice Canada: Relationships can become strained

Relationships can become strained with your lender and suppliers when business debts are mounting and your company is facing a cash crisis. However, there are actions a borrower can take to prevent calamity. Reassuringly, most of the time, lenders would rather support you if you have a viable business plan to correct the situation going forward, and not putting you out of business.

I hope the suggestions below shows you that you should look at this as an opportunity to fix your business. I have found that in trying times when a company has mounting debts and insufficient cash, there is no replacement for good management.

A solid business plan showing how the company will turn itself around is what your lender wants to see. Communication with your lender and your suppliers is key. Do not hide from the problem. Face it head on. If your business plan shows you can turn things around, you will feel like you are dealing from a sound platform and not just running scared.

Business debt advice Canada: Take emotion out of the equation

These situations generally become more tense before they become better. You, your lender and your unpaid suppliers all want the same thing. You all want the company to be successful and profitable, and to be able to pay all of its bills in full when due. Your lender and suppliers are not out to get you. However, if they do not: (i) know that you have solid business turnaround plan; and (ii) receive ongoing information to show what steps you are taking to fix the problems, they will have no choice but to turn off the tap.

I have unfortunately seen too many companies fail in their business restructuring efforts due to lack of communication. The turnaround plan may have been sound, but nobody knew. This only creates ill will among the stakeholders and a result that nobody wants.

Business debt advice Canada: Informal and formal turnaround options

I must preface this section by saying do not be afraid to consult with a licensed insolvency trustee (LIT) for business debt advisory services. Trustees’ training makes them expert in assessing troubled business situations and implementing turnaround steps. A LIT does a lot more than just bankruptcy.

You will find it helpful to have a professional trustee assist you in developing your turnaround business plan, implementing it and keeping management focussed and accountable. You will also find it very helpful to have a LIT go with you for meetings with your banker; there will be many of those!

Business debt advice Canada: Troubleshooting

Fully understanding the full current status of the company showing signs of financial trouble is key. Things that I focus on early on when looking at troubled companies are:

  • What are all the different assets of the company and where are they located?
  • Are all the assets properly insured?
  • What is the going-concern value and the estimated liquidation value of the assets?
  • What is the full extent of all liabilities and business debt levels? This includes amounts owing to the government for:
  • What is the status of premises lease(s) for both remaining term and cost?
  • Is the cost of the leased premises above or below current market value?
  • Has anyone personally guaranteed bank debt, the landlord or any other creditor that would affect turnaround decisions to be taken?
  • Has a current crisis cash-flow statement and turnaround business plan been developed and tested for reasonableness?
  • What are the causes of the company’s current financial problems and how likely are those causes to recur?

This list is not meant to be exhaustive. No doubt other questions will arise as answers are found for these first questions. However, this is the information I first want to get before embarking on developing a restructuring plan.

Business debt advice Canada: Informal restructuring and turnaround

If the business problems have been identified early and have not been allowed to fester, then an informal restructuring may very well work. Perhaps all that will be needed is some accommodation from the lender both in time and money. Banks are quite willing to enter into a forbearance agreement with their corporate client allowing the time (and sometimes more money) to see if the turnaround plan will work.

The bank would rather have a successful turnaround than shut you down. The bank needs to know that management has the bench strength to pull off the restructuring. If not, they will expect you to have a lawyer experienced in turnarounds and a LIT active on your team.

Companies that have relatively few trade suppliers may also be able to work out a restructuring of their unsecured debt. The fewer people you have to talk to and get onside, the higher the likelihood of success. Of course, the trust developed from earlier dealings is very important. If there is no trust, or if there are just too many suppliers, an informal restructuring will not work with them.

Business debt advice Canada: Formal restructuring

The Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA) and the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA) are the two primary Federal statutes that govern corporate restructuring in Canada. The requirements of each statute and the exact processes themselves are weighty enough to deserve their own blog. However, the takeaways from this blog on formal restructuring are:

  • In a formal restructuring, I still go through the checklist I have identified above of issues to look into.
  • Under the BIA, the restructuring section is Part I Division III of the BIA
  • If a restructuring under the BIA does not receive the necessary creditor AND court approval, the company will automatically be bankrupt
  • In a formal restructuring, the company stays in control of its assets and business operations
  • A formal restructuring invokes a stay of proceedings so no party can begin or continue litigation or enforcement action against the company
  • A company needs to have at least $5 million in debt to restructure under the CCAA
  • A BIA restructuring will be less costly than a CCAA restructuring because the company does not have to go to Court for approval every time it wishes to do something
  • The term “bankruptcy protection” in Canada, refers to a formal restructuring under either the BIA or CCAA.

Business debt advice Canada: What to do if your company has too much debt

Is your business facing financial problems? Perhaps your company is in need of a restructuring. The Ira Smith Team can develop a restructuring plan which may or may not include the need to file for bankruptcy protection.

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to keep your company alive while trying to negotiate with potential purchasers. We understand that you are playing beat the clock, and the pain and stress you are feeling thinking that you may just run out of time. The bankruptcy protection process can ease this stress and provide a level playing field so that no potential purchaser takes advantage of you.

The Ira Smith Team has a great deal of experience in running a stalking horse stalking horse asset purchase agreement. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put your company back on a healthy profitable path, Starting Over, Starting Now.

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Brandon Blog Post

CANADA BANKRUPTCIES: GRAPHIC & VID – CANADIAN BANKRUPTCY AND INSOLVENCY LAW

Canada bankruptcies: Introduction

The purpose of this infographic, video and blog is to give you Canada bankruptcies information. I want to explain how Canadian bankruptcy and insolvency law works for companies and what the major steps corporate bankruptcy laws in Canada are. So watch the video below and feel free to read in more detail right below the video.

Canada bankruptcies: Video

 

Canada bankruptcies: The 10 standard steps in a voluntary corporate bankruptcy

The actions of a Licensed Insolvency Trustee (Trustee) takes with respect to the assets and the claims of creditors in a corporate bankruptcy may differ from case to case. However, there are 10 standard steps the Trustee takes in each corporate bankruptcy file. These steps are to understand and deal with the nature of the assets and the creditor claims.

Here are the 10 steps I take as a standard process with each corporate bankruptcy.

Step 1 – Initial meeting with Trustee

I meet with the Directors of the company by providing a free consultation. In this meeting, I learn the causes of the company’s insolvency and the nature and extent of the assets and the claims of various creditors. This includes potential trust claimants and secured creditors.

After obtaining the information I need to provide advice specific to that company’s situation, I decide if the company is a candidate for a restructuring, either informally or in a bankruptcy protection mode. If possible, this is preferable, as it will save jobs and allow the company to continue in business. If not, I advise about corporate bankruptcy and what is involved.

Step 2 – Directors meeting

If bankruptcy is the answer, the Directors formally meet and pass a resolution stating that the company is insolvent and must file an assignment in bankruptcy. The resolution also indicates which Director is authorized to sign all documents and be the Designated Officer in the bankruptcy proceedings. The Designated Officer is the person that will attend the First Meeting of Creditors and answer questions about the causes of the company’s insolvency and bankruptcy and how the company conducted business.

Step 3 – Signing all documents

With the signed Directors’ resolution in hand, I prepare all necessary bankruptcy documents. I then meet with the Designated Officer to explain the documents and have them all signed by him or her.

Step 4 – Filing with Official Receiver

The Official Receiver is the local representative and part of the Federal Office of the Superintendent of Bankruptcy. I electronically file the required documents and wait for the Official Receiver to issue the bankruptcy certificate. The company is not officially bankrupt until the day and time that the Official Receiver issues the bankruptcy certificate. Normally it gets issued on the same day or the next day. So, if the timing of the start of the bankruptcy is important, I need to take a time lag into consideration.

Step 5 – Bankruptcy certificate

The company is not officially bankrupt until the day and time that the Official Receiver issues the bankruptcy certificate. Normally the issuance is on the same day or the next day. So, if the timing of the start of the bankruptcy is important, I need to take a time lag into consideration.

Once the certificate is issued, my firm Ira Smith Trustee & Receiver Inc., is named as the Trustee. This appointment is valid until the First Meeting of Creditors. At the meeting, one of the things the creditors must vote on, is affirming the Trustee’s appointment.

Step 6 – Trustee takes possession

Now that I am the Trustee, I have a duty to take possession of the company’s books and records and the known assets. Taking possession of the assets is subject to the rights and wishes of any trust claimants or secured creditors.

Step 7 – Trustee notifies known creditors

Within 5 days of the date of bankruptcy, I must familiarize myself with the books and records as ot the names and addresses of the creditors. I must also in those same 5 days, set the time and place for the First Meeting of Creditors and mail out the notice to the creditors advising of the bankruptcy, the creditors meeting details and providing a proof of claim form. I must also arrange for a notice of the bankruptcy be placed in a local newspaper so that any unknown creditors are officially on notice.

Step 8 – Trustee safeguards assets

Again subject to the rights of any trust claimants or secured creditors, I must safeguard, insure and store the assets. I can begin formulating a plan for selling the assets if there is equity for the bankruptcy estate. However, I cannot sell any assets before the First Meeting of Creditors without a Court Order. At the creditors meeting is where I seek the approval of the creditors for the plan I have prepared to sell the assets. After obtaining that approval, sales can be completed by the Trustee.

Step 9 – Trustee prepares the report

I prepare my Trustee’s Report To The Creditors On Preliminary Administration. The report is handed out to the creditors present at the First Meeting of Creditors. It is also a public document, so any creditor who could not attend the meeting can receive a copy.

The report covers the following areas:

  • Background information
  • Causes of financial difficulty
  • Description and estimated value of the company’s assets
  • Any trust, secured or property claims against the assets
  • What conservatory and protective measures to safeguard the assets the Trustee has taken to date
  • Books and records of the company
  • What the Trustee’s review to date of the books and records has determined, if anything
  • Did the Trustee retain legal counsel yet and if so, for what reason? If there is a trust, secured or property claims that the Trustee knows about, it would be normal for the Trustee to get a legal opinion on the validity and extent of such claims prior to the creditors meeting. The Trustee would advise the creditors of what the legal opinion says and how it will affect the sale of assets, or if there is even anything for the Trustee to sell.
  • The claims of the creditors identified to date.
  • What the anticipated realization and distribution to the unsecured creditors may be
  • The Trustee’s fee
  • Any other matters

Step 10 – The First Meeting of Creditors

Within 21 days of the date of bankruptcy, I hold the creditors meeting. My report described above is distributed. The Trustee, the Designated Officer and possibly the lawyer hired by the Trustee, attend the creditors meeting. Also attending are any creditors who wish to take part.

The creditors meeting is the place where the creditors can ask questions and find out information about the causes of bankruptcy and the Trustee’s estimate of what the unsecured creditors may receive by way of a distribution.

As mentioned above, the creditors also must approve the actions and activities of the Trustee to date, and approve any steps the Trustee wishes to take in realizing upon assets and dealing with creditors’ claims. The creditors also appoint up to 5 Inspectors. The Inspectors are representatives of the creditors who supervise and assist the Trustee and ultimately must approve the Trustee’s actions.

canada bankruptcies
canada bankruptcies

 

These are the 10 standard steps I take in every voluntary corporate bankruptcy. The exact things I must do to realize upon the assets and deal with the claims of creditors will depend on the assets and claims themselves. When the bankruptcy administration is complete, including any distributions made, the Trustee then obtains a discharge.

Is your company experiencing financial difficulty?

I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a company in financial difficulty. If caught early enough, we can get involved in a turnaround situation for your company to keep jobs and value.

The Ira Smith Team knows that you are worried because your company is facing significant financial challenges. Your business provides income not only for your family. Many other families rely on you and your company for their well-being. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points.

Contact the Ira Smith Team today. We know how to solve your company’s financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your company, Starting Over Starting Now.

canada bankruptcies
canada bankruptcies

 

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Brandon Blog Post

STALKING HORSE CREDIT BID: WE NEED COURT APPROVAL BEFORE STARTING A COURT SUPERVISED SALES PROCESS

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Stalking horse credit bid: Introduction

In last week’s vlog, “STALKING HORSE ASSET PURCHASE AGREEMENT: THE WEINSTEIN COMPANY GALLOPS INTO A COURT SUPERVISED SALES PROCESS“, I described what a stalking horse asset purchase agreement is. I also defined and described the proposed stalking horse credit bid process of The Weinstein Company. That process was approved last Friday by a Delaware bankruptcy judge. The Court delayed the court sales auction by a couple of business days to May 4, 2018.

Stalking horse credit bid: Our earlier case studies

Over the last few weeks, I have provided some case studies from our files for both personal and corporate insolvency matters. As a refresher, these case study vlogs are:

Stalking horse credit bid: Our stalking horse sales process case study

This is the last vlog along our case study theme. The purpose is to show the decision making that the Court goes through in being asked to approve a stalking horse credit bid and a stalking horse sales process in a corporate insolvency file.

We were Court-appointed as Receiver and Manager of a club operating a golf course, restaurant and party function business. The first secured creditor filed its motion to appoint us. We were appointed very close to Christmas that year. Obviously, the golf course was not operating at the time of our appointment. The food and beverage facilities only had one remaining Christmas party and the annual club New Year’s party. No parties were booked yet into the New Year.

We did the normal things a Receiver does such as:

  • taking physical possession of the premises and the books and records;
  • identifying if there were any assets located off premises; and
  • arranging for property and liability insurance.

We were able to use the time to understand the business and the nature and extent of the assets.

There was already a purchaser ready to give an offer to purchase the Receiver’s right, title and interest in the operating assets comprising the club’s businesses. We arranged for an appraisal of the assets and business. We received and reviewed the appraisal. The secured creditor told us the form of offer they would support.

Armed with the appraisal information and the secured creditor information, we entered into a conversation with the potential purchaser. The amount this purchaser told us it was willing to pay was far more than appraised value and above the minimum threshold for acceptance from the secured creditor.

Stalking horse credit bid: Our stalking horse offer

We decided that a stalking horse bid process would be ideal. We doubted that any party would bid higher than the value this potential purchaser was discussing. It made sense to also have the court supervised sales process completed prior to April, so that it would be the purchaser opening up and preparing the course for play and running the food and beverage business, rather than the Court appointed Receiver.

The potential purchaser agreed to become a stalking horse bidder and to the timeline. We and our legal counsel worked with the potential purchaser and its legal counsel to prepare a draft stalking horse asset purchase agreement. The purchase price was the amount this now stalking horse purchaser was always discussing.

Stalking horse credit bid: We galloped off to Court

We filed our motion for approval of our activities to date, requested permission to enter into the proposed stalking horse agreement and sought approval for our proposed stalking horse sales process. The Court had no problem with our activities to date, or the stalking horse agreement, but did not like our truncated stalking horse sales process. We were not able to be in Court until February and we wished to complete the sale by March 31. The Court felt that was not enough time to run a sales process that was fair to all potential bidders. Our legal counsel attempted to persuade the Judge that comparing the appraisal (which the Court saw but our purchaser did not see) and the value of the stalking horse offer, we did not feel that there would be any other bidders.

We could not persuade the Court. The Judge approved everything, but he amended the timeline so that we would run a process that would last at least 5 weeks from the time we ran our advertisement for this business opportunity.

The Court considers various factors when asked to approve a receivership or bankruptcy sales transaction. The basis for this comes from a 1991 Court of Appeal for Ontario decision in Royal Bank of Canada v. Soundair Corp., 1991 CanLII 2727 (ON CA). In no particular order, the Court is concerned with:

  1. Whether the Receiver has made enough effort to get the best price and has not acted improvidently.
  2. Considering the interests of all parties.
  3. The efficacy and integrity of the process used to get offers.
  4. If there has been unfairness in the working out of the process.

In the Judge’s opinion, a 5 week sales process would ease any concerns he had.

ISI 4
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Stalking horse credit bid: The outcome

We amended our sales process in accordance with the Judge’s instructions. We then:

Anyone who wished to do due diligence signed our confidentiality agreement. Everyone who signed our confidentiality agreement was then provided with a unique password to enter the online data room.

The due diligence period ended and since everyone knows the amount of the stalking horse offer, no other potential bidders submitted an offer. Nobody wanted to bid more.

We went back to Court to tell of the results and obtained Court approval to complete the transaction of the stalking horse bidder whose asset purchase agreement was already approved by the Court.

In the meantime, spring had arrived. We hired the necessary golf course superintendent and other maintenance and operating staff and opened up the golf course. We ran the golf club until the sale was completed near the end of June that same year. In the eyes of the Court fairness was achieved, we operated the golf club and the secured creditor was happy with the result of the sale.

Stalking horse credit bid: Is your business facing financial problems?

This case study shows how we were able to satisfy all stakeholders in a Court supervised sales process, to transfer the assets to a new business, remit funds to the secured creditor on a basis acceptable to them and meet the requirements of the Court.

Is your business facing financial problems? Perhaps your company is in need of a restructuring. The Ira Smith Team can develop a restructuring plan which may or may not include the need to file for bankruptcy protection.

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to keep your company alive while trying to negotiate with potential purchasers. We understand that you are playing beat the clock, and the pain and stress you are feeling thinking that you may just run out of time. The bankruptcy protection process can ease this stress and provide a level playing field so that no potential purchaser takes advantage of you.

The Ira Smith Team has a great deal of experience in running a stalking horse stalking horse asset purchase agreement. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put your company back on a healthy profitable path, Starting Over, Starting Now.

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Brandon Blog Post

STALKING HORSE ASSET PURCHASE AGREEMENT: THE WEINSTEIN COMPANY GALLOPS INTO A COURT SUPERVISED SALES PROCESS

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Stalking horse asset purchase agreement: Introduction

In my July 2015 blog, “STALKING HORSE BID: DO YOU REALLY WANT TO STALK YOUR HORSE ANYWAY?”, I defined and described the stalking horse bid process in the Canadian insolvency context. In my November 2017 vlog, “FILING FOR BANKRUPTCY PROTECTION: THE WEINSTEIN COMPANY RETAINS ATTORNEYS FOR POSSIBLE BANKRUPTCY PROTECTION FILING”, I described the (then) financial condition of The Weinstein Company (TWC) and correctly predicted that it would have no choice but to ultimately file for bankruptcy protection. The purpose of today’s vlog is to provide an update on TWC’s bankruptcy protection filing. My expectation that on April 6, 2018, the US Bankruptcy Court will approve a stalking horse asset purchase agreement.

Stalking horse asset purchase agreement: Stalking horse agreement definition

As a refresher, the stalking horse bid process is, an effort by a company to look at the marketplace ahead of an auction. The intent is to make the most of the value of its assets. This is done as part of normally what is a court supervised public auction sale. It is common to being used in a bankruptcy case.stalking horse bidder

Stalking horse asset purchase agreement: How a stalking horse bid works

The insolvent company in bankruptcy protection, canvasses the marketplace. It comes up with what it determines to be, under the circumstances, the best possible offer. The insolvent company and the potential purchaser, enter into a stalking horse asset purchase agreement. The potential purchaser allows its stalking horse bid to go public.

While entering a stalking horse asset purchase agreement, the company can use bidding process protections. An example is breakup charges. This protects the stalking horse bidder prior to the public auction sale. These incentives improve the worth of the offering for the stalking horse buyer. This process may bring about a far better offer before the public auction starts. This greater deal is currently the beginning deal for the public auction. The aim is to produce the best possible offer.

Stalking horse asset purchase agreement: How did the stalking horse offer process get its name?

This type of bidding process gets its name from the use of a stalking horse in hunting. The hunter uses a horse, or a screen made in the shape of a horse. The hunter stays concealed when stalking prey.

The stalking horse bid becomes “the stalking horse”; the “animal” used to attract the “prey”, being other bidders.

The terms of the sales process would show by what minimum amount any other bid must beat the stalking horse bid. That minimum amount would have to be at least the amount of the break fee. The break fee is compensation for stalking horse bidder. It attempts to compensate for due diligence time and costs if they don’t win the deal.stalking horse bidder

Stalking horse asset purchase agreement: TWC bankruptcy case

In the evening of March 19, 2018, TWC filed for bankruptcy protection in a Delaware Bankruptcy Court. The reasons for the filing were twofold: (i) TWC had canvassed the marketplace and had obtained an offer to purchase its assets by a stalking horse buyer, Lantern Capital; and (ii) to have a Court supervised forum so that both a sale and transfer of the assets can take place and all claimants can make a claim against the resulting cash. TWC announced that anyone subject to a non-disclosure agreement (NDA) was now released. No doubt this will lead to more allegations and claims.

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stalking horse asset purchase agreement

Stalking horse asset purchase agreement: The stalking horse purchase agreement

Variety reported that Lantern Capital, a Dallas based private equity firm, entered into the stalking horse asset purchase agreement with TWC. Variety stated Lantern’s bid offers $310 million in cash, plus assuming up to $114.5 million in liabilities connected with TV and film projects, for a total stalking horse bid of $424.5 million.

If approved by the Delaware Bankruptcy Court, this will serve as the floor for other bidders. There is a hearing scheduled for April 6 in Delaware, at which time the Bankruptcy Court is expected to approve this stalking horse bid and the entire stalking horse process. As currently drafted, all other bids must be submitted by April 30. The bids will then be vetted, discussions will take place and TWC will then appear again in Bankruptcy Court to recommend which offer is deemed to be the best and be approved and completed. No further information is available at this time.

Stalking horse asset purchase agreement: Does your company have a buyer but might need a Court-supervised process to finish a sale?

In next week’s vlog, I will provide a case study of how we used a stalking horse asset purchase agreement Bankruptcy Court supervised process to sell the assets of an insolvent company. The successful sale also continued employment for many people.

Is your company facing financial hardship, yet its assets are attractive to multiple potential purchasers? Perhaps you need to be thinking of using bankruptcy protection to maximize the value of the company’s assets through a sale. This process can also continue employment for both you the entrepreneur owner and for many of your current employees.

The Ira Smith Trustee & Receiver Inc. Team understands the pain you are going through trying to keep your company alive while trying to negotiate with potential purchasers. We understand that you are playing beat the clock, and the pain and stress you are feeling thinking that you may just run out of time. The bankruptcy protection process can ease this stress and provide a level playing field so that no potential purchaser takes advantage of you.

The Ira Smith Team has a great deal of experience in running a stalking horse stalking horse asset purchase agreement. The stress placed upon you due to your company’s financial challenges is enormous. We understand your pain points. Call the Ira Smith Team today for your free consultation. We can end your pain and put your company back on a healthy profitable path, Starting Over, Starting Now.stalking horse bidder

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