Tag: CCAA

Categories
Brandon Blog Post

SEARS CANADA DEFINED BENEFIT PENSION PLAN SHORTFALL: MP SCOTT DUVALL COMES THROUGH ON HIS PROMISE IN CANADIAN PARLIAMENT

2

Sears Canada defined benefit pension plan shortfall: Introduction

On November 6, 2017, Hamilton Mountain NDP MP Scott Duvall rose in the House of Commons for leave to introduce Bill C-384. It is titled “An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (pension plans and group insurance programs)”. Mr. Duvall’s motivation was the Sears Canada defined benefit pension plan shortfall.

Sears Canada defined benefit pension plan shortfall: Hamilton Mountain MP Scott Duvall introduces Private Member’s Bill C-384

Here is what Mr. Duvall said:

“Mr. Speaker, I would like to take this time to thank my seconder, my colleague who has done great work and works very hard in this House, and who has also helped me a lot on this bill.

I rise today to introduce a private member’s bill titled, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act. This bill will amend the Bankruptcy and Insolvency Act and the CCAA so that companies will have to bring any pension plan fund to 100% before paying any other secured creditors. It also makes amendments to require companies to pay any termination or severance pay owing before paying any secured creditors.

Other amendments will prevent a company from stopping the payment of any post-retirement benefits during any proceedings under the BIA or CCAA. These amendments will inject some fairness into a process that often sees the interests of workers, retirees, and their families placed behind all others.

We must fix the imbalances in current legislation and provide Canadian workers, retirees, and their families with the protection they expect and deserve. I am hopeful that all my colleagues in Parliament will put aside their partisan differences and support this bill. Canadian workers, retirees, and their families deserve no less.”

Although he did not mention it specifically by name in the House of Commons, Mr. Duvall has said that he would introduce such a Bill as a result of the Sears Canada defined benefit pension plan shortfall.

Sears Canada defined benefit pension plan shortfall: Hamilton Mountain MP Scott Duvall walks the walk

In our September 27, 2017 blog, TORONTO BUSINESS BANKRUPTCY PROTECTION: NDP WANTS FEDERAL INSOLVENCY LAWS CHANGED SO THERE IS PENSION PLAN SECURITY WHEN FINANCIALLY TROUBLED BUSINESSES FAIL, we told you that Hamilton Mountain MP Scott Duvall, the NDP pension plan critic, informed a group at the United Steelworkers’ Hall that he will present a private member’s bill to secure employees’ pension plans and benefits, and pressure business to offer termination or severance pay, prior to paying secured lenders.

With his Bill C-384, Mr. Duvall has lived up to his promise.

3bestaward
sears canada defined benefit pension plan shortfall

Sears Canada defined benefit pension plan shortfall: This is actually the second Bill attempting deal with this problem

In our November 1, 2017 blog, SEARS CANADA CLOSING: POLITICIANS WANT NEW LAWS TO PROTECT PENSIONERS DUE TO SEARS CANADA CLOSING, we reported that Bloc Québécois MP Marilène Gill’s Private Member’s Bill C-372, passed First Reading. That Bill is titled “An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (pension plans and group insurance plans)”. In that blog, we described the provisions included in that Bill.

Like Mr. Duvall, Ms. Gill is trying to pass legislation to avoid another Sears Canada defined benefit pension plan shortfall insolvency situation.

Sears Canada defined benefit pension plan shortfall: What does Bill C-384 actually say

The purpose of this blog, is to describe the terms of Mr. Duvall’s Bill.

Mr. Duvall’s Private Member’s Bill C-384 passed First Reading. It is very similar to Ms. Gill’s BIll C-372. He wishes to amend the Bankruptcy and Insolvency Act (BIA) as follows:

  • In order to be approved by the Court, a corporate restructuring proposal under the BIA, for a company with a prescribed pension plan, the Proposal must include payment in full of any unfunded pension liability or solvency deficiency. The amount is calculated at the time of the filing of the Notice of Intention To Make A Proposal (NOI) or the Proposal if there is no NOI filed.
  • New section 69. 7 be added to the BIA that in the restructuring proposal of an employer, upon filing, until the discharge of the Licensed Insolvency Trustee (LIT), or the insolvent employer becomes bankrupt, all amounts that the employer must contribute under any arrangement for the benefit of the employees, must continue throughout the restructuring period. This would cover any pension plan, health, injury or accident plans and group insurance coverage.
  • The unfunded pension liability or solvency deficiency calculation is called “special payments” in Bill C-384. The calculation is by section 9 of the Pension Benefits Standards Regulations, 1985.
  • In a receivership, the receiver is personally liable for paying any unfunded pension liability or solvency deficiency. However, the receiver’s liability is only from the proceeds of the sale of current assets.
  • In either a receivership or corporate bankruptcy, the charge for any unfunded pension liability or solvency deficiency would rank ahead of the charge of any other secured creditor. It is interesting to note that the Bill does not attempt to provide such a security ranking to anything other than the pension liability or solvency deficiency.
  • The Officers and Directors of the company are not entitled to the benefit of this secured charge. Even if they are participants in the pension plan that has the unfunded pension liability or solvency deficiency.
  • New subsection 136(1) (d. 001) to the BIA, creating an extra class of preferred creditor. A preferred creditor is an unsecured creditor who ranks ahead of the ordinary unsecured creditors and ranks after the secured creditors. The Bill states that it would say that the amount of any termination or severance pay owed to an employee by a bankrupt employer, less any amount previously paid by the LIT, would rank in priority right after the wages owed to the employee.
  • There are also proposed amendments to the Companies’ Creditors Arrangement Act (CCAA) in Bill C-384. It is to bring the same changes in that statute as those to the BIA described above. The intent is that the treatment under both statutes is the same.

Sears Canada defined benefit pension plan shortfall: Now it is up to Justin Trudeau and his Liberal Party

We will now have to wait and see what happens to both Ms. Gill’s and Mr. Duvall’s Private Member’s Bills. As we previously reported, it is unusual that a Private Member’s Bill becomes real legislation. As the Liberals hold a majority in Parliament, if they don’t want it, or a revised Bill for the same purpose, to pass, it won’t.

Sears Canada defined benefit pension plan shortfall: Does your company need a restructuring and turnaround plan?

Is your company insolvent and needs to restructure? Is your business viable but can only employ people and carry on business if it can restructure its debt? Contact the Ira Smith Trustee & Receiver Team. If we meet with you early on, we can create a restructuring and turnaround strategy. That way your company won’t have to be like Sears Canada closing.

sears canada defined benefit pension plan shortfall 0
sears canada defined benefit pension plan shortfall
Categories
Brandon Blog Post

SEARS CANADA CLOSING: POLITICIANS WANT NEW LAWS TO PROTECT PENSIONERS DUE TO SEARS CANADA CLOSING

2

Sears Canada Closing: Introduction

Following the Sears Canada failed restructuring, is the Sears Canada closing of all stores. It is leaving 16,000 retirees unclear about the future of their underfunded pension plan. Support is expanding for brand-new laws to better protect Canadian workers during a company’s collapse.

Sears Canada Closing: What CARP has to say

CARP, a nationwide not-for-profit group formerly called the Canadian Association for Retired Persons, was recently on Parliament Hill to meet dozens of MPs as it lobbies for law adjustments.

Wanda Morris, vice-president of CARP, stated that CARP is requesting for the unfunded pension liability be provided priority position so it goes to the front of the line.

Pensioners hold no priority when it pertains to dividing up assets through a bankruptcy, and Ms. Morris wants protection for retirees for underfunded defined benefit pensions when the company goes through a restructuring or into bankruptcy.

Ms. Morris stated that along with the practically 16,000 retirees at Sears, CARP estimates that there are about 1.3 million workers in Canada that possibly could be in danger with defined advantage pension. Sears Canada closing all stores has made the plight of retirees a front and centre issue for CARP.

Sears Canada Closing: Private Member’s Bill C-372 passes First Reading

On Oct. 17, Bloc Québécois MP Marilène Gill suggested a member’s bill, C-372. The intent is to change the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act.

The change attempts to correct the injustice dealt with by retired workers whose pension as well as group insurance policy benefits are not secured when their company declares bankruptcy or undergoes restructuring. The changes are a result of the Sears Canada employees and retirees treatment, as a result of Sears Canada closing locations.

Sears Canada Closing: What the NDP has to say

Hamilton Mountain MP Scott Duvall plans to introduce his very own private member’s bill to try to solve this problem. While he notes he has actually had talks with Gill, he claimed his suggestion will be a bit different.

Mr. Duvall specifies that his bill will amend the regulations from where it’s worded currently. He wishes that when a company goes into bankruptcy protection, the pensioners will be a secured creditor. He is also responding to the process which has led to Sears Canada closing store locations,

Sears Canada Closing: Bloc MP Marilène Gill and her Bill C-372

On October 17, 2017, MP Marilène Gill rose in Parliament and stated:

“Mr. Speaker, I have the honour to introduce my first bill in the House today, a private member’s bill that seeks to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act.

This bill seeks to correct the injustice faced by retired workers whose pension plans and group insurance plans are not protected when their company goes bankrupt or undergoes restructuring.

I will do everything in my power to ensure that this bill receives royal assent, that way, we can help prevent retirees, like those from my riding who are here today to support me, from losing their pensions, and improve the existing legislation by giving pension plans’ unfunded liabilities preferred creditor status, among other things. I hope my colleagues will be supporting this bill.”

Sears Canada Closing: Can it get Royal Assent?

BILL C-372 which passed First Reading on October 17, 2017 is named “An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (pension plans and group insurance plans)”.

Private member’s bills such as this one rarely pass the House. However, I thought it would be useful to describe what Ms. Gill’s views are as a result of Sears Canada closing.

Below is my analysis of how BILL C-372 proposes to amend the Bankruptcy and Insolvency Act (Canada) (BIA) and the Companies’ Creditors Arrangement Act (Canada) (CCAA). The impetus of course is certain high-profile corporate restructurings/failures with underfunded defined benefit pension plans. With Sears Canada closing, Ms. Gill put forward her private member’s bill.

The most recent corporate failure which initiated her private member’s bill of course was a result of Sears Canada closing.

Sears Canada Closing: Bill C-372 proposed BIA and CCAA amendments

Bill C-372 wishes to amend the BIA as follows:

  • In order to be approved by the Court, a corporate restructuring proposal under the BIA, for a company with a prescribed pension plan, the Proposal must include payment in full of any unfunded pension liability or solvency deficiency calculated at the time of the filing of the Notice of Intention To Make A Proposal (NOI) or the Proposal if there is no NOI filed.
  • The unfunded pension liability or solvency deficiency calculation is by section 9 of the Pension Benefits Standards Regulations, 1985.
  • In a receivership, the receiver is personally liable for paying any unfunded pension liability or solvency deficiency but only from the proceeds of the sale of current assets.
  • In either a receivership or corporate bankruptcy, the charge for any unfunded pension liability or solvency deficiency would rank ahead of the charge of any other secured creditor.
  • The Officers and Directors of the company are not entitled to the benefit of this secured charge. Even if they are participants in the pension plan that has the unfunded pension liability or solvency deficiency.
  • In a corporate restructuring proposal or bankruptcy, the amount not paid under the Wage Earner Protection Program Act (Canada) (WEPPA). It is the amount to adequately indemnify the beneficiaries in the event the employer ceases to take part in a group insurance plan. Such a plan is one that provides for the payment of benefits to, or in respect of, employees or former employees for, among other things, life, disability, health or dental insurance is a preferred claim. It will be a preferred, but still an unsecured claim.
  • The amount equal to the difference between any severance pay or compensation in lieu of notice owed by an employer to an employee and any amount previously paid by the trustee for that severance pay or compensation in lieu of notice.

There are also proposed amendments to the CCAA in Bill C-372. It is to bring the same changes in that statute as described above. The intent is that the treatment under both statutes is the same. I won’t repeat those again.

3bestaward
sears canada closing

Sears Canada Closing: Will Bill C-372 become law?

As I stated above, it is very rare that a private member’s bill becomes real legislation. The other reason is that the Liberals hold a majority in Parliament. If they don’t want it to pass, it won’t.

On October 25, 2017, Innovation Minister Navdeep Bains said the Liberal government has no plans to change laws to protect pensioners in the wake of Sears’ bankruptcy. That is a pretty definitive statement.

So right now it seems there is a lack of political will to make the proposed law amendments. I suspect that on a financial basis, there will also be opposition for the following reasons:

  • In most cases, it will be impossible to have a successful large corporate restructuring if 100% of unfunded pension liability must be paid. Therefore, jobs will not be saved if we have more corporate bankruptcy filings instead of restructurings.
  • Lenders will have to now ignore current assets in the borrowing base of corporations. This will make corporate borrowing much more difficult for solvent corporations with pension plans to carry on business.
  • Lenders may have to reserve the entire amount of any unfunded amounts. They will rank ahead in a receivership or bankruptcy.
  • Severance pay or compensation in lieu of notice will now be a claim ranking ahead of trade suppliers in a corporate restructuring or corporate bankruptcy. This may alter the amount of an unsecured credit line a supplier will be willing to give to a customer.
  • It will cause more chaos to normal lending and trade practices which will be a problem for any government.
  • Claims under the group health indemnity provisions may not result in any real benefit to employees of a company going through either a corporate restructuring or bankruptcy. There is rarely funds left over after the claims of secured creditors.

We will keep monitoring this important issue. We will update you when MP Scott Duvall puts forward his private member’s bill and as other matters arise.

Sears Canada Closing: What To Do If You Or Your Company Need A Financial Restructuring?

It is now Sears Canada closing time. If you’re attempting to discover a means to restructure your firm’s debt, so that you can avoid a Sears Canada closing scenario, call Ira Smith Trustee & Receiver Inc. If we meet with you early on, we can create a restructuring and turnaround strategy. That way your company won’t have to be like Sears Canada closing.

Our strategy for every person is to create a result where Starting Over, Starting Now occurs, starting the minute you walk in the door. You’re simply one telephone call away from taking the crucial steps to go back to leading a healthy, balanced and tension free life.

sears canada closing 8
sears canada closing

 

 

Categories
Brandon Blog Post

DEEMED TRUST CANADA REVENUE AGENCY CLAIM: CAN THE CANADA REVENUE AGENCY SUPER PRIORITY LIEN BE PRIMED IN A CORPORATE RESTRUCTURING?

2

Deemed Trust Canada Revenue Agency claim: Introduction

Section 227 (4) of the Income Tax Act (Canada) (ITA) and the mirrored provisions in the Employment Insurance Act (Canada), create deemed trusts against the property of a tax debtor. When a tax debtor doesn’t remit employee source deductions or HST collections, a deemed trust Canada Revenue Agency claim arises.

Deemed Trust Canada Revenue Agency claim: Parts of the Initial Order

In every Court-supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA), there are several standard provisions in the Initial Order issued by the Court. In addition to the stay of proceedings provision, there’s also the need to make sure that the insolvent company has:

  • sufficient debtor in possession (DIP) funding to survive the restructuring process;
  • the Directors incentivized to stay in their capacity; and
  • the services of the Court-appointed Monitor and its legal counsel properly retained.

The normal way of achieving this is to give Court-ordered priority charges. Examples are for the borrowing authority, the Directors’ Charge and the Administrative Charge. This is so the lender, the Directors and the Court-appointed Monitor and its legal counsel know that there is a source of (re)payment.

Priority charges are made when certain affected parties may not be represented in Court. Therefore, a standard “comeback clause” is also in the standard Initial Order. This allows any affected party to make a motion before the Court to amend such Court-ordered priority charges.

Deemed Trust Canada Revenue Agency claim: The Canada North Group Inc. decision

A decision was recently released by the Alberta Court of Queen’s Bench in Canada North Group Inc. (Companies’ Creditors Arrangement Act), 2017 ABQB 550. The Court case reviewed several issues, but the one I found most interesting was one specific question. Can Court-ordered priority charges under a CCAA restructuring prime the deemed trust Canada Revenue Agency claim?

The decision goes through a very interesting analysis as to whether a deemed trust Canada Revenue Agency claim provides Her Majesty with the ownership of the property of the company or is merely a secured interest in the property. Section 227 (4) of the Income Tax Act (Canada) and the mirrored provisions in Employment Insurance Act (Canada), create deemed trusts. Section 37(2) of the CCAA explicitly preserves their operation. Specifically, can Court-ordered priority charges under a CCAA restructuring prime the deemed trust Canada Revenue Agency claim.

Deemed Trust Canada Revenue Agency claim: Section 227(4.1) of the ITA

Section 227(4.1) of the ITA states:

“Extension of trust

(4.1) Notwithstanding any other provision of this Act, the Bankruptcy and Insolvency Act (except sections 81.1 and 81.2 of that Act), any other enactment of Canada, any enactment of a province or any other law, where at any time an amount deemed by subsection 227(4) to be held by a person in trust for Her Majesty is not paid to Her Majesty in the way and when provided under this Act, property of the person and property held by any secured creditor (as defined in subsection 224(1.3)) of that person that but for a security interest (as defined in subsection 224(1.3)) would be property of the person, equal in value to the amount so deemed to be held in trust is deemed

(a) to be held, from the time the amount was deducted or withheld by the person, separate and apart from the property of the person, in trust for Her Majesty whether or not the property is subject to such a security interest, and

(b) to form no part of the estate or property of the person from the time the amount was so deducted or withheld, whether or not the property has in fact been kept separate and apart from the estate or property of the person and whether or not the property is subject to such a security interest

and is property beneficially owned by Her Majesty despite of any security interest in such property and in their proceeds, and the proceeds of such property shall be paid to the Receiver General in priority to all such security interests.”

3bestaward
deemed trust canada revenue agency claim

Deemed Trust Canada Revenue Agency Claim: What is the nature of Canada Revenue Agency’s interest?

The Court raised, amongst other things, the following two questions:

  1. What is the nature of Canada Revenue Agency’s interest?
  2. Does the statutory secured status deemed trust Canada Revenue Agency claim elevate it above a priority charge?

Canada Revenue Agency relied on the trust provisions in the Fiscal Statutes. It argued that it holds a proprietary and not secured interest in the debtor’s property. Key to its position under its deemed trust claim is the concluding phrase in s 227(4.1) described above.

Canada Revenue Agency asserted that these words take it beyond a mere secured creditor. They stated it was so because they do not just consider the Crown to be the owner of the interest. Rather, the statute says that it is the owner. However, previous decisions in Canada have found that the deemed trust is not in truth a real one as the subject of the trust cannot be identified from the date of creation of the trust.

The Court also stated that, in principle, the deemed trust is similar to a floating charge over all the assets of the tax debtor. This is because the tax debtor is free to deal with its property. When it does, the trust releases the disposed-of property and attaches to the proceeds of sale. To find otherwise would freeze the tax debtor’s assets and prevent it from carrying on business. The Court found that this was not a result intended by Parliament.

The Court concluded that Canada Revenue Agency’s interest is a security interest, not a proprietary interest.

Deemed Trust Canada Revenue Agency Claim: Can the statutory deemed trust Canada Revenue Agency claim be raised?

The Court stated that it may seem that certain sections of the CCAA conflict with the deemed trust sections in the Fiscal Statutes on a strict reading of only the above-noted section of the ITA. That is what Canada Revenue Agency did to support its interpretation.

However, the Court went on to say that one must not read these provisions in a vacuüm. The Fiscal Statutes, the BIA, and the CCAA are part of complex legislative schemes that run concurrently. They must be read in their entire context. The aims of the statutes and Parliament’s intention kept in mind.

The Court agreed with earlier cases that the purpose of the CCAA is to let the debtor to continue to carry on business and, where possible, avoid the social and economic costs of liquidating its assets. The Court also stated that the CCAA legislation is remedial in the purest sense. It provides a means whereby the devastating social and economic effects of bankruptcy or creditor initiated termination of business operations can be avoided. It allows for a Court-supervised attempt to reorganize the financial affairs of the company.

Deemed Trust Canada Revenue Agency Claim: The Supreme Court of Canada on the Indalex deemed trust

Following the Supreme Court of Canada decision in the Indalex deemed trust decision, the Court agreed that the securing of the DIP facility is a key aspect of the debtor’s ability to attempt a workout. The harsh reality is that commercial imperatives govern the lending practices of the lenders, not the interests of the policy considerations that lead the government to legislate in its favour.

The Court also found that the priority charges aid in the restructuring process. Certain examples of such priority charges are:

  1. Interim DIP lender’s charge providing both an incentive and guarantee to the lender the recovery of funds advanced during the restructuring.
  2. The priority charge in favour of Directors is important. The charge keeps the captains aboard the sinking ship. Without the benefit of this charge, directors might abandon the ship.
  3. A priority charge for administrative fees is critical to a successful restructuring. It is the only protection the Court-appointed Monitor and its legal counsel have to make sure that their bills are paid.

Further, the Court found that the Section 11.52(2) of the CCAA codifies and elaborates on priority charges. Previously, the Court used its inherent jurisdiction in granting priority charges. The Court found that this shows Parliament’s intention that secured creditors’ interests could be eroded if the Court felt the need.

Deemed Trust Canada Revenue Agency Claim: The Court’s Decision

The Court stated that Canada Revenue Agency’s position that the deemed trust Canada Revenue Agency claim cannot be primed, fails to reconcile that the goal of the Canadian insolvency restructuring regime and Parliament’s continued commitment to facilitating complex corporate CCAA restructurings, even if it requires erosion of security.

For this and the other reasons listed above, the Court determined that the CCAA gives the Court the ability to rank the priority charges ahead of the deemed trust Canada Revenue Agency claim and the resultant security interest.

Deemed Trust Canada Revenue Agency Claim: Is Your Company In Need of Financial Restructuring?

The CCAA’s aim is to help business survival and avoid the multiple traumas caused by business failure. The Ira Smith Team have decades of experience in both complex personal and corporate financial restructurings.

If you or your company cannot survive without a restructuring, contact Ira Smith Trustee & Receiver Inc. NOW for a free consultation. You are just one phone call away from getting back on the road to financial health and reducing your stress levels, Starting Over, Starting Now.

UPDATE: CHECK OUT OUR NEW VLOG BY CLICKING ON:

SEARS CANADA IS CLOSING: THE #1 REASON YOU HAVE TO RUN AND NOT JUST WALK TO REDEEM YOUR GIFT CARDS AND CREDITS

DEEMED TRUST CANADA REVENUE AGENCY CLAIM 10
deemed trust canada revenue agency claim
Categories
Brandon Blog Post

TORONTO BUSINESS BANKRUPTCY: NDP WANTS PENSION PROTECTION

320efcd005100f3ee3522fefba70f917 1

Toronto business bankruptcy protection: Introduction

The federal NDP party recently met in Hamilton, just outside of the Greater Toronto Area. There was a rally to argue for federal government regulation changes to safeguard pensioners in business bankruptcy and restructuring administrations.

Toronto business bankruptcy protection: Proposed NDP private member’s bill

Hamilton Mountain MP Scott Duvall, the New Democrats’ pension plan critic, informed a group at the United Steelworkers’ Hall that he will certainly present a private member’s bill to secure employees’ pension plans and benefits, and pressure business to offer termination or severance pay, prior to paying secured lenders.

Toronto business bankruptcy protection: The U.S. Steel Canada saga

The concern has actually been a lengthy simmering one with unions and created significant debate throughout the almost three-year, court-supervised restructuring of U.S. Steel Canada. The company exited from its business bankruptcy protection proceedings with a brand-new owner– Bedrock Industries– as well as an old name, Stelco.

Pensioners were smarting. The court permitted the firm to put on hold health benefit repayments for a year and a half while the business was under bankruptcy protection under the Companies’ Creditors Arrangement Act (CCAA).

Generally, these advantages have been maintained by the reorganized business. Pensioners are fretting that a financing system to maintain the pension plan solvent will ultimately fail. It calls for, inter alia, extra Stelco land to be cleaned up, marketed and sold for the net sales proceeds to cover future pension plan commitments.

Toronto business bankruptcy protection: Sears Canada too

Duvall, with NDP leader Tom Mulcair, claimed one more instance of exactly how the regulations are unfair to employees. They cited the Sears Canada situation. Sears Canada remains in business bankruptcy protection. Its employees are encountering a potential decrease in their pension plan benefits.

Toronto business bankruptcy protection: Fairness for employees

They say this should have to do with justness for employees. The NDP wants to see a Canada that benefits every person as well as seeing to it that companies, including multinationals, cannot take the pension plans their employees have earned.

They state that the existing regulation permits funds that ought to go to employees’ pension plans to be given to the secured creditors instead. The NDP is especially concerned when the secured lender is the financially troubled or creditor-protected company’s parent company.

Stelco’s biggest secured lender was U.S. Steel in the United States. The $500 million restructuring saw the American firm get $130 million.

Toronto business bankruptcy protection: Pension plan funding should have first priority

The Duvall proposed private member’s bill would call for pension plans to be 100 percent funded prior to secured lenders being paid. Firms would certainly not be permitted to put on hold retirement benefits in court-supervised restructurings, which occurred with U.S. Steel Canada.

The NDP is calling their proposal “End Pension Theft”. It focuses on altering CCCA legislation as well as the Bankruptcy and Insolvency Act (BIA) to stop companies from placing investors, financial institutions and other lenders ahead of their staff members when they go into bankruptcy protection.

3bestaward
business bankruptcy

Toronto business bankruptcy protection: Is there a comparable precedent for such an amendment

Yes there is – the enactment of the Wage Earner Protection Program Act (WEPPA). From 1975, proposals were proactively taken into consideration for the facility of a wage protection plan for when the bankruptcy, liquidation or receivership of a company. The many choices gone over for just how this could be attained consisted of:

  1. very top priority for wages;
  2. acknowledgment of existing provincial/territorial concerns within the BIA structure;
  3. a waiver of the waiting time for EI benefits; and
  4. a wage earner protection fund financed either from basic tax revenue or as a part of the EI coverage regimen.

In November 2003, the Senate Committee on Banking, Trade and Commerce examined the background of these conversations and chose

the alternative for a super priority be taken on. Although the BIA was amended in 2005, these changes did not quickly come into force, as many technical amendments were required to be passed in 2007. The WEPPA came into force on July 7, 2008.

The reason for the timing of creating the WEPPA was a result of NDP pressure put on the minority Liberal government of Prime Minister Paul Martin. The Liberals agreed to the NDP proposal as part of obtaining continued NDP support for the minority government.

So there is precedent for a significant amendment to Canadian insolvency legislation.

Toronto business bankruptcy protection: How likely is such a pension reform in restructuring proceedings to succeed?

At this time, I believe there are certain obstacles from seeing such a significant overhaul being successful. The reasons I say this include:

  1. Today there is a Liberal majority government in power, so the support of the NDP party is not required for the government to pass the legislation it wishes to.
  2. Providing a super priority for all pension shortfalls would dramatically alter the way lending is done in Canada. Banks would be required to include pension plan actuarial shortfall calculations into their borrowing base calculations. It may end up that when there is a pension plan shortfall, there is no borrowing room available at all for a business. This would increase the number of insolvencies.
  3. If the number of business insolvencies increased, that could lead to an increase in job losses. That would hurt employees which would hurt the same group the private member’s bill would be trying the protect.

However, the Liberal government of Prime Minister Justin Trudeau has shown that it does try to play to whichever group the government feels it can gain votes from. So, it is not out of the realm of possibilities that the government would try to enact some legislation to give a limited super priority to a part of an underfunded pension plan liability. Time will tell whether such a proposal has any chance of success at this time.

Toronto business bankruptcy protection: Does your Toronto area business require restructuring proceedings to survive?

If you’re company is struggling with too much debt, give the Ira Smith Team a call. We can help with refinancing and restructuring so that your business can get back on track Starting Over, Starting Now.

UPDATE: CHECK OUT OUR NEW VLOG BY CLICKING ON:

SEARS CANADA IS CLOSING: THE #1 REASON YOU HAVE TO RUN AND NOT JUST WALK TO REDEEM YOUR GIFT CARDS AND CREDITS

toronto business bankruptcy

Categories
Brandon Blog Post

SEARS CANADA NEWS TODAY: ARE THEY SABOTAGING THEIR OWN RESTRUCTURING?

2 6

 

Sears Canada news today: Introduction

“I will certainly not invest one red cent in your shop … no severance, no sale,”

A (typical comment) posted on the Sears Canada Facebook page before the company blocked new comments and made old ones vanish.

Well there has been a lot of Sears Canada News today and in the last month. The company sought bankruptcy protection only last June 22, 2017. It has been only a little over 1 month, but there has been so much media attention it seems a lot longer.

Sears Canada news today: Social media backlash

We’ve seen on social media that Sears Canada is facing a backlash when it comes to how they’re handling this liquidation. Notice that I am using the word liquidation, as opposed to restructuring. This is in spite of they are currently operating under the Companies’ Creditors Arrangement Act (Canada) (CCAA). This statute is designed as a restructuring statute.

Sears Canada news today: Why KVETCH about a KERP?

It comes just as the company began its liquidation sales at those fifty-nine stores they’re looking to close. There is a boycott in Canada that is gaining some traction on social media. People are upset with Sears Canada’s senior management. They obtained on the first Court application, approval from the Court on their plan to pay themselves retention bonuses. These bonuses would be paid under the terms of what is commonly called in complex corporate restructurings a “Key Employee Retention Plan” (KERP).

The retailer introduced that, as part of a Court-supervised restructuring procedure. It is shutting 59 of its 255 shops and letting go 2,900 workers. None of them will get severance pay. Sears also will stop payments to the employees’ defined benefit pension plan. The retailer recently accepted to delay that pension plan payment issue till September 30th.

Sears also accepted the compromise with the former employees to maintain paying health benefits for an extra 3 months until the end of September. This is so the people could have that time to get alternate coverage. It is still not great though. The employee pension plan will remain underfunded. The employees will have to look for a new health plan. To date, there is no provision for former staff to receive any sort of package.

Sears Canada news today: What exactly is a KERP?

It is normal in complex corporate restructurings to set up a KERP. The concept of a KERP began in US corporate restructurings in the 1990’s. The theory is that to have a successful restructuring, senior management have specific knowledge and ability. If they walked away from the company in bankruptcy protection, such as to accept a senior position elsewhere, the company would have a much more difficult and costly time in restructuring. Hence the idea was born that those essential managers should be promised a bonus to create the most value possible in the restructuring for the stakeholders. This is in addition to their normal compensation.

Often KERPs are now viewed as either:

  1. a standard item that senior management expects to receive; or,
  2. a greedy money grab negatively affecting other stakeholders.

I have not yet read any material to show why the Sears Canada bankruptcy protection case is so complex. I have not read how Sears Canada could not liquidate without existing senior management. It is earlier and current senior management who have not created a retail vision niche for Sears Canada for years.

Sears Canada news today: Time to “come back”

Thankfully, all CCAA protection orders have a standard “come back” clause. The reason for this is that not every stakeholder receives notice of the company applying for the bankruptcy protection order. Any stakeholder can come back to Court to oppose any part of the original order they did not receive notice of. They could not tell the Court of their position, and now want to come to Court with their complaints.

The Court appointed a law firm to represent the interests of the employees and former employees. As part of their motion material filed with the Court, they are asking the Court to amend the Sears Canada KERP. They state:

  1. the amounts are excessive under the circumstances; and
  2. the KERP does not incentivize senior management to enhance the value of Sears Canada.

It will be very interesting to follow this.

Sears Canada news today: It didn’t have to be this way

You may recall that Target Canada took a slightly different route towards its former employees when it decided to liquidate and leave Canada. It also liquidated under the CCAA. In our blog “TARGET CANADA CLOSING: $5.4 BILLION AND COUNTING”, we told you about the liquidation and that Target US established a trust fund for payment of the Target Canada obligations to its employees. For sure personal hardships occurred. At least they tried to soften the blow.

So now, while Sears Canada wants customers to come and buy at the liquidation sale, they have a PR nightmare on their hands.

Sears Canada news today: No comments please

It is so bad, that Sears Canada is not permitting public messages on its Facebook page. Most the messages from the public so far are negative against the company. CBC News recently noted that Sears Canada’s Facebook page was riddled with remarks from Canadians objecting exactly to what was happening to the company’s employees. Sears Canada has removed those comments from its Facebook page as well as blocking new comments.

sears canada facebook comments layoffs
Picture courtesy of CBC News

Sears Canada news today: Certainly a funny way to stay in business

You must wonder if Sears Canada really wants to restructure, or if they are just liquidating their inventory. They are also trying to sell whatever other assets they can. If it was a true restructuring, you would think that senior management would want to see more customers who would be loyal to (the new) Sears Canada when it would exit bankruptcy protection.

So instead of growing a loyal customer base, Sears Canada’s actions have spawned a strong and growing “Boycott Sears” momentum. They’re going to have to deal with that. It’s going to be interesting to see exactly how this plays out while Sears Canada currently is shopping for a buyer.

According to Sears Canada, the unhappy remarks did not motivate it to close the public articles or to remove many of the bitter statements. Regardless, the former employees are still faced with now with the question “how do you collect salary owed to you from an employer that goes out of business”.

Sears Canada news today: What to do if you or your company have too much debt

If your company or you are experiencing financial problems, contact Ira Smith Trustee & Receiver Inc. We’re here to tell you on your restructuring and other options to avoid bankruptcy. If necessary, we can also talk to you about your bankruptcy options.

We can help you put your financial house back in order and set you on a path to debt free-living. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make.

Contact us today. We are a licensed insolvency trustee and will listen to your issues and offer compassionate, professional assistance to aid you to avoid bankruptcy.

With our help, you can regain control of your life, Starting Over, Starting Now.

UPDATE: CHECK OUT OUR NEW VLOG BY CLICKING ON:

SEARS CANADA IS CLOSING: THE #1 REASON YOU HAVE TO RUN AND NOT JUST WALK TO REDEEM YOUR GIFT CARDS AND CREDITS

SEARS CANADA CLOSING DOWN 1

Categories
Brandon Blog Post

HOW TO SOLVE THE BIGGEST PROBLEMS WITH BANKRUPTCY PROTECTION MEANING

Bankruptcy protection meaning: Introduction

The Cambridge English Dictionary gives us the bankruptcy protection meaning as follows:

“bankruptcy protection noun [ U ]

UK ​ US ​ also bankruptcy-law protection

​LAW, FINANCE laws that limit the amount of money a bankrupt company (= one that owes more money than it can pay) must pay to those it owes money to:

The firm filed for bankruptcy protection after a massive accounting scandal.

We have filed for bankruptcy protection from creditors.

It’s the second time the company has sought bankruptcy protection in 25 months.

The Chicago-based business, already forced into Chapter 11 bankruptcy protection, said that a complete collapse is now a “distinct possibility”.

See also

Chapter 11”

Bankruptcy protection meaning: Bankruptcy protection meaning

The above definition is helpful, but, I would make one small change to it. There is a difference between a company that does not have enough cash to meet its expenses, or whose assets are worth less than the value of its liabilities. Such a company is insolvent. Such a company is only bankrupt if it has filed an assignment in bankruptcy or a Court has issued a Bankruptcy Order against it. Insolvency is the financial condition; bankruptcy is a legal state.

So, I will give you my bankruptcy protection Canada definition:

Bankruptcy protection is a legal state where the insolvent company (or person) has filed under the country’s bankruptcy laws to restructure and avoid becoming a bankrupt.

Bankruptcy protection meaning: How does it begin?

A company starts to go into “bankruptcy protection” by putting together its motion to the Court to tell that:

  1. they are admitting that they cannot pay their debts generally as they come due;
  2. their assets are worth less than the amount of their liabilities;
  3. they cannot continue in business in their current financial and business condition;
  4. there may be come calamity about to befall them if they do not have the time and breathing space to focus only on a restructuring and running of their business to regain profitability;
  5. and they’re asking for the Court’s help and protection while they formulate a proposal or a plan of arrangement to present to the creditors.

The company is not seeking “bankruptcy protection”. Rather, it is seeking protection from its creditors. It is seeking a “time out” from the Court so that the company’s creditors cannot begin or continue legal action against the company. It wishes to be protected from such outside influences so that nobody can tip it over.

Management is saying that if given time, it believes that it can come up with a plan to restructure the company so that it can emerge a better and financially healthy company. It wishes to take the opportunity to see if its creditors, and the Court, will agree to a restructuring plan. It wishes to continue in business to continue to buy and sell goods and services and to continue to be an employer.

Bankruptcy protection meaning: We have all heard about Chapter 11 bankruptcy protection

We have all heard about Chapter 11 bankruptcy protection proceedings. This refers to the restructuring provisions of the United States Bankruptcy Code. A case filed under chapter 11 of the United States Bankruptcy Code is often called a “reorganization” bankruptcy.

The Chapter 11 filing provides bankruptcy protection to the company and allows it to restructure itself and its assets to attempt to maximize creditor and shareholder value and avoid bankruptcy. A Chapter 11 case begins with the petition being filed with the bankruptcy court serving the area where the debtor can show a domicile or residence. A petition may be a voluntary petition, a debtor filing, or it may be an involuntary petition, a filing by creditors that meet certain requirements.

You have probably just heard about Chapter 11 this week, as Takata Corp., the Japanese company that made faulty airbag inflators and is now the subject of many lawsuits in the United States and elsewhere just filed Chapter 11 bankruptcy protection proceedings this week.

Bankruptcy protection meaning: Does Chapter 11 exist in Canada?

Chapter 11 is not a Canadian term or provision. In Canada, there are two federal statutes that a company wishing to reorganize can rely upon. Because they are federal statutes, they apply across the country. So, it does not matter if you are applying for bankruptcy protection Ontario Canada or in any other province.

The first statute is the Part III Division I Proposal restructuring provisions of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). The second, and today more common statute large companies file under, is, the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) (CCAA).

There is no such thing as a bankruptcy protection act Canada. The BIA and CCAA are also not new bankruptcy laws in Canada. They have been on the books for some time and form part of the corporate bankruptcy laws in Canada . This vlog does attempt to give a bankruptcy protection Canada definition.

Bankruptcy protection meaning: The Canadian restructuring laws

Both companies and people can file under the restructuring provisions of the BIA. Only companies that meet the test can file under the CCAA. The CCAA is a relatively brief statute which allows a company the time for them to restructure their affairs. The CCAA is more flexible than the BIA and that is why it is the restructuring statute of choice for large and complex Canadian corporations. It has often been called the Canadian Chapter 11.

The reason for filing under the restructuring provisions of either the BIA or CCAA, is for the company to avoid bankruptcy. So there is a big difference when considering bankruptcy protection vs bankruptcy. That will be a topic for another blog or vlog.

A company would file for restructuring if management believes there is a viable business to be saved. Management believes that it has a viable business within the corporation and the corporation can be nursed back to good health by taking certain steps, including:

  1. reducing debt;
  2. preparing and implementing a new business plan;
  3. reducing expenses; and
  4. perhaps shedding redundant assets and/or unsuccessful business units.

3bestaward

Bankruptcy protection meaning: What happens to the company when it is in restructuring mode?

The premise is that management remains in control of the business, its assets and operations while restructuring. As part of the plan, there may be senior management changes if confidence has been lost in the old management. However, management remains in control and the company continues to run.

The further assumption is that the company has enough cash flow, and/or enough lines of credit while in reorganization mode, to run and ultimately emerge from its restructuring proceedings. The Court needs to know that there will not be prejudice to any creditor by providing the bankruptcy protection to the company. Ultimately, the creditors and the Court will consider the company’s restructuring plan and decide whether to approve it.

Bankruptcy protection meaning: Some examples please

There have been many CCAA filings over the last few years. Some very well-known household names in fact, such as:

  1. Sears Canada Inc. – June 22, 2017
  2. Express Fashion Apparel Canada Inc. and Express Canada GC GP, Inc. – May 04, 2017
  3. Grafton-Fraser Inc. – January 25, 2017
  4. Performance Sports Group Ltd., Bauer Hockey Corp. – October 31, 2016
  5. Urbancorp Group of companies – May 18, 2016 and October 6 and 18, 2016
  6. Golf Town Canada – September 14, 2016
  7. Victorian Order of Nurses for Canada – November 25, 2015
  8. Verity Energy Ltd. – May 1, 2015
  9. Target Canada Co., et al – January 15, 2015 (this was just a liquidation, not a restructuring, but they used the CCAA)
  10. U.S. Steel Canada Inc. – September 16, 2014

Bankruptcy protection meaning: What to do if your company cannot carry on because of too much debt

If your company has too much debt and insufficient cash flow, you need your plan and strategy in place NOW. Contact us now. The Ira Smith Team is here to solve your debt problems and help you carry out that winning strategy, no matter the reason. We’re here to help and get you back on solid financial footing Starting Over, Starting Now. We’re just a phone call away.

UPDATE: CHECK OUT OUR NEW VLOG BY CLICKING ON:

SEARS CANADA IS CLOSING: THE #1 REASON YOU HAVE TO RUN AND NOT JUST WALK TO REDEEM YOUR GIFT CARDS AND CREDITS

bankruptcy protection meaning 4

Categories
Brandon Blog Post

COMPANY WENT BANKRUPT AND DIDN’T PAY ME WAGES: IT DOESN’T HAVE TO BE HARD

Previous blogs for the company went bankrupt

The issue of the company went bankrupt and didn’t pay me wages is not a new one. We previously wrote two blogs on this topic:

We have noticed a surge of renewed interest in this topic based on recent activity from readers of our Brandon’s Blog, so, we thought it would be a good idea to put together a short video on this topic.

People ask us what if the company didn’t pay me wages?

We answer if wages are owed by your employer because the employer went bankrupt with unpaid employees or is in receivership don’t despair; there is hope for you to recuperate monies owed to you. The Wage Earner Protection Program (“WEPP”) Act – WEPPA – in conjunction with an amendment to the Bankruptcy and Insolvency Act (Canada) – BIA – created a mechanism for employees to be compensated for claims of unpaid wages, commissions and vacation pay accrued in the six months preceding the employer files for bankruptcy or being placed in receivership and wages are owed to you along with claims for unpaid termination and/or severance pay.

Are there any exceptions? What are the rules?

There are a few exceptions to the company went bankrupt and didn’t pay me wages. You are generally not eligible if, during the period for which your wages are owed to you by your employer, you:

  • were an officer or a director of your former employer
  • had a controlling interest in the business of your former employer
  • were a manager whose responsibilities included making binding financial decisions impacting the business of your former employer, and/or making binding decisions on the payment or non-payment of wages by your former employer

Who is eligible for the WEPP? You may apply if wages are owed to you by your employer and:

  • your former employer has filed for bankruptcy or is subject to a receivership
  • wages are owed to you by your employer, vacation pay, termination or severance pay from your former employer
  • amounts earned during the eligibility period or, in the case of termination or severance pay, your employment was terminated during the eligibility period ending on the date of bankruptcy or receivership

One more very important exception – it only applies if wages are owed to you by your employer and your employer is in either receivership or bankruptcy and owes you wages. If your employer is attempting a corporate restructuring under a Notice of Intention to Make a Proposal, a Division I Proposal or the Companies’ Creditors Arrangement Act, then WEPPA and its provisions do not come into play.

Claim limits when the company went bankrupt and didn’t pay me wages

Regardless of the total amount owing to you, the maximum any employee can receive under WEPPA is the greater of $3,200 or four times the maximum weekly insurable earnings under the Employment Insurance Act (which is now around $3,900).

Once employees file claims with both the Trustee/Receiver and Service Canada, Service Canada pays their claims for owed wages by the employer and Service Canada becomes the creditor. The amendment to the BIA has recognized WEPPA and created a priority charge that supersedes all secured charges except CRA’s deemed trust claim (and the reclaiming rights of farmers and suppliers) to a max of $2,000 per employee, secured against current assets.

Documentation needed if the company went bankrupt and didn’t pay me wages

While no one wants – or expects – to be part of a receivership or bankruptcy, you should always keep detailed records of hours worked for any pay period. On any occasion when you discover there will be no paycheque, record the loss that you will suffer, such as not being able to pay bills or buy groceries. Ask for a formal explanation from your employer and keep detailed notes on your efforts. It’s important to prove that when owed wages by an employer; you still expect to be paid, even if it’s late.

If your employer is in receivership or bankruptcy proceedings, and you believe you have a claim for owed wages by the employer, find the trustee and get in touch with Service Canada. Have your records ready and make sure you get your Proof of Claim.

What should I do if I have too much debt and the company went bankrupt and didn’t pay me wages?

This is an important issue. If you are experiencing financial problems, contact Ira Smith Trustee & Receiver Inc. We’re here to find what your bankruptcy options are, put your financial house back in order and set you on a path to debt free-living. You’ll be amazed at the difference one phone call to Ira Smith Trustee & Receiver Inc. can make.

Contact us today. We are a licensed trustee and will listen to your issues and offer compassionate, professional assistance to aid you to avoid bankruptcy, so that you can regain control of your life, Starting Over, Starting Now.

company went bankrupt and didn’t pay me wages

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

 

 

Categories
Brandon Blog Post

PERSONAL BANKRUPTCY BLOG – TRUSTEE EXPLAINS BANKRUPTCY OPTIONS

Introduction

Our Brandon’s Blog certainly is a personal bankruptcy blog, but it is more than that. Brandon writes on various finance and insolvency-related topics including corporate restructuring, corporate bankruptcy, alternatives to bankruptcy, credit counselling, restructuring through a consumer proposal or a Division I Proposal or the Companies’ Creditors Arrangement Act (CCAA).

Every Monday and Wednesday night Brandon posts to Brandon’s Blog. Monday night is a blog and Wednesday night is a vlog. Just to remind you what this means, here are dictionary definitions:

blog Pronunciation: /blɒɡ/noun

A regularly updated website or web page, typically one run by a person or small group, written in an informal or conversational style: you can add personal bankruptcy blog to the growing list of insolvency-related material popping up on the Web

vlog Pronunciation: /vlɒɡ/ noun

A blog in which the postings are primarily in video form: you can add personal bankruptcy vlog to the growing list of insolvency-related material popping up on the Web

Differences between US and Canadian insolvency statutes

In the United States, people filing for bankruptcy have many “chapters” from which to choose. Similarly, Canada has one chief insolvency law, the Bankruptcy and Insolvency Act, or BIA, and several supporting pieces of legislation. In perusing a personal bankruptcy blog, the potential filer can find the information he or she seeks.

In the United States, Chapter 11 bankruptcy is the most complex because it applies to large businesses and usually involves gigantic sums of money. In Canada, the equivalent is the Division I proposal. In such a proposal, the debtor’s business can keep assets necessary for its role so that it can generate streams of income from other places to repay its debts. Management also stays in control of the company and business operations.

What are the Choices in Canada?

The BIA sets out the ground rules, and several smaller pieces of legislation fill in the details. Although we Canadians don’t call them various chapters, our legislation is like that of the U.S. Here are the options for filing bankruptcy in Canada:

Personal bankruptcy in Canada is most similar to Chapter 7 in the U.S. By filing bankruptcy, the debtor seeks to deal with his or her entire debt load at once. The debtor does not believe that he or she has the means to attempt a restructuring. There are certain assets that are exempt for any one of a number of reasons, so anyone filing bankruptcy should consult a Trustee to find out more.

If a debtor decides to file a consumer proposal (because his or her debt load is $250,000 or less, not including any mortgages against the principal residence) or a Division I Proposal (for unsecured debts $250,000 or greater) instead, he or she is seeking a restructuring of debt so for repayment over a five years or less. Many times, debtors can negotiate with their creditors for part of the amount owed and work out deals on monthly payments, rates of interest, and other such considerations. A proposal is most similar to Chapter 13 in the U.S. and used by people who wish to AVOID bankruptcy.

Basically, the business operates as usual while making an offer to its creditors of payments over time, totalling an amount greater than the creditors would receive if everything was sold off in liquidation in bankruptcy. The largest businesses might even have several layers of debt that would need restructuring as part of a Division I proposal, and each layer might have different guidelines and restrictions based on the proposal.

For companies with greater than $5 million in debt, they could also make use of a different Federal restructuring statute called the Companies’ Creditors Arrangement Act (CCAA). Both the Proposal under the BIA and restructuring under the CCAA are for large complex corporate reorganizations.

Is a Lawyer Required?

Unlike citizens of the United States, Canadians don’t need a lawyer to file for bankruptcy. A Licensed Insolvency Trustee acts as the “referee” between debtor and creditors. In this way, people file and handle bankruptcy proceedings on their own in Canada. If the debtor has various complex issues or is a defendant in litigation where the plaintiff wishes to continue the litigation perhaps to attempt to prove that their claim is one not released by the person’s discharge from bankruptcy, then they may very well need a lawyer for those issues.

What to do if you have too much debt and want to read a personal bankruptcy blog?

To find out more, check out our Brandon’s Blog entries for the topic of personal bankruptcy blog. If you’re dealing with serious financial issues, contact a trustee, who is the Canadian bankruptcy expert. For the reasons already given, you should do this whether or not you’re contemplating bankruptcy. The reason is very simple: the licensed insolvency trustee will assess your situation, offer you all of your available options and will do this for you for free! You can’t find a better deal anywhere.

We’re not only bankruptcy experts; we’re experts in dealing with debt. Contact Ira Smith Trustee & Receiver Inc. today for a free consultation and you will be well on your way to regaining your former quality of life Starting Over, Starting Now.

THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

personal bankruptcy blog

Categories
Brandon Blog Post

#VIDEO – BANKRUPTCY EXPERTS IN ON: TOP REASONS WHY OTHERS CALL US THAT#

Who says you qualify as bankruptcy experts in ON?

Ira Smith Trustee & Receiver Inc. is a licensed insolvency trustee, licensed to practise in the Province of Ontario (ON). In our recent vlog, #VIDEO: CHCH TV BANKRUPT: using shell companies legal but controversial experts say, Sean O’Shea, Global News, December 17, 2015, interviewed various experts on the CHCH TV bankruptcy. Mr. O’Shea sought licensed insolvency trustees as his bankruptcy experts in ON, and the one he chose was our Ira Smith of Ira Smith Trustee & Receiver Inc. We are also contacted by the Toronto Star when they wish clarification on insolvency issues for an article to appear in the newspaper.

So why are we sought out as bankruptcy experts in ON?

Here is our list:

  1. We provide a free first consultation – Part of being an expert is professionalism. An expert licensed insolvency trustee will provide a free first consultation to prove expertise and to lay out all the possible options for the bankruptcy alternatives in addition to discussing the bankruptcy option.
  2. We have the necessary qualifications – Mr. O’Shea checked us out with 3rd parties before determining that he would call our Firm as an expert. The reviews he received from those 3rd parties confirmed to him that he should call us as his bankruptcy expert. How do we know? We asked him why he called us as opposed to the many other licensed insolvency administrators in the GTA and he told us.
  3. We regularly appear in the Bankruptcy Court and the Commercial List Court – We attend normally representing the Trustee ourselves in Bankruptcy Court, and with counsel in the Commercial List Court. We communicate well with and are trusted by the insolvency bar, the Bankruptcy Court Masters and the Commercial List judges. We are up on the Canadian bankruptcy laws and regulations. To me, that is the mark of an expert.
  4. We always first consider the restructuring option – To me the sign of an expert is someone who understands the totality of their industry. An expert can assess a situation and provide the debtor with a range of options. Not all can be done and most of the time each comes with its own set of peculiarities, but we always put all the options on the table for the individual or corporate Director to consider. The amateur uses a cookie cutter with the same answer for every different situation. The expert thinks “out of the box” too. We always think “out of the box”
  5. When you deal with us, our licensed insolvency trustees are always accessible – No matter how small or large the mandate, you will always be able to discuss issues of concern with either Ira Smith or Brandon Smith, our two licensed insolvency trustees. To us, the expert is a professional, and never too busy to be reachable and accessible, no matter what day or time it is. You will find that we provide a great deal of education and information on our website. We provide a great deal of bankruptcy information online. That is also the mark of an expert and professional.
  6. How did you feel after meeting with us – The expert and professional always tries to be reassuring and provide recommendations on how to overcome the personal or corporate financial challenges, while not sugar-coating and always being realistic. That is how you will feel after consulting with us. You may not like what you hear, but it will be the best expert advice we can provide.
  7. Do you regularly practice in the insolvency area – Our practice is limited to the insolvency area. We do not do any other type of work. That is why others call us bankruptcy experts in ON. As a result, we know and can explain in layman’s terms the Canadian bankruptcy laws.
  8. Our experience is in personal insolvency and corporate insolvency – Given the range of experience of our licensed insolvency trustees and other senior staff, Ira Smith Trustee & Receiver Inc. can handle all types of insolvency work from the smallest no asset consumer file to the large complex corporate restructuring under the Canadian Bankruptcy Act, either the Bankruptcy and Insolvency Act (Canada) (BIA) or the Companies’ Creditors Arrangement Act (Canada) (CCAA).
  9. Will you communicate in a prompt manner – Part of being a professional and expert is that we always communicate with stakeholders. It does not matter whether you are the party that referred us the work, you are the Debtor or you are a creditor, if you are a stakeholder, then you deserve timely and accurate communication. That is what being a professional and an expert is all about.
  10. How do you charge for your work – An expert and professional is upfront about the cost of performing the work. We always have that discussion with stakeholders. You will find that we never shy away from that discussion so that there are no surprises for anyone. You will find that although our expertise is as a large firm, our pricing is that of a small firm.

What to do if you or your company has too much debt?

If you or your company are facing financial challenges and do not know what to do, contact Ira Smith Trustee & Receiver Inc., one of the bankruptcy experts in ON. Obtain a free consultation from a licensed insolvency trustee to understand the options available either as an alternative to bankruptcy or of bankruptcy itself. We are professionals, federally regulated, licensed and subject to a strict code of ethics. We can help; Starting Over, Starting Now you can live a debt-free life.

bankruptcy experts in on

 

Categories
Brandon Blog Post

BUSINESS RESTRUCTURING PROPOSAL: REASONS WHY GOODWILL TORONTO IS NOT ALWAYS ENOUGH

The issue of a business restructuring proposal of Goodwill Toronto has recently been in the news. This video is an interview aired on TV Ontario, The Next Ontario show, with Dr. Sarah Kaplan, Professor of Strategic Management at Rotman School of Management, University of Toronto. The purpose of the interview is to obtain Dr. Kaplan’s views on the Goodwill Toronto closure of 16 Goodwill stores.

Toronto Goodwill thrift stores were operated, not unlike a Salvation Army thrift store, to raise funds to support the aims of the non-profit; in this case job skills and job creation for those who might otherwise be unemployable.

It takes money to restructure

We have all heard the expression “It takes money to make money”. I would like to make a slight twist on that expression by stating that it takes money to have a successful business restructuring proposal. Not only does the company and business have to be able to have sufficient cash flow in order to operate during the restructuring period, but there are also extraordinary one time expenditures related to the restructuring. Examples of such one time expenditures are reasonable one time exit fees to get out of uneconomical contracts, bonus payments to key personnel to ensure that they perform throughout the entire restructuring rather than resign for a new position elsewhere and professional fees.

Our Goodwill Toronto analysis

Our firm was consulted early in January to act as the licensed insolvency trustee in a business restructuring proposal of Goodwill Toronto. We spent half a day meeting with representatives of Goodwill Toronto in order to learn of their plight and to determine what sort of restructuring proposal might be possible.

In our meeting we learned that the main assets of Goodwill Toronto consisted of: (i) cash or liquid investments pledged to a Canadian chartered bank on account of business loans; (ii) accounts receivable with a certain percentage collectability; and (iii) inventory of items for sale, mainly used clothing, spread across 16 stores in leased locations.

We also learned that there were over 400 unionized employees, the majority of which had long term service with Goodwill Toronto. This is significant for three main reasons: (i) a viable restructuring proposal would be required to save the jobs of many, but probably not all of the employees; (ii) if the business restructuring proposal was unsuccessful, Goodwill Toronto would automatically be deemed to have filed an assignment in bankruptcy (a deemed assignment); and (iii) in a bankruptcy, the employees would have a claim under the Wage Earner Protection Program Act (WEPPA).

It takes money to implement a successful business restructuring proposal

So, why is this significant? The reasons it is significant for a restructuring vs. bankruptcy are:

  1. The secured portion of the employees’ WEPPA claim coming ahead of all creditors, including the chartered bank, totalled approximately $900,000.
  2. Next in priority was the claim of the chartered bank.
  3. There were no free assets after the above 2 claims that Goodwill Toronto could use to fund operations or the extraordinary expenses associated with a business restructuring proposal discussed above.

So as you can see, with no free cash flow, no excess realizable assets or a third party who could fund a business restructuring proposal (or in the worst case a bankruptcy proceeding), it would not be possible for a knowledgeable licensed insolvency trustee to agree to act as there was no source of funding available.

This is why the best of intentions and goodwill (toronto) is not always enough!

The Sarah Kaplan interview

Professor Kaplan raises many good points in this interview, including:

  1. We should first think about what the whole business model of the goodwill is.
  2. The goods that they get to sell are aimed at just generating revenues that allow them to perform their actual services like job.
  3. It may be that the retail environment is tougher in some ways if we think about the alternative for people who buy things at goodwill would be to go to discount stores or dollar stores.
  4. As the market is becoming more and more competitive we could imagine that people would not need to shop at Goodwill if they can get a t-shirt for $5 at WalMart.
  5. Goodwill’s in other areas though are doing fine so we may need to look a little bit more deeply into the problem.
  6. The entire board resigned so there could be some other management issues that led to Goodwill Toronto to be running a deficit.
  7. You have to be well managed and being a social enterprise is not an excuse to not be well managed; you need the same skills capabilities and maybe even more skills and more capabilities than in the for-profit world.
  8. The fact that they’ve taken this extraordinary really drastic measure leads me to believe that the difficult retail environment is not the whole story and therefore not the whole story for other social enterprises.

NOTE: After writing this blog, Goodwill Toronto filed an assignment in bankruptcy.

Is your company in need of a business restructuring proposal?

If your company is trapped with too much debt, you need a professional trustee to help you manage debt and create a viable business restructuring proposal (either under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act – BIA or CCAA) before it reaches a critical stage where bankruptcy is your only option. We have been able to help many companies carry out a successful business restructuring proposal. Successful completion of such a program, will free you from the burden of your company’s financial challenges to go on to be a productive, profitable employer allowing management to focus on business growth and not be plagued by debt problems.

Contact the Ira Smith Team today in order to look at the bankruptcy alternative of a business restructuring proposal. We can help and Starting Over, Starting Now you can be restored to financial health.

keiko nakamura goodwill.org, business restructuring proposal, Goodwill Toronto, toronto goodwill thrift store, goodwill thrift stores toronto, salvation army thrift store, toronto thrifting, good will hunting, mathematics, matt damon, the next ontario, business, retail, social enterprises, goodwill toronto, ira smith trustee, hoyes, spergel, david sklar, farber, deemed assignment, assignment in bankruptcy, restructuring vs. bankruptcy, sarah kaplan, rotman school of management, licensed insolvency trustee, bankruptcy and insolvency act, bia, companies creditors arrangement act, ccaa, closure of 16 Goodwill stores

 

Call a Trustee Now!