Tag: receivership

Brandon Blog Post

RESTRUCTURING FOR RESILIENCE: NAVIGATING THE 8% MANUFACTURING SQUEEZE IN VAUGHAN, ONTARIO

Post author By Brandon Smith
Post date March 9, 2026

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By Brandon Smith, Senior Vice-President, Ira Smith Trustee & Receiver Inc.

Restructuring Key Takeaways

Vaughan manufacturers are staring down a “Tariff Trap” in 2026. Rising material costs and trade doubts are crushing margins, and it’s happening through no fault of bad management.
A BIA restructuring Proposal isn’t bankruptcy; it’s a lifeline. It allows you to strategically restructure debt, scrap bad contracts, and keep your doors open.
Local traffic nightmares are bleeding cash. Gridlock on Rutherford Road and Highway 400 is heavily compounding the financial strain for Vaughan-based businesses.
Directors face massive personal risk. You could be on the hook for unpaid wages and HST if the Ontario Business Registry (OBR) hits your company with an administrative dissolution.
Early action is your best defence. Sitting down with a Licensed Insolvency Trustee (LIT), such as Ira Smith Trustee & Receiver Inc., before things spiral out of control ensures you have the most options to protect your business and personal assets.

Restructuring: The Invisible Squeeze – Why Vaughan Manufacturers Are Hurting in 2026

Are you running a manufacturing shop in Vaughan—maybe over in Concord or the Vaughan Metrropolitan Centre (VMC)—and feeling an invisible vice grip on your margins? You aren’t the only one. Right now, plenty of tight, well-run operations are slipping into crisis mode. This is the 2026 “Tariff Trap”: a brutal mix of global trade disputes and local headaches making standard business basically impossible to sustain.

At Ira Smith Trustee & Receiver Inc., we’re seeing this play out daily. It’s incredibly frustrating when the rules keep shifting under your feet. Shops in the steel and auto parts sectors are especially vulnerable right now, and fighting massive global forces from a factory floor in Vaughan can feel pretty isolating. But here is the reality: the problem is messy, but your options are incredibly powerful. Simply ignoring the red flags and hoping the market corrects itself is the biggest gamble you could take right now. We’re here to break down those options so you can play offense, not just defense.

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I. The 2026 Context: When “Normal” Business Just Isn’t Enough

The manufacturing sector in Ontario is hitting a serious wall, and the outlook for 2026 isn’t promising. The Financial Accountability Office of Ontario (FAO) has already flagged that real GDP growth is stalling out, largely because persistent trade uncertainties and US tariffs are hamstringing exports and business investments. While you might not see an exact “8% manufacturing decline” quoted directly by the FAO, the ripple effect of these Emergency Tariffs on metals like steel and aluminum has essentially sheared 8% (or more) right off the top of profit margins. For a lot of shops, that makes turning the machines on a losing financial proposition.

This isn’t an economics lesson; it’s the reality for real families and real businesses in Vaughan. It’s usually not a demand issue or a quality problem. It’s an insane cost burden creeping into the supply chain that eats every bit of profit before the product even leaves the bay.

A. The Tariff Trap: Rising Costs vs. Fixed Contracts

Since 2025, those 25% tariffs on Canadian steel and 10% on aluminum rolling into the US haven’t budged. In fact, retaliatory moves and trade friction have only pushed costs higher. These aren’t just political talking points—they are massive line items gutting your bottom line.

For Vaughan’s metal stampers, fabricators, and auto parts suppliers, raw materials are suddenly costing a fortune. We’re routinely hearing about primary inputs jumping by 25% to 50%.

Here is where the “Tariff Trap” actually snaps shut: you probably signed long-term supply agreements or locked into pricing with your clients long before these tariff spikes became the new normal. So now, you’re legally obligated to churn out products at prices that were highly competitive a year ago, but are now bleeding you dry because the metal itself costs too much.

You simply can’t eat a 50% material cost spike without adjusting your outbound pricing. This mismatch violently strangles cash flow, burns through working capital, and pushes solid companies right to the edge of insolvency. It creates a nightmare scenario where the more orders you ship, the more cash you lose.

B. The Vaughan Angle: Concord and VMC Feeling the Heat

Vaughan is an absolute economic engine for Ontario. Between Concord and the expanding VMC, these industrial zones are the backbone of the Canadian supply chain. But because these businesses are so tightly woven into North American logistics, they take the hardest hits from border politics.

If you own a business here, you need to hear this: your current cash crunch probably isn’t a reflection of your management skills. You are caught in a crossfire of external economic policies. It’s infuriating because it feels entirely out of your hands, but diagnosing the actual cause is step one. Don’t let geopolitical shifts convince you that you’ve forgotten how to run your business.

C. CUSMA Review 2026: Uncertainty is the Enemy of Credit

Then there’s the upcoming CUSMA (Canada-United States-Mexico Agreement) review, locked in for July 1, 2026. This deal basically dictates North American trade, and its future is completely up in the air right now. We could see minor tweaks, massive renegotiations, or—in a worst-case scenario—a full US withdrawal. Some analysts are already floating the idea of a 2027 Canadian recession if things go south.

Banks absolutely hate this kind of uncertainty. Lenders run on risk assessment, and unquantifiable trade risks make them incredibly nervous. Because of this, we are already seeing banks tighten their grips. Securing a new operating line, bumping up existing credit, or getting capital for new gear is becoming a Herculean task for mid-market manufacturers. This credit crunch essentially traps you: your raw costs are up, your cash is low, and the banks won’t lend you the bridge capital you need to pivot.

II. Restructuring Through BIA Proposals: A Trade Strategy, Not a Surrender

When you’re squeezed by tariffs and frozen out by lenders, filing a Notice of Intention to Make a Proposal (NOI) or a formal Division I Proposal under the Bankruptcy and Insolvency Act (BIA) is not waving a white flag. It is a highly strategic business maneuver. It’s a legally binding shield designed to give you breathing room to fix your debt, adapt to the new market, and get back in the black.

A. The Technical Gap: Repudiating Unviable Contracts

Here’s a major, often overlooked advantage of a BIA Restructuring Proposal for Vaughan manufacturers: the legal power to “repudiate” (or cancel) terrible supply contracts. If you are stuck in a pre-2026 pricing agreement that forces you to lose money on every part you make, that contract is literally sinking your business.

Guided by a Licensed Insolvency Trustee (LIT) like our team at Ira Smith, a BIA Restructuring Proposal lets you legally walk away from those toxic obligations. This is the reset button you need to align your costs with reality and stop the bleeding.

How it Works: The moment you file a Notice of Intention (NOI) with the Official Receiver, an automatic stay of proceedings kicks in. This is a massive legal wall. It means creditors cannot sue you, seize assets, call in collections, or enforce judgments. You get 30 days of immediate peace (which can be extended up to six months through the courts) to build a formal proposal.

This proposal outlines how you’ll handle your debts—often paying a fraction of what is owed over time, sometimes without interest. Once the majority of your creditors vote to accept it, and the court sanctions it, the deal is locked in for everyone. You get a clean slate to operate without the anchor of past, unsustainable promises dragging you down.

B. Restructuring Through BIA Proposals vs. Other Options

It’s critical to know that a BIA Restructuring Proposal isn’t just another word for bankruptcy. Picking the right tool is the difference between saving your shop and shutting it down.

Avoiding Bankruptcy: Bankruptcy is a liquidation process. The business stops, an LIT sells the assets, and the doors close permanently. A BIA Restructuring Proposal is exactly the opposite: it’s a restructuring tool. You keep your assets, you keep running the business, and you keep your brand. It’s rehab, not the end of the line.

Leaner, Faster than CCAA: Massive corporations with over $5 million in debt use the Companies’ Creditors Arrangement Act (CCAA). It’s incredibly flexible but notoriously slow, highly public, and massively expensive due to constant court appearances. For a mid-market manufacturer in Vaughan, a BIA Restructuring Proposal is the leaner, faster, and much cheaper alternative. It’s a rules-based framework that gets you back to focusing on the factory floor rather than sitting in a lawyer’s office.

Comparison Table: Key Insolvency Options for Businesses in Canada

Feature	BIA Division I Proposal	Bankruptcy	Receivership	CCAA (Companies’ Creditors Arrangement Act)
Primary Purpose	Restructure debt, continue operations, avoid liquidation	Liquidate assets, extinguish debts, cease operations	Creditor-driven asset realization/sale – csan be “going concern” or liquidation.	Restructure large, complex corporate debts (usually $5M+)
Debtor Control	Debtor (management) remains in control of the business, but under a LIT	Debtor loses control; Trustee takes over management and assets	Debtor loses control; Receiver manages/sells assets.	Debtor remains in possession, but under a court-appointed monitor
Contract Repudiation	Can legally repudiate (cancel) unviable contracts	Existing contracts are generally terminated upon bankruptcy	May repudiate contracts under court supervision.	Can legally repudiate (cancel) unviable contracts
Debt Limit	No upper monetary limit for corporations	No monetary limit	No monetary limit	Minimum $5 million in debt required
Cost	Generally lower than CCAA. Fees are structured and rules-based	Varies, can be lower if few assets, but the business is lost	Varies greatly, can be substantial, paid by a secured creditor	Generally highest, highly complex, extensive legal and monitor fees
Stay of Proceedings	Automatic and broad stay of proceedings upon filing	Automatic and broad stay of proceedings upon filing	Stay if court-orderedspecific to receiver’s appointment	Broad, court-ordered stay of proceedings, very powerful
Impact on Business	Rehabilitates business; allows for a fresh start financially	Business ceases to exist; assets sold	Business may be sold as a going concern or liquidated	Rehabilitates business, often with significant operational changes
Publicity	Public filing, but often less media attention than CCAA	Public filing	Public process, often initiated by banks	Highly public, often attracts significant media scrutiny
Decision-Making	Management and LIT propose plan; creditors vote	LIT makes decisions based on legal requirements	Receiver makes decisions in best interest of appointing creditor	Management and monitor propose plan; court approves

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III. The “Gridlock” Multiplier: Local Infrastructure Strain

Tariffs and trade talks are macro problems, but local infrastructure is hitting you right in your backyard. The daily traffic reality in Vaughan is multiplying the financial strain, severely impacting how fast you can turn over product and generate cash.

A. Rutherford Road and Highway 400 Lane Reductions

If you move freight, you already know the nightmare that is Rutherford Road and Highway 400. Lane reductions, detours, and the massive CN Rail bridge project are choking logistics. And with timelines dragging into Fall 2026, this bottleneck isn’t clearing up anytime soon.

Getting a truck from point A to point B used to be a fixed, predictable expense. Now, it’s a moving target. Every half hour a driver spends staring at brake lights is cash out of your pocket.

B. The Cost of Congestion on Your P&L

This isn’t just an annoyance; it’s actively draining your P&L statement:

Fuel Burn: Idling trucks burn expensive diesel while moving zero product.
Wages and Overtime: Your drivers are clocking longer hours just to finish standard routes.
Bottlenecked Capacity: Fewer drop-offs per shift means you can’t hit your optimal fulfillment numbers.
Late Penalties: If your contracts have strict on-time delivery clauses, traffic is literally triggering financial penalties.
Inventory Bloat: Because inbound logistics are so unreliable, you’re likely holding more safety stock, which ties up vital cash on your warehouse floor.

If your metal costs are up 30% and your trucking costs are spiking because of gridlock, you are being crushed from both sides.

Restructuring Trustee Note: We Understand Your Local Reality

Our office at 167 Applewood Crescent is just minutes from this mess. I see the transport trucks backed up on Rutherford and at the 400 interchange every single day. This isn’t just abstract data to our team; it’s the exact same traffic we sit in. We actively factor this localized “cost of congestion” into our turnaround strategies because we know a solution has to work on the ground in Vaughan, not just on paper in a boardroom.

IV. Director Protection: Avoiding the “OBR Silent Dissolution” Nightmare

When you’re trying to save a sinking ship, paperwork is usually the last thing on your mind. But letting corporate compliance slide can trigger a silent, catastrophic threat: the OBR Silent Dissolution. It takes a purely corporate money problem and turns it into a personal financial disaster.

A. The Ontario Business Registry (OBR) 2026 Compliance Audits

The Ontario Business Registry (OBR) requires standard annual corporate returns. During a financial crisis, it’s easy to throw these forms in a drawer. But the OBR is running strict compliance audits. If you fail to file for a set period (usually two years), the province can automatically dissolve your corporation.

Letting these slide as we head into the 2026 headwinds is like walking into a minefield.

B. The Risk: Losing Your Corporate Veil

If the OBR administratively dissolves your business, the “corporate veil”—the legal shield that separates the company’s debts from your personal bank accounts—evaporates.

In a restructuring scenario, this is the ultimate nightmare. Without that veil, creditors can suddenly look past the company and come directly after your house, your savings, and your investments to settle corporate debts:

Unpaid Wages: Under Ontario law, directors can be personally on the hook for up to six months of employee wages and a year of vacation pay.
Unremitted HST and Source Deductions: This is the big one. If the company used CRA money (like HST, CPP, or EI deductions) to keep the lights on, the CRA holds directors personally responsible. They don’t mess around, and they have the power to seize your personal assets rapidly.
Other Liabilities: Depending on the situation, directors might also face personal heat for environmental issues or other statutory breaches if they acted negligently while insolvent.

Protecting your family’s assets isn’t selfish; it’s your duty. This is exactly why you need an expert to help you navigate financial distress safely before an administrative oversight destroys your personal future.

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V. Frequently Asked Questions (FAQs)

Q1: What’s the absolute first step if my Vaughan manufacturing business is struggling with tariff costs and other financial pressures?

A1: Pick up the phone and call a Licensed Insolvency Trustee. At Ira Smith Trustee & Receiver Inc., we do a free, confidential deep dive into your numbers. We’ll look at your specific manufacturing hurdles and map out exactly what the BIA can do for you. Time is your best asset here; the longer you wait, the fewer options you have.

Q2: Can a BIA Proposal actually save my business from closure, or is it just a delay tactic?

A2: It is absolutely built to save your business. It’s not stalling; it’s a heavy-duty legal mechanism. The automatic stay of proceedings forces creditors to back off while we build a plan to cut the dead weight, renegotiate your debts, and restructure the operation so it can actually make money again.

Q3: How long does a BIA Proposal typically take, and what exactly happens?

A3: It starts the day we file the Notice of Intention (NOI), which instantly gives you 30 days of legal protection. We can push that out to six months through the courts if needed. During that time, we look at which contracts need to be ripped up and draft a payment plan for your creditors. It is vastly faster and much more controlled than going through a bankruptcy.

Q4: Will I lose my business’s assets in a BIA Proposal, like machinery or inventory?

A4: No. This is the main reason to choose a Proposal over bankruptcy. You keep the factory, the CNC machines, the inventory, and the brand. The whole point is to keep the business alive and generating revenue so you can fulfill the new, negotiated payment terms.

Q5: What if my creditors vote no?

A5: We need a majority of your creditors (by both number and dollar value) to agree. We handle the negotiations to ensure the offer is fair and highly likely to pass. If they do reject it, the business automatically goes into bankruptcy. That is exactly why having a seasoned LIT handling the negotiations is critical.

Q6: Are there government grants to help Vaughan manufacturers offset these 2026 tariffs?

A6: The government occasionally rolls out temporary relief or remissions, but they are notoriously narrow, constantly changing, and unreliable. Pinning your survival on a future government handout is incredibly risky. A BIA Proposal is something you can control internally right now to fix your balance sheet.

Q7: Will a BIA Proposal ruin my reputation with suppliers?

A7: It’s a public filing and will hit your credit rating temporarily, but the market views it infinitely better than a bankruptcy. It shows suppliers you took ownership of a tough situation, restructured smartly, and kept the doors open. A clean, restructured balance sheet actually makes you a safer bet moving forward.

Brandon’s Restructuring Take: Don’t Let the “Tariff Trap” Define Your Future

I’ve sat across the desk from countless hard-working Vaughan business owners who are feeling crushed right now. Between the 2026 tariffs, jumpy lenders, CUSMA fears, and the fact that you can barely get a truck down Rutherford Road, it’s a brutally unfair landscape. You built your shop with your own two hands, and watching global politics threaten to tear it down is demoralizing.

But please, don’t throw in the towel. We firmly believe there is a path through this if you play it smart and act early. The Bankruptcy and Insolvency Act was written for exactly this scenario—to give good companies the legal teeth to shed bad debt, ditch toxic contracts, and stabilize.

More importantly, we need to make sure you are personally shielded. The last thing you need is the CRA coming after your house because of corporate HST arrears. We aren’t here to judge how you got into a cash crunch; we’re here to give you the strategic playbook to get out of it safely.

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Restructuring Conclusion: Your Path to Resilience Starts Here

The 2026 squeeze on Vaughan’s manufacturing sector is severe, but it doesn’t have to be fatal. For the shops in Concord and the VMC, surviving this requires expert advice and decisive action. You do not have to figure this out alone.

At Ira Smith Trustee & Receiver Inc., we specialize in pulling Canadian manufacturers out of complex financial distress. We know the insolvency laws inside out, and because we work right here in Vaughan, we understand the exact local pressures you’re dealing with.

Don’t wait until the bank forces your hand. Engaging a Trustee proactively can absolutely mean the difference between losing the shop and setting it up for its next decade of success.

Contact Ira Smith Trustee & Receiver Inc. today for a free, completely confidential consultation. Let us build a restructuring plan that works for you.

Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy and is a member of the Canadian Association of Insolvency and Restructuring Professionals.

Phone: 905.738.4167 Toronto line: 647.799.3312

Website: https://irasmithinc.com/

Email: brandon@irasmithinc.com

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Disclaimer: This analysis is for educational purposes only and is based on the cited sources and my professional expertise as a licensed insolvency trustee. The information provided does not constitute legal or financial advice for your specific circumstances. Every situation is unique and involves complex legal and factual considerations. The outcomes discussed in this article may not apply to your particular situation. Situations are fact-specific and depend on the particular circumstances of each case. Please get in touch with Ira Smith Trustee & Receiver Inc.

About the Author: Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a licensed insolvency trustee serving clients across Ontario. With extensive experience in complex court-ordered receivership administration and corporate insolvency & restructuring proceedings, Brandon helps businesses, creditors, and professionals navigate challenging financial situations to achieve optimal outcomes. Brandon stays current with landmark developments in Canadian insolvency law. He brings this cutting-edge knowledge to every client engagement, ensuring his clients benefit from the most current understanding of their rights and options.

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Brandon Blog Post

DISTRESSED PROPERTY FOR SALE IN ONTARIO: UNDERSTANDING COURT-APPOINTED RECEIVERS AND ASSET VESTING ORDERS – WHAT THE COURT OF APPEAL FOR ONTARIO WANTS YOU TO KNOW

Post author By Brandon Smith
Post date January 19, 2026

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By Brandon Smith, LIT, CIRP, Senior Vice-President of Ira Smith Trustee & Receiver Inc.

Distressed Property For Sale Introduction

The idea of finding a “distressed property for sale” can spark a mix of excitement and curiosity. Many see it as a chance to find hidden value in a tough market. However, behind every distressed property sale is often a challenging story of financial strain, requiring a clear and fair solution.

When a company faces deep financial trouble, its assets may need to be sold. This process often involves a court-appointed receiver and specific legal tools, such as an Asset Vesting Order (AVO). These tools ensure fairness and clarity for everyone involved.

At Ira Smith Trustee & Receiver Inc., we understand these complex situations. We are here to guide you through them. This blog will explain the roles of receivers and AVOs, and delve into a recent and important decision from the Court of Appeal for Ontario. This decision sheds crucial light on what happens when someone tries to appeal an AVO. We bring expert advice to help you understand your options and rights.

Distressed Property For Sale Key Takeaways

Court-appointed receivers are neutral officers of the court. Their job is to manage and sell assets fairly when someone is in financial distress.
An Asset Vesting Order (AVO) is a court order that legally transfers ownership of an asset. It ensures the buyer gets the asset sold through distress sales, free from past claims. The cash paid by the purchaser replaces the sold asset.
Appealing an AVO is very difficult. Courts prioritize the fairness and finality of sales managed by a receiver.
The Court of Appeal for Ontario case, Toronto-Dominion Bank v. 1871 Berkeley Events Inc., shows how important it is to follow strict legal timelines when appealing.
If you are involved in a distressed property for sale situation, whether as a buyer, owner, or creditor, getting expert guidance from a Licensed Insolvency Trustee and an insolvency lawyer is vital.
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The Landscape of Distressed Property for Sale

“Distressed property for sale” refers to real estate or other assets that are being sold because the owner is under severe financial pressure. This pressure might come from overwhelming debt, a failing business, unpaid mortgages, or other economic hardships. It’s a term that describes assets that need to be sold quickly, often at a potentially reduced price, due to the seller’s urgent financial needs.

For some, buying a distressed property for sale seems like a smart investment, offering a chance to acquire assets at a potentially lower price than what might be found in a regular market. These properties can include homes, commercial buildings, land, or even business assets. The allure is often the prospect of a good deal, especially in a fluctuating real estate market where interest rates and economic shifts can put significant pressure on property owners.

However, these sales are often far more complicated than a typical real estate transaction. They are handled through specific legal processes like foreclosure, power of sale, bankruptcy, or receivership. Each of these paths has its own rules, timelines, and potential risks. These aren’t standard transactions with straightforward negotiations. Instead, they often involve multiple parties – the owner, various creditors, and the legal system – all with different interests and claims.

For the person or business holding the distressed property for sale, it represents significant financial pain. It means they’ve reached a point where they can no longer meet their financial obligations, and selling assets is the only way to try to resolve the situation. This can be a deeply stressful and emotionally taxing experience.

Understanding these processes is key. Without proper knowledge and expert help, even a promising opportunity can turn into a costly mistake for buyers. For sellers and creditors, navigating this landscape without professional guidance can lead to further losses or missed opportunities. At Ira Smith Trustee & Receiver Inc., we regularly see the impacts of financial distress and provide solutions that bring order and fairness to these challenging situations.

Distressed Property For Sale: The Court-Appointed Receiver – An Impartial Steward in Crisis

When financial trouble strikes and assets are at risk, a court may step in and appoint a special party called a court-appointed receiver. A court-appointed receiver’s main job is to manage and sell assets fairly and transparently when a person or business is in severe financial distress.

This person is a neutral professional and can only be a Licensed Insolvency Trustee (LIT) like Ira Smith Trustee & Receiver Inc., whose role is to take control of specific assets or an entire business. We act as an officer of the court, and when in a court-appointed role, we must be impartial and work for the benefit of all parties involved, not just one creditor.

The receiver’s primary goal is to maximize the value from the sale of these assets to pay off debts in an orderly and legally compliant manner.

Receivers are appointed for several reasons, all aimed at bringing order to a chaotic financial situation. These include preserving the value of assets, preventing them from being wasted or misused, ensuring an organized and fair sale process, and ultimately, repaying creditors as much as possible according to their legal priorities. The court steps in to protect the interests of everyone involved – the owner, secured creditors, unsecured creditors, and even employees – by having an independent expert manage the assets.

Their Key Responsibilities in Selling Assets Include:

Taking control: The receiver secures and manages the distressed property or business assets. This might involve changing locks, reviewing financial records, assessing inventory, or taking over the day-to-day operations of a business for a short period. Their immediate action is to protect the assets from further harm or loss.
Valuation: They often hire independent experts, such as real estate appraisers or business valuators, to appraise the assets. This is done to determine their true market value, ensuring that any sale is based on realistic and fair pricing. This step is crucial for demonstrating that the receiver is trying to get the best possible price.
Marketing: Once valued, the receiver actively markets the assets widely to attract the best possible offers. This isn’t just a simple listing; it involves strategic marketing to a broad audience of potential buyers, ensuring a competitive bidding process. This transparency in marketing helps assure all parties that a fair attempt is being made to maximize recovery.
Court Approval: A critical step in the process is that the receiver must ask the court to approve their sales process and each specific sale transaction. This court oversight ensures that the process is fair, transparent, and proper, protecting the interests of all stakeholders. The court reviews the receiver’s efforts to ensure the best price was obtained and that no procedural errors occurred.
Distribution: After a sale is approved and completed, the receiver collects the funds. They then distribute the money to creditors according to legal rules and priorities set out in Canadian insolvency laws. This complex task ensures that everyone with a valid claim gets their rightful share, based on the legal pecking order of creditors.

The court-appointed receiver’s actions are always overseen by the court. This supervision builds confidence among all parties that the process is transparent and just. For any business or individual facing severe financial challenges where assets might need to be sold, working with a court-appointed receiver provides a structured and legally sound path forward. At Ira Smith Trustee & Receiver Inc., our team has extensive experience acting as court-appointed receivers, bringing both expertise and empathy to these difficult situations.

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Distressed Property For Sale: Understanding the Asset Vesting Order (AVO)

An Asset Vesting Order (AVO) is a powerful legal tool often used in receivership proceedings. In a receivership, an AVO is critical because it gives the buyer clear legal title to the assets, which means the buyer usually receives the property “free and clear” of any previous claims, liens, or other legal burdens that were on the distressed property for sale before the sale. Essentially, it’s a court order that directly transfers legal ownership of the distressed property for sale from one person or entity to another.

Think of an AVO as a legal “clean slate” for the asset being sold. When a property or asset is sold in a regular transaction, the buyer usually takes it subject to any existing liens, mortgages, or other claims registered against it. In a distressed situation handled by a receiver, however, there are often many such claims. If the buyer had to take on all these existing problems, very few people would want to buy the asset, or they would only offer a very low price. This would defeat the purpose of the receivership, which is to maximize the value from the sale.

The purpose of an AVO in a receivership sale is twofold:

Buyer Certainty: It assures buyers that their purchase is final and that they won’t inherit the previous owner’s debts or legal problems tied to the asset. This certainty makes the distressed assets more attractive to buyers, encouraging competitive bidding and helping the receiver achieve a better sale price. Without this guarantee, buyers would be hesitant, fearing future legal challenges or unexpected liabilities.
Streamlined Sales: It makes it easier to sell assets that might otherwise be held up by complicated legal disputes or claims against them. By wiping the slate clean, the AVO removes obstacles that could delay or even prevent a sale, allowing the receiver to move quickly and efficiently. This is especially important when asset values might be declining.
Converting Claims: The AVO essentially shifts the creditors’ claims from the actual assets to the money received from the sale. Instead of having a claim against the specific property, creditors now have a claim against the pool of money generated by the sale. This money is then divided among creditors based on legal priorities, such as who has a secured interest, what type of debt it is, and the order in which claims were registered. This process ensures an equitable distribution of proceeds, even if some specific claims on the asset are extinguished.

The power of an AVO is immense, but it is always granted by a court after careful consideration. The court ensures that the receiver has acted properly and that the sale process is fair. This legal tool is a cornerstone of effective receivership, enabling the orderly resolution of complex financial distress. At Ira Smith Trustee & Receiver Inc., we understand the nuances of AVOs and how they impact all parties in an insolvency proceeding.

Appealing an AVO: The Court’s Strict Approach

While it’s theoretically possible to appeal a court order made during a receivership, challenging a sale approval and an Asset Vesting Order (AVO) is extremely difficult. The courts have a very high standard for such appeals, often prioritizing the finality of the sale. This strict approach is not arbitrary; it’s fundamental to the integrity and effectiveness of the insolvency system.

Why Courts Uphold Finality:

Integrity of the Process: The court system relies on its processes being seen as fair and final. Overturning a sale that has been approved by a court undermines confidence in the entire receivership system, which is designed to resolve financial distress efficiently and predictably. If every sale could be easily challenged, the whole system would become bogged down in endless disputes, rendering it ineffective.
Maximizing Value: Delays caused by appeals can make assets lose value. For example, if a property’s market value drops during a prolonged appeal, or if a business asset deteriorates, it hurts all creditors who are hoping to recover funds. Receivership aims for a quick and decisive sale to preserve and maximize asset value for creditors.
Buyer Certainty: Buyers who purchase assets through a court-approved process need to be sure that their new ownership won’t be undone by a later appeal. Without this certainty, fewer buyers would be willing to participate in court-supervised sales, leading to lower prices for distressed assets. This would be detrimental to the creditors, as they would recover less money. Buyers need to know that once they buy, the asset is truly theirs, free from ongoing legal challenges. This confidence is what drives competitive bids and ensures that receivers can effectively liquidate assets.

When deciding whether to approve a receiver’s sale, Ontario courts often refer to the “Soundair Test.” This test comes from the case Royal Bank of Canada v. Soundair Corp. and provides a framework for the court’s review. It guides the court to consider:

(a) if the receiver made enough effort to get the best price, meaning they conducted a thorough marketing process to attract qualified buyers and maximize the sale price; and
(b) if the receiver acted properly and not carelessly, which means the receiver followed all legal procedures, acted impartially, and fulfilled their duties responsibly.

To succeed in an appeal against a sale approval or an AVO, a party generally needs to prove a major mistake by the initial judge, a deeply flawed sales process (such as a failure by the receiver to properly market the assets), or significant unfairness that fundamentally compromised the integrity of the sale. The bar for success is set very high, and simply believing a better price could have been obtained is usually not enough. The appellant must demonstrate a serious error in principle or a clear misapprehension of the facts by the lower court.

This strict approach brings us to a crucial Ontario Court of Appeal decision, Toronto-Dominion Bank v. 1871 Berkeley Events Inc. This case vividly illustrates the court’s commitment to finality and the procedural hurdles involved in challenging an AVO. Understanding this strictness is vital for anyone involved with a distressed property for sale, whether as a buyer, an owner, or a creditor. Our team at Ira Smith Trustee & Receiver Inc. guides clients through these stringent legal requirements, ensuring they understand the reality of their position.

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Distressed Property For Sale Case Study: Toronto-Dominion Bank v. 1871 Berkeley Events Inc., 2026 ONCA 22

(CanLII: https://canlii.ca/t/khldq)

Background and Factual Context

On July 31, 2023, the moving party corporations were placed under receivership control. At the time of receivership, these entities owned and operated an events centre located in Toronto. On January 16, 2024, the Ontario Superior Court of Justice made an unopposed order authorizing the Receiver to sell the property. After approximately two years on the market, the Receiver entered into an agreement of purchase and sale (APS) with a buyer on August 13, 2025.

Lower Court Proceedings

The Receiver brought a motion before Justice Myers seeking an approval and vesting order (AVO) to close the sale. On October 28, 2025, Justice Myers granted the motion, applying the “Soundair principles“. The motion judge found that the Receiver’s decision to accept the offer was reasonable because:
The offer was unconditional and fell within a narrow range of three other offers received.
It was obtained after responsible marketing efforts in the absence of bad faith.
The offers themselves provided a better indication of current market value than earlier appraisals, which had anticipated a higher valuation.
The Receiver was not acting improvidently.

Procedural Issues on Appeal

A critical issue arose regarding the appellants’ failure to meet procedural deadlines. Under the Bankruptcy and Insolvency Act rules, the appeal period for receivership orders is only 10 days. Although the moving parties attempted to initiate an appeal within the deadline, they erroneously filed in the Divisional Court instead of the Court of Appeal for Ontario.

After being advised of the correct jurisdiction, they eventually submitted an updated motion for leave to appeal, but it was rejected by the Registrar for having “too many deficiencies with the materials.” Subsequently, on December 23, 2025, the moving parties brought a motion for an extension of time to file the appeal, coupled with a motion for a stay of the approval and vesting order.

Motion 1: Extension of Time to File a Motion for Leave to Appeal

The Court of Appeal applied the test from Shaver-Kudell Manufacturing Inc. v. Knight Manufacturing Inc. (2021 ONCA 202), which requires consideration of:

A bona fide intention to appeal during the appeal period.
The length and explanation for the delay.
Prejudice against the responding party.
The merits of the proposed appeal.

Decision: Motion dismissed. While the moving parties had demonstrated an intention to appeal, Justice Paciocco found that:

The explanation for the delay was inadequate. The moving parties failed to provide affidavit evidence addressing the legal tests for an extension, relying instead on “bald assertions about unspecified errrs caused by court staff.”
Unexplained delay: The delay of approximately 40 days (nearly four times the 10-day period) was unexplained and unjustified.
Substantial prejudice accrued to the Receiver. The APS contained a condition precedent that would be breached if an appeal or threatened appeal restricted closing. Additionally, the moving parties’ principal’s conduct in publicly disclosing confidential information about the sale price and marketing details would prejudice any future bidding process if the proposed sale fell through.
The receiver continues to bear the carrying costs of the distressed property for sale until the sale is completed.

Merit Assessment: Justice Paciocco also found the proposed appeal lacked merit. The moving parties’ grounds fell into two categories: (a) claims of procedural unfairness related to the removal of counsel, and (b) attempts to re-argue the motion by challenging the providence of the sale, alleging conflicts of interest and valuation irregularities. The Court found that:

The procedural fairness submissions lacked supporting material and detail.
The substantive grounds failed to identify any legal errors or palpable and overriding errors of fact.
The submissions simply represented disagreement with the motion judge’s conclusions, which would be entitled to deference on appeal.

Motion 2: Stay Pending Appeal

Decision: Motion dismissed. Once the extension of time motion was dismissed, there was no valid appeal pending before the Court, eliminating the Court’s jurisdiction to grant a stay under Rule 63.02(1)(b) of the Rules of Civil Procedure. Even if jurisdiction existed, Justice Paciocco would have dismissed the stay motion because:

The moving parties failed to raise a serious issue to be decided on appeal.
Any harm from the pending sale (the building being put out of reach) was not clearly non-compensable.
The balance of convenience favoured the Receiver and creditors, given that a delay to the sale would be prejudicial to the receivership estate.

Procedural Notes

The moving partie’s principal, though not a lawyer, had been granted leave by a different judge to represent the moving party corporations before the Superior Court on October 8, 2025.
Justice Paciocco noted that self-represented litigants, like all parties, have an obligation to familiarize themselves with relevant procedures.
No costs order was made, as the Receiver did not request one.

Disposition

Both of the moving parties’ motions were dismissed.

Professional Significance

This decision illustrates the strict temporal requirements in insolvency proceedings, designed to discourage delay and maintain the integrity of receivership sales. It also demonstrates the court’s deference to a receiver’s business judgment in accepting conditional offers within a reasonable range of other bids, provided the receiver has undertaken responsible marketing efforts absent bad faith. The case underscores the significant risks posed by disclosure of confidential sale information and the procedural barriers faced by self-represented parties in appellate proceedings.

Comparison Table Section: Key Players in Insolvency – Receiver and Other Licensed Insolvency Trustee (LIT) Roles

Understanding the various roles in financial distress is important. While a court-appointed receiver is a Licensed Insolvency Trustee (LIT), their specific functions can differ depending on the type of insolvency proceeding. It’s crucial to recognize these distinctions, as they impact how assets are managed and debts are resolved. Both roles are vital in the Canadian insolvency system, but they serve different primary purposes and are governed by different sets of rules and circumstances.

Here’s a comparison to clarify their distinct, though sometimes overlapping, responsibilities:

Feature	Court-Appointed Receiver (a LIT)	Licensed Insolvency Trustee (LIT) (e.g., in consumer proposal or bankruptcy)
Primary Role	Manages specific assets or an entire business, usually to sell them and pay creditors. Their focus is asset realization.	Administers formal debt relief processes like consumer proposals, financial restructuring and bankruptcies for individuals and corporations. Their focus is on debt restructuring or liquidation.
Appointment	Appointed by a court order (under the Courts of Justice Act and BIA, or equitable powers), or by a secured creditor through a private agreement.	Appointed by the Office of the Superintendent of Bankruptcy (OSB), a federal regulator, to administer BIA proceedings.
Scope of Work	Takes control, manages, and sells specific assets or a business to maximize recovery for creditors, primarily secured creditors. Can also manage the business.	Helps debtors find debt solutions, negotiates with creditors, manages bankrupt estates, and distributes proceeds to all creditors according to the BIA.
Primary Goal	Maximize recovery for secured creditors by realizing on assets efficiently and according to court direction. Often asset-specific.	Fairly administers assets for all creditors and provides a financial fresh start for debtors (if applicable). Oversees the entire debt resolution process.
Who They Help	Primarily secured creditors looking to recover their loans, but indirectly benefits all stakeholders by ensuring an orderly and transparent process.	Individuals and businesses struggling with debt can be offered solutions, and creditors can obtain a fair distribution according to the BIA.
Legislation	Governed by the provincial Courts of Justice Act, the federal Bankruptcy and Insolvency Act (BIA), and sometimes specific contractual agreements.	Strictly governed by the federal Bankruptcy and Insolvency Act (BIA).
Officer Of	The Court (for court-appointed receivers) or a secured creditor (for private receivers).	The Court and the OSB (a federal regulator). They owe duties to all creditors and the debtor.

Only LITs can act as court-appointed receivers. Their specific powers and duties in a receivership come from the court order or private agreement, not directly from their LIT license for a BIA proceeding. An LIT acting in a consumer proposal or bankruptcy has a broader mandate concerning all creditors and the debtor’s overall financial situation, guided strictly by the Bankruptcy and Insolvency Act.

At Ira Smith Trustee & Receiver Inc., our team consists of experienced Licensed Insolvency Trustees who are qualified to act for a creditor. You receive the most appropriate and effective advice for your unique situation. We bridge the gap between complex legal frameworks and practical solutions.

distressed property for sale

Distressed Property For Sale FAQ Section

Q: What exactly is a distressed property for sale?

A: A distressed property is typically real estate or a business asset that must be sold quickly due to the owner’s severe financial problems. These problems might include unmanageable debt, mortgage default, a failing business, or other economic hardships. The sale is driven by a need for funds rather than a strategic decision, and often occurs through formal legal processes like receivership or bankruptcy.

Q: Can I buy a distressed property for sale directly from a receiver?

A: While you can’t typically “bargain” directly in a private sale sense, a receiver is legally bound to market properties widely to get the highest possible price for the creditors. As a buyer, you would submit an offer, usually through standard real estate channels, to the receiver. This offer, along with others, would then be presented to the court for its approval. The court will ensure the receiver acted diligently to obtain the best offer.

Q: What happens if I try to appeal an AVO, based on the TD case?

A: The TD case clearly shows that even if your appeal has legal merit, it will likely be dismissed if it’s not filed within the strict legal deadlines. For sale approval orders and AVOs under the Bankruptcy and Insolvency Act, this deadline is often just 10 days. Courts prioritize the finality and efficiency of these sales to ensure market stability and recover value for creditors.

Q: How long does a receivership process usually take?

A: The length of a receivership varies greatly depending on the complexity of the assets and the financial situation. Simple cases involving easily liquidated assets might be resolved in a few months. However, complex situations with many assets, ongoing legal disputes, environmental issues, or the need to operate a business before sale can take several years. Each receivership is unique.

Q: When should I contact a Licensed Insolvency Trustee like Ira Smith Trustee & Receiver Inc.?

A: You should contact us as soon as you recognize signs of financial difficulty, whether for yourself or your business. This applies whether you’re an individual struggling with overwhelming debt, a business owner facing insolvency, a creditor looking to recover funds, or even an interested party in distressed asset sales. Early professional advice is always the most effective strategy to understand your options, protect your interests, and work towards a solution. Waiting too long can limit your choices and worsen the situation.

Brandon’s Take:

Navigating financial distress, whether you’re a business owner facing tough decisions, a creditor trying to recover what’s owed, or an investor looking at a “distressed property for sale,” can feel overwhelming. It’s a complex landscape filled with legal jargon and strict rules. The TD decision is a powerful reminder of how critical both the substance and the procedure are in insolvency proceedings. It teaches us that even when there’s a good argument on the core legal issue, missing a deadline can swiftly end your chances. This underscores the necessity of immediate, informed action when dealing with court orders in receivership.

This case reinforces that courts are committed to the integrity and finality of court-supervised sales. They want processes to be fair, but also efficient and conclusive. This gives stability to the market and ensures that when a receiver sells an asset, the deal is truly done, providing certainty for buyers and maximum recovery for creditors. The strictness isn’t to be punitive; it’s to ensure the system works effectively for everyone.

At Ira Smith Trustee & Receiver Inc., we understand the human element behind these legal and financial challenges. We know that these situations can be incredibly stressful, filled with uncertainty and fear. Our role in the Greater Toronto Area is to bring clarity, expertise, and a non-judgmental approach to help you understand your options. We ensure that your rights are protected and that you make informed decisions, whether you’re dealing with personal or business debt, considering a receivership, or exploring buying assets from one. Don’t navigate this alone; professional guidance is your strongest ally to achieve a clear path forward.

distressed property for sale

Distressed Property For Sale Conclusion: Your Clear Path Forward

The world of distressed property sales, court-appointed receivers, and Asset Vesting Orders is complex, but it doesn’t have to be a mystery. We’ve seen how court-appointed receivers act as crucial, neutral figures, ensuring assets are sold fairly and transparently to maximize recovery for creditors. We’ve also learned about the power of AVOs to provide a clear title to buyers, making these sales viable. Most importantly, we’ve understood the strong emphasis courts place on the finality and procedural correctness of these sales, as vividly highlighted by the Toronto-Dominion Bank v. 1871 Berkeley Events Inc. case. Missing a deadline, no matter how strong your argument, can be fatal to your case.

Whether you are a business owner facing insolvency, a creditor seeking recovery of funds, or an individual considering a distressed property purchase, understanding these legal frameworks and the strict timelines involved is absolutely essential. More importantly, having the right expert by your side can make all the difference, transforming confusion into clarity and stress into solutions.

Don’t navigate the complexities of financial distress or distressed asset sales on your own. The team at Ira Smith Trustee & Receiver Inc. consists of experienced Licensed Insolvency Trustees who can provide the authoritative, actionable, and empathetic advice you need. We offer confidential, no-obligation consultations to discuss your specific situation and help you understand all your options.

Contact Ira Smith Trustee & Receiver Inc. today. Let us provide you with the professional guidance and peace of mind you deserve during these challenging times. We can help you achieve a financial fresh start and ensure you make the best decisions for your future.

Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy and is a member of the Canadian Association of Insolvency and Restructuring Professionals.

Phone: 905.738.4167
Toronto line: 647.799.3312
Website: https://irasmithinc.com/
Email: brandon@irasmithinc.com

——————————————————————————–

Disclaimer: This analysis is for educational purposes only and is based on the cited sources and my professional expertise as a licensed insolvency trustee. The information provided does not constitute legal or financial advice for your specific circumstances.

Every situation is unique and involves complex legal and factual considerations. The outcomes discussed in this article may not apply to your particular situation. Situations are fact-specific and depend on the particular circumstances of each case.

Please contact Ira Smith Trustee & Receiver Inc. or consult with qualified legal or financial professionals regarding your specific matter before making any decisions.

About the Author:

Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a licensed insolvency trustee serving clients across Ontario. With extensive experience in complex court-ordered receivership administration and corporate insolvency & restructuring proceedings, Brandon helps businesses, creditors, and professionals navigate challenging financial situations to achieve optimal outcomes.

Brandon stays current with landmark developments in Canadian insolvency law. He brings this cutting-edge knowledge to every client engagement, ensuring his clients benefit from the most current understanding of their rights and options.

distressed property for sale

Brandon Blog Post

THE ONE BLOOR WEST CONDO: OUR COMPLETE BILLION-DOLLAR CCAA CASE STUDY IN REAL ESTATE INSOLVENCY

Post author By Brandon Smith
Post date November 24, 2025

The One Introduction: Toronto’s Resilient Icon at Bloor & Yonge Faces Financial Distress

For entrepreneurs and advisors across the GTA, the story of The One—now officially One Bloor West (the Project)—for some time now was Toronto’s most talked-about condo project. Now it is Toronto’s most talked-about troubled condo project. Its story offers a powerful real-world lesson in the mechanics and necessity of complex financial restructuring. As one of Toronto’s most ambitious luxury condo, hotel, and retail developments, its financial unravelling sent shockwaves through developers, creditors, and, most painfully, individual purchasers.

As a Licensed Insolvency Trustee and Senior Vice-President at Ira Smith Trustee & Receiver Inc., I’ve worked with businesses of all sizes, navigating financial distress. The One’s insolvency illustrates how court-supervised processes—specifically Receivership and the Companies’ Creditors Arrangement Act (CCAA)—can be used to stabilize troubled assets, preserve value, and manage multi-billion-dollar liabilities.

This case study explores the events that led to court intervention, the strategic decisions made to protect and enhance the Project’s value, and the difficult—but necessary—termination of hundreds of condo purchase agreements. For those advising companies facing critical debt and project risk, this case highlights the vital role of insolvency professionals in steering them toward recovery and maximizing value.

The One Descent Into Insolvency – A Pivotal Turning Point: Receivership and a New Beginning

Located at the southwest corner of Yonge and Bloor in Toronto, the 85-storey mixed-use tower was envisioned as a landmark. But Sam Mizrahi and Mizrahi Developments, the original developer, encountered years of delays, cost overruns, supply chain issues, and legal disputes.

Mounting financial strain led to court intervention. On October 18, 2023, the Ontario Superior Court of Justice (Commercial List) appointed a Receiver and Manager of the Project’s assets.

The Receiver’s Mandate

The Receiver’s role was clear but challenging: stabilize the Project, protect its value, and maximize recoveries for stakeholders. A critical early step was securing additional financing from senior secured lenders to keep construction moving.

The financial distress was immense. As of the Receivership Date, secured debt totalled approximately $1.9 billion, including accrued interest. By September 30, 2025, that figure had surpassed $2.0 billion. Notably, purchasers of condo units were not among the secured creditors—highlighting the precariousness of their position.

During this phase, the Receiver reviewed all existing contracts, including condominium sales agreements (CSAs), and assessed unit fair market values. Importantly, the Receiver made it clear that early communications did not affirm any contracts and reserved the right to disclaim them if necessary.

The One Pivot to CCAA Protection and Strategic Governance

Insolvencies of this complexity often require transitioning between legal frameworks. While Receivership provided initial stabilization, the Project ultimately moved under the CCAA to enable a more flexible and strategic restructuring.

This transition occurred on April 22, 2025, when the Court issued the Initial Order. The Receiver was appointed as Monitor, and FAAN Advisors Group Inc. became the Chief Restructuring Officer (CRO).

Why the CCAA Was Essential

For GTA businesses considering restructuring, The One demonstrates the advantages of the CCAA over traditional receivership in complex, ongoing developments:

Ordinary Course Sales: Under the CCAA, the restructured Companies could sell units in the ordinary course of business—rather than through a Receiver’s “as-is, where-is” process. This approach is expected to yield higher sale prices and better value realization.
DIP Financing: The CCAA enabled approval of $615 million in Debtor-in-Possession (DIP) financing to fund construction and restructuring. This capital was critical to keeping the Project on track for completion in 2028.
CSA Plan Implementation: Section 32 of the CCAA allowed the Companies to disclaim or resiliate agreements—an essential power for executing the Condominium Sales Agreement Plan (CSA Plan) aimed at maximizing asset value.

This strategic shift, supported by Tridel (the new project manager), the Monitor, and senior secured lenders, had one goal: to maximize the Project’s value.

Maximizing The One Value and The New Era: Tridel’s Stewardship and Renewed Promise

The restructuring team concluded that the original design and existing CSAs (the Base Configuration) no longer aligned with market realities. To protect creditor recovery, the strategy focused on boosting future residential sales revenue.

Independent Validation

The Receiver engaged respected market experts—Milborne Group and Urbanation Inc.—to assess the residential component’s value. Their findings were clear:

Milborne Group advised that aligning with a five-star luxury hotel brand could increase pricing by up to 20%.
Urbanation Inc. confirmed that reconfiguring unit sizes and mix could command a premium over the average price per square foot (PSF) under the existing CSAs.

The One CSA Plan Reconfiguration

Originally, the Project included 415 residential units. But by 2022, demand for small, investor-type condos had sharply declined. In response, the Monitor and Tridel implemented a reconfiguration strategy:

Reduced the total number of units to 411.
Converted smaller one-bedroom units into larger two-bedroom suites.
Shifted focus toward “ultra-luxury” units aligned with the anticipated hotel partnership.

This redesign, combined with the ability to resell units at significantly higher prices (compared to the $1,651 PSF average under the original CSAs), is projected to generate over $200 million in additional proceeds—directly benefiting the secured creditors.

Disclaiming The One Purchaser Contracts

Why Contracts Were Cancelled

Nearly all Purchase and Sale Agreements (CSAs) were terminated to maximize value for creditors.
Justice Osborne approved the disclaimer of 314 out of 329 contracts in November 2025.
Only 15 contracts were deemed economically viable to retain.

The One Legal Basis and Process

The Companies used Section 32 of the CCAA to disclaim agreements.
Notices were sent on October 24, 2025, with termination effective November 23, 2025.
The Monitor and CRO argued this was necessary due to insolvency and creditor recovery needs.

Buyer Reaction and Court Response

Many buyers were emotionally devastated, with some attending court to oppose the motion.
Justice Osborne acknowledged the hardship but emphasized the developer’s insolvency.
Only one formal objection was filed by the November 10 deadline.
Buyers were informed that any damage claims would be unsecured and likely unrecoverable.

The One Deposit Return Protocol

Protection Mechanisms

Total deposits under disclaimed CSAs: approx. $87.5 million.
Two protections in place:

Tarion Bond – covers first $20,000.
Excess Deposit Insurance – provided by Aviva Insurance Company of Canada for amounts over $20,000.

Court-Approved Refund Process

Justice Osborne approved the protocol on November 17, 2025.
Refunds include principal + interest (per Condominium Act, 1998).
Administered by Aviva’s agent.

Steps for Buyers

Submit documents via the Agent’s website:

Release and Termination Agreement
Government-issued ID
Original CSA
Refunds issued within 10 business days of Tarion confirmation.

The One Market Impact and Buyer Implications

Buyer Losses

Buyers lost units purchased at 2017–2018 prices, now far below the current market value.
Many expressed concern over the fairness and transparency of pre-construction contracts.

Market Lessons

The case highlights risks in pre-construction real estate, especially in insolvency scenarios.
Government addendums may give developers Its, eroding buyer confidence.

Early Purchase Opportunity

Disclaimed buyers were offered early access to new units before public sale (mid-to-late 2026).
New units are priced significantly higher due to luxury rebranding and market appreciation.

FAQs: Understanding the Financial Restructuring of One Bloor West

Q1: What is One Bloor West, and why is it important?

One Bloor West is a luxury condo, hotel, and retail building planned for the corner of Yonge and Bloor in Toronto. It was supposed to be an 85-storey tower and one of Canada’s tallest buildings. At first, it was a symbol of ambition, but delays and financial problems turned it into one of Toronto’s most troubled real estate projects.

Q2: What caused the financial problems?

The original developer, Sam Mizrahi of Mizrahi Developments, faced years of setbacks. These included construction delays, rising costs, supply chain issues, and legal battles. Eventually, the financial pressure became too much, and in October 2023, the Ontario Superior Court appointed a Receiver to take control of the project.

Q3: How much debt did the project have?

By the time the court stepped in, the project had about $1.9 billion in secured debt. By September 2025, that number had grown to over $2 billion. People who bought condo units were not considered secured creditors, meaning they were not first in line to get their money back.

Q4: What legal steps were taken to fix things?

The project first went into receivership, which helped stabilize it. Then, in April 2025, it moved under the Companies’ Creditors Arrangement Act (CCAA). This law gave the team more flexibility to restructure the project and try to save its value.

Q5: Why was switching to the CCAA important?

The CCAA allowed for:
• Regular Sales: Units could be sold normally, not just as-is, which helped get better prices.
• New Financing: The court approved $615 million in new funding to keep construction going.
• Contract Changes: The team could cancel or change old agreements that no longer made financial sense.

Q6: Why were most condo purchase agreements cancelled?

Out of 329 original condo contracts, 314 were cancelled. The court agreed that keeping them would hurt the project’s value. Only 15 contracts were kept because they still made financial sense.

Q7: What was the new plan to increase the project’s value?

The team redesigned the building to focus on ultra-luxury units, possibly with a hotel partner. They reduced the number of units from 415 to 411 and made many one-bedroom units into larger two-bedroom suites. Experts believe this could raise prices by up to 20% and bring in over $200 million in extra revenue.

Q8: What happened to buyers’ deposits?

Buyers whose contracts were cancelled had about $87.5 million in deposits. Two protections were in place:
• Tarion Warranty: Covered the first $20,000.
• Aviva Insurance: Covered amounts above $20,000.
Refunds included the original deposit plus interest, following Ontario’s Condominium Act.

Q9: What can businesses learn from this case?

Three key lessons stand out:

Secured creditors come first: Every decision is aimed to protect those who lent the most money.
Adapting to market changes is crucial: The project had to shift to meet luxury market demands.
Legal flexibility matters: The CCAA helped cancel outdated contracts and move forward.

The One Business Lesson: Proactive Restructuring

For GTA entrepreneurs and the professional advisor community, the restructuring of The One offers a compelling case study in strategic insolvency management. It highlights three essential principles that can guide businesses through financial turbulence:

1. Secured Creditor Priority Is Paramount

Every major decision—from pivoting to CCAA protection, conducting market research, and redesigning the project, to disclaiming 314 contracts—was driven by the imperative to maximize recovery for Senior Secured Lenders. In Canadian insolvency law, fulcrum creditors (those most at risk of loss) hold significant influence in shaping and approving restructuring plans. Their interests must be prioritized to ensure legal and financial viability.

2. Market Realignment as a Survival Tool

The Project’s original failure stemmed from poor planning (too many small investor units) and shifting market dynamics. The restructuring demanded a bold pivot: redesigning the development to meet ultra-luxury market expectations and partnering with a trusted builder like Tridel. In times of distress, survival hinges on aggressive, market-responsive strategies that unlock asset value and restore stakeholder confidence.

3. The CCAA Enables Contractual Flexibility

Unlike many legal frameworks, the CCAA empowers debtors—under court-appointed Monitor oversight—to disclaim burdensome contracts, including long-term purchase agreements. This flexibility is vital when legacy obligations obstruct operational or financial recovery.

The One Expertise in the Eye of the Storm

The One Bloor West restructuring journey—from the tallest building Receivership to a court-approved CCAA plan—required balancing billions in secured debt, divergent stakeholder interests, and the expectations of hundreds of purchasers, all while constructing Canada’s tallest building. The successful implementation of the CSA Plan and Deposit Return Protocol safeguards buyer deposits and preserves long-term value for senior creditors.

This case underscores a critical truth: when a business faces overwhelming financial headwinds, decisive action and expert legal navigation are non-negotiable. Whether it’s a high-profile real estate insolvency or a smaller corporate crisis, the path to stability demands seasoned guidance to transform chaos into clarity.

Your Partner in Restructuring

At Ira Smith Trustee & Receiver Inc., we specialize in helping GTA entrepreneurs and businesses navigate these pivotal moments. If your company is burdened by debt, locked into unworkable contracts, or approaching a financial breaking point, engaging a Licensed Insolvency Trustee isn’t just prudent—it may be the only way to stop the bleeding, stabilize operations, and build a solvent future.

Our team brings the same level of strategic insight, legal acumen, and hands-on execution that defined The One Bloor West troubled condo project turnaround. We don’t just manage crises—we engineer recoveries.

If your business is in distress, don’t wait. Contact Ira Smith Trustee & Receiver Inc. today to take proactive steps toward financial stability.

P: 905.738.4167

Toronto line: 647.799.3312

brandon@irasmithinc.com or ira@irasmithinc.com

https://irasmithinc.com/

Disclaimer: This analysis is for educational purposes only and is based on the cited legal decisions and my professional expertise as a licensed insolvency trustee. The information provided does not constitute legal or financial advice for your specific circumstances.

Every situation is unique and involves complex legal and factual considerations. The outcomes discussed in this article may not apply to your particular situation. Court decisions are fact-specific and depend on the particular circumstances of each case.

Please contact Ira Smith Trustee & Receiver Inc. or consult with qualified legal or financial professionals regarding your specific matter before making any decisions.

About the Author:

Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a licensed insolvency trustee serving clients across Ontario. With extensive experience in complex court-ordered receivership administration, corporate restructuring, and insolvency proceedings, Brandon helps businesses, creditors, and professionals navigate challenging financial situations to achieve optimal outcomes.

Brandon stays current with landmark developments in Canadian insolvency law, including the recent The One decision that is reshaping receivership practice. He brings this cutting-edge knowledge to every client engagement, ensuring his clients benefit from the most current understanding of their rights and options.

Brandon Blog Post

THE CANADIAN MOTOR FREIGHT LTD. SAD RECEIVERSHIP SAGA: OUR COMPLETE GUIDE ON WHAT HAPPENS WHEN YOU DON’T FOLLOW COURT ORDERS

Post author By Brandon Smith
Post date April 21, 2025

Canadian Motor Freight Ltd. Introduction

Have you ever wondered what happens when a company can’t pay its debts? In the case of Canadian Motor Freight Ltd., a Mississauga, Ontario-based logistics company providing seamless transportation solutions, the situation became a legal drama that teaches us important lessons about following court orders.

What Happened to Canadian Motor Freight Ltd.?

Canadian Motor Freight Ltd. was a logistics company that ran into serious money problems. By October 2024, the company owed over $20 million to Canadian Western Bank (CWB) and couldn’t keep up with payments. This financial crisis led to a court process called “receivership,” in which a licensed insolvency trustee is appointed to take control of a company’s assets to sell the assets to help pay back all or a portion of what is owed.

The Road to Receivership

The court put Canadian Motor Frleight Ltd. into interim receivership on October 8, 2024, and then full receivership on November 15, 2024. This interim receiver appointment happened because:

The company stopped making loan payments to CWB
The company gave false financial information to the bank
The business had consistent losses
Beyond the CWB debt, they owed around $1.7 million to equipment financing companies
They were selling their accounts receivable to another company (REV Capital) without telling CWB
The City of Mississauga had started the tax sale proceedings process to sell CMF’s property due to unpaid taxes

Because of these serious issues, the court went from an interim receiver to a full receiver. The Receiver’s job was to take control of all Canadian Motor Freight Ltd.‘s assets and manage them to pay back creditors as fairly as possible.

The Missing Trucks Mystery

One of the most valuable things Canadian Motor Freight Ltd. owned was its fleet of trucks. These vehicles were essential assets that could be sold to help pay back some of the debt. However, instead of cooperating with the receiver as required by law, management made a fateful decision.

Rather than turning over the trucks to the receiver, company managers moved all the vehicles to a different location – a yard owned by a company called United Group of Companies. This move directly violated the court’s receivership order.

Trying to Recover the Assets

When the receiver discovered the trucks were missing, they tried to talk with United Group to gain access to the vehicles. When these discussions failed, the receiver had to return to court to get a specific “Asset Recovery Order” that directed United Group to allow the receiver onto their property to take possession of the trucks.

Unfortunately, this didn’t solve the problem. United Group and its management refused to comply with this new court order. They wouldn’t let the receiver take the trucks as directed by the court. This direct defiance of a court order is considered very serious in the Canadian legal system.

When Ignoring Court Orders Leads to Contempt

Because both Canadian Motor Freight Ltd.’s management and United Group weren’t following the court’s instructions, the receiver took further legal action. The receiver asked the court to hold both companies and their management in contempt of court for disobeying both the original Receivership Order and the Asset Recovery Order.

The evidence showed a clear pattern of defiance:

Debtor company’s management deliberately moved the trucks to United Group’s yard despite knowing about the Receivership Order
United Group refused to allow the receiver access to take the trucks
United Group demanded payments they weren’t entitled to before they would cooperate
After being specifically ordered to provide access, United Group secretly moved the trucks again to unknown locations

The judge strongly criticized these actions, saying the parties were playing a “shell game” with the company’s assets and “thumbing their nose” at the court. This kind of behaviour undermines the entire legal system.

The Contempt Ruling

The judge found that both Canadian Motor Freight Ltd.‘s management and United Group’s management were guilty of civil contempt. In Canada, three main elements must be proven for civil contempt:

The court orders must be clear and understandable
The people accused must have known about the orders
The violation of the orders must have been intentional

The judge determined that all three conditions were met in this case. United Group claimed they were just “negotiating” with the receiver, but the judge dismissed this excuse, seeing it as just a delay tactic.

The judge then scheduled a sentencing date, giving the parties a chance to fix the situation before final penalties were decided. It is very normal for courts to allow those accused of contempt of court to take the right steps to purge their contempt. Most people take advantage of that opportunity so that they are no longer running afoul of court orders.

Because of these actions, the judge sentenced the leader of United Group to spend four days in jail. This person was considered the “directing mind” of the company, meaning they were the main decision-maker. The judge also ordered several other individuals involved in the case to pay different amounts of money to cover legal costs.

United Group itself received a much larger financial penalty, having to pay a significantly higher amount in costs than the individuals. These penalties show how seriously the court took the failure to follow orders in the Canadian Motor Freight Ltd. case.

Taking It to a Higher Court

Not accepting the contempt findings, both Canadian Motor Freight Ltd. and United Group (along with their management) appealed to the Court of Appeal for Ontario. They hoped the higher court would overturn the original judge’s decision.

However, on April 8, 2025, the Court of Appeal dismissed both appeals, fully supporting the original judge’s findings. The Court of Appeal explained their reasoning:

The original judge had provided detailed and clear reasons for the contempt finding
The so-called “negotiations” were correctly identified as delay tactics
The companies and their management failed to show that the original judge made any serious errors
The Receivership Order clearly stated that all of the company’s property had to be turned over to the receiver
Management knew about this order and intentionally disobeyed it
The sentences given by the original judge were appropriate and possibly even “on the lenient side.”

The Court of Appeal concluded with a powerful statement:

“It is a fundamental principle that orders of a court are to be obeyed. They are not to be stalled, and they are not to be negotiated. Serious consequences are to be expected by anyone who wilfully fails to obey a court order.”

The Wider Financial Problems at Canadian Motor Freight Ltd.

The case of Canadian Motor Freight Ltd. reveals a company facing enormous financial challenges. Online industry forums like InsideTransport.com had threads discussing CMF’s situation starting in October 2024, showing that people in the trucking industry were aware of the company’s troubles.

Documents from the receivership process provide more details about the company’s financial state. A Motion Record includes various documents related to the receivership, including:

Examination of company officials to gather information about assets
Lists of company receivables and customers
Communications between the receiver and legal representatives
Evidence of returned checks due to insufficient funds from earlier in 2024
Financial statements showing significant expenses against their revenue

The 2023 financial statements for the company showed sales of over $21 million but also revealed major expenses.

All these factors contributed to the company’s inability to meet its financial obligations, ultimately leading to receivership.

How Receivership Works in Canada

To better understand the Canadian Motor Freight Ltd. case, it helps to know how receivership works in Canada. Receivership is a legal process used when a company can’t pay its debts and creditors need help recovering their money.

The Receivership Process

Court Appointment: A creditor (like a bank) asks the court to appoint a receiver, usually when a company has defaulted on loans.
Taking Control: Once appointed, the receiver takes control of the company’s assets. Company management must cooperate and turn over all property and records.
Asset Management: The receiver evaluates assets, may continue running the business temporarily, and eventually sells assets to generate funds.
Debt Repayment: Money from asset sales goes toward paying creditors according to legal priorities.

For Canadian Motor Freight Ltd., this process began when Canadian Western Bank sought the court’s help to recover their $20+ million. The receiver was appointed to manage the company’s assets, including the valuable truck fleet that later became the center of the contempt case.

Why Court Orders Must Be Followed

The Canadian Motor Freight Ltd. case highlights a crucial aspect of our legal system: court orders aren’t suggestions – they’re commands that must be obeyed. There are several reasons why following court orders is essential:

Legal Consequences

As seen with Canadian Motor Freight Ltd. and United Group, failing to follow court orders can lead to:

Being found in contempt of court
Financial penalties
Potential jail time for individuals
Damage to business and personal reputations

System Integrity

Our legal system works only if people respect court authority. If people could pick and choose which orders to follow, the entire system would break down. The Court of Appeal emphasized this point in its ruling on this case.

Fair Resolution of Disputes

Court orders ensure that conflicts are resolved fairly. In receivership cases like Canadian Motor Freight Ltd., the process helps ensure that creditors are treated according to established legal priorities rather than allowing some parties to gain unfair advantages.

The Impact on the Trucking Industry

While the Canadian Motor Freight Ltd. case focuses on one company’s struggles, it raises questions about the broader Ontario trucking industry. The trucking sector faces numerous challenges:

Rising Costs

The financial documents from Canadian Motor Freight Ltd. highlight the significant costs of running a trucking operation:

Fuel costs in the millions
High insurance premiums
Equipment financing payments
Maintenance expenses

Thin Profit Margins

Trucking companies often operate on slim profit margins, making them vulnerable when costs rise or when economic downturns reduce shipping demand.

Competitive Pressures

The logistics industry is highly competitive, with companies often underbidding each other to win contracts, sometimes at unsustainable rates.

Regulatory Requirements

Trucking companies must comply with numerous regulations regarding safety, driver hours, vehicle maintenance, and environmental standards, all of which add to operational costs.

While we can’t say from this single case whether the entire Ontario trucking industry faces similar problems, the Canadian Motor Freight Ltd. situation highlights the financial pressures that can push logistics companies to the breaking point.

Lessons from the Canadian Motor Freight Ltd. Case

The story of Canadian Motor Freight Ltd. offers several important lessons for businesses and individuals:

1. Court Orders Are Non-Negotiable

The primary lesson is that court orders must be followed. The Court of Appeal made it clear that orders “are not to be stalled, and they are not to be negotiated.”

2. Transparency with Creditors is Essential

Canadian Motor Freight Ltd.‘s provision of false financial information to CWB contributed to its problems. Being honest with lenders about financial difficulties might lead to workable solutions before receivership becomes necessary.

3. Legal Problems Compound When Ignored

What started as financial difficulties for Canadian Motor Freight Ltd. escalated into contempt of court findings when company leadership tried to hide assets rather than comply with the receivership process.

4. Expert Help is Valuable During Financial Distress

Companies facing financial problems should seek qualified legal and financial advice early. Professional guidance can help navigate difficult situations and potentially avoid the more severe consequences of receivership.

Conclusion: Respect for the Legal Process

The Canadian Motor Freight Ltd. receivership saga demonstrates the serious consequences that can follow when court orders are ignored. From the initial financial troubles to the contempt findings and appeals, this case reinforces a fundamental principle of our legal system: court orders must be respected and obeyed.

For businesses facing financial difficulties, the case serves as a cautionary tale about the importance of transparency, cooperation, and compliance with legal processes. While financial problems are challenging, attempting to hide assets or obstruct court-appointed receivers only makes the situation worse.

The Court of Appeal’s firm stance in upholding the contempt findings against Canadian Motor Freight Ltd. and United Group sends a clear message about the importance of court authority in ensuring that financial disputes are resolved fairly and according to established legal procedures.

As we follow developments in the trucking and logistics industry, the Canadian Motor Freight Ltd. case will likely be remembered as an important example of how not to handle a company’s financial crisis and the serious consequences that can follow when court orders are defied.

I hope you’ve found this Canadian Motor Freight Ltd. Brandon’s Blog helpful. If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance.

At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

Tags accounts receivable, Asset Recovery Order, Canadian Motor Freight, Canadian Motor Freight Ltd., Canadian Western Bank, consistent losses, Contempt of court, court appointed receiver, court orders, fleet of trucks, interim receiver, Ira Smith Trustee, logistics company, Ontario trucking industry, receiver, receivership, tax sale proceedings, trucking company, United Group of Companies

Brandon Blog Post

THE CANADIAN RECEIVERSHIP EASY BEGINNERS GUIDE

Post author By Brandon Smith
Post date September 27, 2021

receivership

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

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

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

**What is Receivership?**

Last week I wrote an easy beginner’s guide on bankruptcy. This Brandon Blog is for anybody interested in finding out what type of insolvency process receivership is and how it differs from some other insolvency processes. I will explain the receivership process, provide an overview of what happens in a receivership, explaining what is sought to achieve, and the consequences of receivership.

Receiverships occur when a secured lender enforces its security to recover loans that have been defaulted on by a borrower. Secured creditors appoint an insolvency trustee to serve as receiver or receiver-manager depending on the terms of their security documents when the corporate debtor defaults.

Receivers and secured lenders can enter into a private contract appointing a receiver. Alternatively, the secured lender may seek an order from the court appointing a receiver. I’ll talk more about that shortly.

**What Does Going into Receivership Mean?**

If the corporate debtor defaults on a secured loan, the creditor may be entitled to appoint a receiver to collect their money. In Canada, “Section 244” notices are specific forms of notification that secured creditors must send to defaulting companies.

The notice specifies the assets covered by the security, the amount owed by the company in default, and that the secured creditor has the right to enforce the security after 10 days. The debtor company in default can consent to the appointment of the receiver before the expiration of the 10 day notice period.

A Section 244 notice is prescribed under the Bankruptcy and Insolvency Act (Canada) (BIA), and it is usually the last notice a creditor receives before the receiver takes possession of the debtor’s assets, properties, and undertakings.

Receivers then liquidate the assets of a business in order to pay secured creditors.

**How Receivership Works**

Parliament amended the BIA insolvency legislation in 1992 by enacting Part XI. BIA sections 243 through 252 to deal with secured creditors and receivers. Prior to that time, there was no federal statute insolvency legislation dealing with receivership matters. These provisions provide information about the court that hears bankruptcy and insolvency cases control over receivership matters that involve all or substantially all of the inventory, the accounts receivable, or the other property of a debtor. There are also restrictions imposed on the duties of secured creditors and receivers. It also stipulates that only a licensed insolvency trustee can act as a receiver. Part XI applies to both privately-appointed and court-appointed receivers.

These sections do not confer any powers available to a trustee of a bankrupt estate on secured creditors or receivers. Only those powers conferred upon the receiver in the appointment letter are granted to private receivers, and those are the powers specified in the security instrument. However, the receiver may also exercise certain statutory powers. If certain powers are required to administer the estate but are omitted under the security instrument, a receiver cannot act. Receivers are generally appointed by the secured creditor pursuant to security that at least states:

the collateral secured under the security; and
the receiver has the right to dispose of the collateral, including operating the insolvent debtor‘s business.

In a court-appointed receivership, the powers of the receiver come from the receivership appointment court order appointing the court-appointed receiver.

Receivership: Notice and Statement of the Receiver

From the 1992 amendments to the BIA, a receiver is required to provide notice to all known creditors of an insolvent debtor in receivership. Previously, creditors were not required to be notified.

When the receiver has become the receiver of an insolvent debtor‘s property, the receiver must provide notice of receivership as soon as reasonably possible but within 10 days of its appointment. Notice of the receivership must be sent to all creditors, the Office of the Superintendent of Bankruptcy and the insolvent debtor.

If the debtor is also bankrupt, rather than sending the notice to all creditors, the receiver sends the notice to the bankruptcy trustee. Since the creditors are already represented in corporate bankruptcy by the Trustee, the bankruptcy process will deal with them.

A receivership notice states, among other things, that the receiver has been appointed, whether it is a private appointment or a court appointment, and what the receiver’s plan of action is. Additionally, it contains a list of all known creditors.

As part of the receivership process, the receiver must provide interim reports every six months as well as a final report when the receivership is concluded. A copy of the receiver’s final receipts and disbursements statement must also be included in the final notice.

**What’s The Difference Between a Court-Appointed Receiver and a Privately Appointed Receiver?**

A court-appointed receiver vs. a privately appointed receiver is something people always want to know the answer to. I will explain the difference to you. It is pretty simple. Based on what I have already written, you have probably guessed it by now.

In a Court-appointed receivership, when the Court appoints a receiver, it does so through an Order on the application of the secured creditor. As between a secured creditor and a debtor, a privately appointed receiver is a receiver who is appointed by the secured creditor as provided in the Security Agreement. The Court-appointed receiver’s administration is supervised by the Court.

How is Receivership Different from Bankruptcy? Bankruptcy / receivership

Bankruptcy vs. receivership is also something people want to know. Many times, people confuse the two and use the terms receivership and bankruptcy, mistakenly, interchangeably. Often, receiverships and bankruptcy are confused, but the differences between the two are fairly straightforward. Whether it is a private appointment or a Court-appointed receivership, it is still different.

There are several main differences between bankruptcy and receivership. A receivership is a remedy available to secured creditors, as stated above. In order to enforce the secured creditor’s security rights against a defaulting debtor, a receiver is appointed.

Bankruptcy is a separate legal process. Trustees do not represent secured creditors in bankruptcy. Instead, they represent unsecured creditors. Corporate bankruptcy can occur simultaneously with a receivership of the same corporate debtor. The process of a corporate bankruptcy would be the subject of another Brandon Blog. To find other Brandon Blogs about corporate bankruptcy, use the search function at the top of this page.

What’s the Difference Between Receivership and Liquidation?

By now you know what the definition of receivership is. So I won’t repeat it because I do not want to sound like a broken record (younger people may not catch that reference!)!

Liquidation is not governed by the federal BIA. Rather, it is done under the provincial Business Corporations Act or Wind-Up Act. A liquidation is for a solvent company where the shareholders, Officers and Directors decide to cease business operations by running off any existing contracts and selling off the assets. The cash obtained is then used first to pay off the creditors. Any funds leftover is then distributed to the shareholders.

Just like a receiver, a liquidator can be appointed either privately by resolution of the Directors or by Court order. Liquidation is not a receivership or bankruptcy.

Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership

A device was created by the BIA for employees of a company that went bankrupt or into receivership. It does not apply to employees of a company trying to rightsize itself through reorganization; either a BIA Proposal or a Plan of Arrangement under the CCAA. The Wage Earner Protection Program Act (WEPPA) protects wages or benefits, including termination and severance pay, accumulated in the 6 months prior to a business going bankrupt or going into receivership.

The WEPPA ended up being enacted due to the federal government’s concern that when a company went bankrupt and employees were not paid their wages, there was rarely an opportunity for them to recoup any of their income. There are limits or caps on what employees can receive.

In the period in which amounts are past due to you, you will not qualify for WEPPA if:

you are a Director or Officer of the business;
or you have worked as a manager for the company
you are part of the management responsible for negotiating or refusing to pay amounts owed.

You may qualify if:

the previous employer has gone bankrupt or into receivership.
The firm owes you wages, salaries, vacation pay, or unreimbursed costs throughout the six months prior to the date of bankruptcy or receivership.

When an employer enters bankruptcy or receivership, the WEPPA provides funds to employees owed money. Those employees who qualify are paid as soon as possible. An employee’s qualifying earnings are equal to seven times their maximum regular insurance earnings under the Employment Insurance Act. According to Service Canada, the maximum amount of $56,300 a year is the limit for insurable earnings as of January 1, 2021. Thus, in 2021 the maximum amount a former employee can claim under WEPPA is $7,578.83.

Trustees and receivers are required to inform employees about the WEPPA program and provide information about amounts due. In the event of bankruptcy or receivership, trustees, as well as receivers, have 45 days to submit to Service Canada the Trustee Information Forms showing the amounts owed to each employee.

In other words, WEPPA‘s payment for former employees is something, but it may not be enough to fully compensate each. As a result of the amount paid by Service Canada, which administers the employment insurance system, $2,000 per employee is a super-priority against the company’s current assets. All remaining amounts paid to each employee, up to the maximum, are unsecured claims.

Receivership summary

I hope you found this receivership Brandon Blog informative and that the differences between receivership, bankruptcy, restructuring and liquidation legal proceedings are now clearer. Because it all has to do with corporate insolvency, the provincial Bankruptcy Courts also deal with receivership matters to adjudicate under the applicable insolvency law.

With too high debt levels and not enough wealth, you are insolvent. You can choose from several insolvency processes to get the debt relief that you need and deserve. It may not be necessary for you to file for bankruptcy.

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

If you’re thinking about bankruptcy, you’re probably in a situation where you’re overwhelmed, frightened, and feel like you’re alone. That’s natural and it is not your fault.

It’s good that you’ve come to this site, where you’ll find answers to your questions, sort through your options, and discover that you can get help. You’re not alone, and the professionals at Ira Smith Trustee & Receiver Inc. are committed to helping you find a debt solution that’s best for you.

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

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

You are under a lot of pressure. Our team knows how you feel. You and your financial and emotional problems will be the focus of a new approach designed specifically for you. With our help, you will be able to blow away the dark cloud over your head. We will design a debt settlement strategy for you. We know that we can help you now.

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

Because of this, we can develop a new method for paying down your debt that will be built specifically for you. It will be as unique as the economic problems and discomfort you are experiencing. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

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

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

Tags bankrupt estate, Bankruptcy, Bankruptcy / receivership, bankruptcy and insolvency, bankruptcy and insolvency act canada, bankruptcy process, Bankruptcy vs. receivership, BIA, corporate debtor, corporate debtor defaults, court appointed receiver, court-appointed receiver vs. a privately appointed receiver, Court-appointed receivership, creditor pursuant, creditors, debtor company, debtor defaults, Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership, How is Receivership Different from Bankruptcy, How Receivership Works, insolvency legislation, insolvency trustee, insolvent debtor, licensed insolvency trustee, Notice and Statement of the Receiver, Office of the Superintendent of Bankruptcy, private receiver, Privately-appointed receivers, receiver, receiver manager, receivers, receivership, receivership process, section 244 notice, secured creditors, secured lender, secured lenders, secured loan, trustee, unsecured creditors, Wage Earner Protection Program Act, WEPPA, What Does Going into Receivership Mean, what is receivership, What's The Difference Between a Court-Appointed Receiver and a Privately Appointed Receiver, What's the Difference Between Receivership and Liquidation

Brandon Blog Post

WHAT DOES RECEIVERSHIP MEAN FOR 1 BETTER GUARANTOR BANKRUPTCY DISCHARGE

Post author By Brandon Smith
Post date August 18, 2021

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

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

what does receivership mean

What does receivership mean: Receivership is for secured claims

What does receivership mean? A receivership is an enforcement proceeding that helps secured creditors recover secured debts on debtor defaults on loan payments from troubled companies. There are two types of receivers and receiverships: Privately-appointed receivers and court-appointed receivers.

As you can tell from the title of this Brandon Blog, I am not going to be writing about receiverships. You can take a look at my April 14, 2021, Brandon Blog titled “WHAT IS A RECEIVERSHIP? OUR COMPLETE GUIDE TO RECEIVERSHIP SOLUTIONS” to read all about what receiverships are.

What does receivership mean? It is a remedy for secured creditors.

I want to go through two more concepts quickly, and then I will get to what I really want to talk to you about today.

What does receivership mean: Bankruptcy vs. receivership

Despite the fact that receivership and bankruptcy sometimes get used interchangeably, they are not the same thing. A bankruptcy proceeding and a receivership proceeding are both legal actions conducted under the Bankruptcy and Insolvency Act (Canada) (BIA) and governed by the Office of the Superintendent of Bankruptcy (OSB). According to the BIA, either a receiver or a bankruptcy trustee in Canada needs to be a licensed insolvency trustee, whose license is granted and whose actions are supervised by the federal government’s OSB.

Here is where the similarities end. In a receivership, a secured creditor would either hire a receiver privately or ask a court to place a company into receivership and appoint one to liquidate the collateral they have against the debtor. According to the Canadian bankruptcy process, either the person or company voluntary files for bankruptcy with a licensed insolvency practitioner, or one or more unsecured creditors apply to the Court for the appointment of an insolvency trustee to administer the bankruptcy Estate.

Licensed insolvency trustees are needed in both cases. The receivership procedure is a secured creditor’s remedy and bankruptcy is an unsecured creditor‘s remedy. To read up more on the bankruptcy process, look at my September 30, 2020, Brandon Blog “DECLARE BANKRUPTCY: A COMPLETE GUIDE ON WHAT IS IT LIKE TO DECLARE BANKRUPTCY“.

What does receivership mean? Not the same as bankruptcy.

Employee Rights in Bankruptcy Protection and Bankruptcy⁄Receivership

Bankruptcy protection can be gained to try to make a troubled company stable and then return the company to profitability by filing pursuant to either the BIA or the Companies’ Creditors Arrangement Act (CCAA), employees retain their right to unpaid wages, vacation pay, and severance or termination pay. There is no difference between filing and not filing. They are unsecured creditors of a troubled company, and the company directors are personally responsible for amounts owed to employees.

For the company in receivership or bankruptcy, the employees do have greater rights. The receiver of a company in receivership must register with Service Canada under the Wage Earner Protection Program Act (WEPPA) for the Wage Earner Protection Program. This program provides some compensation to eligible employees who are owed money by a bankrupt or receivership company.

To read more about WEPPA, take a look at my February 10, 2020 Brandon Blog, “SEVERANCE PAY ONTARIO & BANKRUPTCY-BARRYMORE FURNITURE UNPAID WORKERS ANGRY“.

So what does receivership mean to an employee with unpaid wages? It means they can claim a priority and get paid by Service Canada.

***What does receivership mean: Receivership – a typical appointment***

Now I will get to what this Brandon Blog is actually about. In Canada, it is the norm for secured creditors advancing loans secured against company assets, to also take a personal guarantee on the same debt from the principals of the company. In all entrepreneurial companies in Canada, that is at least the president running company affairs. If the lender-secured creditor suffers a shortfall from the liquidation of the company assets, the lender then looks to the guarantor(s) of the company debt to make good on the lender’s loss. Many times the company president/guarantor has no choice but to file consumer bankruptcy.

I was involved in a bankruptcy discharge hearing for one of our personal bankrupts in April 2021. He caused his company, being its sole Director, to file for bankruptcy with another Trustee. That same Trustee was also appointed as the company’s private receiver by the secured creditor. The company president provided the secured creditor with a personal guarantee.

Realizing that they would suffer a shortfall from the company situation, rather than suing on their personal guarantee, they approached us to consent to act as the Trustee in a Bankruptcy Application against the company president. We consented and the company president ultimately consented to a Bankruptcy Order being made to put him into bankruptcy with my Firm as the Trustee.

What does receivership mean: The bankruptcy of the guarantor

We administered the consumer bankruptcy. There were some assets to realize upon which we did. One realization required court approval as we were selling seat licenses and the right to purchase tickets for the Toronto Maple Leafs to a related party. The bankrupt person’s largest single consumer creditor was Canada Revenue Agency for unpaid income tax. The company in receivership was also a creditor as the president owed the company money. The secured creditor of the company was also an unsecured creditor of his in his personal bankruptcy for the personal guarantee on the shortfall.

The known creditors each filed their respective proof of claim in his bankruptcy, including the company by its privately-appointed receiver. We believed that the company by its receiver was a creditor for the amount of the shareholder loan owing to the company. The proof of claim they filed was for a much larger amount. As Trustee, we neither admitted nor disallowed any proofs of claim filed in this bankruptcy estate. The Trustee would have to take a cold hard look at the receiver’s proof of claim at some future date it is determined that a dividend will be paid to the creditors in this bankruptcy estate, which is highly unlikely.

What does receivership mean: The receiver opposes a bankruptcy discharge

Only one unsecured creditor opposed the bankrupt’s discharge. That was the receiver, or more correctly, the company in receivership by its privately-appointed receiver. The Trustee had not opposed. The lender, as an unsecured creditor, did not oppose either along with the other consumer creditors.

As I mentioned, in April 2021, the discharge hearing was held before the Master sitting as Registrar in Bankruptcy Court. The court raised a novel issue. Does the receiver have the standing to oppose the bankrupt’s discharge? The court allowed the hearing to be completed and allowed the parties to file further submissions, subsequent to the hearing, on this issue. Submissions were received from us, the
Trustee and from the Receiver in mid-May, 2021. The bankrupt took no position on the issue.

Does the Receiver have standing to oppose the bankrupt’s discharge?

Here is what I wrote to the court.

The security documents under which a privately-appointed receiver is appointed will determine if an unsecured amount owing by a bankrupt debtor is an asset secured by security held by a creditor over the assets of another party. If so, then the privately-appointed receiver has the right to file a proof of claim in the debtor’s bankruptcy as part of attempting to realize upon that asset forming part of the secured creditor’s collateral.

In doing so, the privately-appointed receiver is acting as Agent for the secured creditor. If the privately-appointed receiver files a proof of claim in the bankruptcy that is not disallowed by the licensed insolvency trustee administering the bankruptcy estate, then, in order to oppose the discharge of the bankrupt, the privately-appointed receiver must also be able to be the Agent for the debtor in receivership.

If the security under which the privately-appointed receiver is appointed allows for that receiver to operate the business of the debtor in receivership, then that receiver has the ability to be an Agent of the debtor in receivership and bring a claim in the name of that debtor.

In this matter, of the various pieces of security held by the secured creditor, only the General Security Agreement (the “GSA”), allows a receiver appointed in writing under it to operate the business of the debtor company. Under the GSA, the privately-appointed receiver has the ability to act as both Agent of the secured creditor and Agent of the company. The appointment letter appointing the receiver confirms that the appointment is under all security held, including the GSA.

Therefore, my opinion was that although we have concerns about the amount being claimed, the receiver has the ability to both file a proof of claim in this bankruptcy and oppose the discharge of the bankrupt as an Agent of the company. I believed it aided the administration of this bankruptcy to allow the receiver to oppose because it is able to draw the attention of the court to conduct of the bankrupt of which the court otherwise might not be aware of.

Finally, I advised the court that if there still was concern that it is formal defect or irregularity section 187(9) of the BIA, the court can determine that such formal defect or irregularity will not invalidate the opposition to the discharge of the bankrupt.

What the bankruptcy court decided

The court accepted our submission and agreed with it. The court continued to be skeptical of the amount of the company’s proof of claim filed by the receiver. The court noted that as Trustee, I reported that the bankrupt has fulfilled all statutory duties. Income and expense statements were provided and there was no surplus income payable.

On a general perusal of the Trustee’s s. 170 report, the Trustee does not report any significant misconduct or concerns but reserved its rights as to its position on the discharge pending the hearing and matters disclosed therein. In the court’s view, the Trustee’s non-opposition to discharge is a factor favouring the bankrupt’s discharge. After considering all facts, the court gave the bankrupt an absolute discharge from bankruptcy.

What does receivership mean summary

I hope that you found this what does receivership mean Brandon Blog helpful in describing the role of a privately appointed receiver especially in opposing the discharge of the bankrupt guarantor of the company’s secured debt. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

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

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Brandon Blog Post

LICENSED INSOLVENCY TRUSTEE VAUGHAN: THE COMPLETE GUIDE FOR YOUR HAPPY DEBT FREE L1FE

Post author By Brandon Smith
Post date August 11, 2021

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

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. Through the use of video meetings, we can help you even if you do not live close to our office in the Jane Street Hwy. 7 area. It is just like we are coming to you!

The bankruptcy trustee in Vaughan: We transformed into a licensed insolvency trustee Vaughan

The bankruptcy trustee in Vaughan went through a metamorphosis similar to a caterpillar becoming a butterfly. The term “bankruptcy trustee” turned into a “licensed insolvency trustee“. The licensed insolvency trustee designation was mandated to all licensed trustees by the Industry Canada Office of the Superintendent of Bankruptcy (OSB). The OSB licenses and supervises the activities of all licensed insolvency trustees across Canada. This includes us as a licensed insolvency trustee Vaughan, Ontario.

The purpose of this Brandon blog is to offer an overview of our role in the Greater Toronto Area with our licensed insolvency trustee Vaughan insolvency trustee firm head office.

Role of a Licensed Insolvency Trustee Vaughan (formerly called Trustee in Bankruptcy Vaughan)

A licensed insolvency trustee Vaughan can fulfill various roles. It all starts with providing a no-cost consultation for a person or company that finds themselves in a troubling financial situation that worries them about their prospects for a bright financial future.

Due to the various roles, a licensed insolvency trustee Vaughan can play, we are also known as “receivers”, “trustee in bankruptcy” or “financial restructuring professionals”. We are appointed when a company or person is financially distressed and either has no other options to get out of financial difficulty and is unable to pay its bills. A licensed insolvency trustee is the only party licensed by the Government of Canada to perform a federal government-approved debt settlement plan, being a consumer proposal consolidation.

As a licensed insolvency trustee Vaughan firm, there are different roles we can play.

Find the right option with the help of a Licensed Insolvency Trustee Vaughan

Personal situation insolvency

For individuals who are insolvent, we can provide and act in the following:

A no-cost initial consultation to provide advice about debt relief.
Credit counselling. to help with your household budget and determine if you really need one of the available debt relief options.
Consumer Proposal – Toronto and GTA – Act as Consumer Proposal Administrator to conduct a Consumer Proposal Process for people who owe $250,000 or less in unsecured debts (not including any debts registered against their home) who wish to eliminate their debt and wish an alternative to bankruptcy so that they can avoid filing bankruptcy. This is a government-approved interest-free debt settlement plan that can be paid over as much as five years.
Division I Proposal – Toronto and GTA – This process is not quite as streamlined as a consumer proposal, but it is for people who wish to eliminate their debt while avoiding personal bankruptcy.
These 2 proposal remedies are the only accredited government debt relief programs in Canada.
Personal bankruptcy – Toronto and GTA – As a licensed insolvency trustee Vaughan, we can of course assist anyone who wishes filing for bankruptcy. In your no-cost consultation with us, we first get to know you and your financial situation in order to determine if you qualify for one of the bankruptcy alternatives. If not, we will discuss the entire bankruptcy process with you, including the cost of bankruptcy. If you wish to proceed, we will accept your assignment in bankruptcy.

All collection activities against you cease when you make an assignment in bankruptcy, or file a debt settlement restructuring proposal. Legal action against you may include wage garnishment, collection calls, or a legal action against you. You get legal protection as a result of the stay of proceedings afforded by an insolvency filing.

The two most common types of debt we encounter in our personal insolvency practice are credit card debt and income tax debt. We have successfully handled for clients serious negotiations with Canada Revenue Agency in order to achieve debt settlement for people with a financial history of income tax debt.

Corporate insolvency

For companies, and especially entrepreneurial family businesses that are insolvent, we can provide and act in the following:

A no-cost initial consultation to provide advice about debt restructuring options.
Restructuring & Turnarounds.
Business analysis, business review and monitoring.
Receivership – Toronto and GTA – Only a licensed insolvency trustee can act as a receiver on behalf of a secured creditor. As a licensed insolvency trustee Vaughan, we act as a privately-appointed receiver on behalf of a secured creditor. We also act as a court-appointed receiver upon the application to a court by a secured creditor or other stakeholders.
Winding-Up and Liquidator – Toronto and GTA – For solvent companies that wish to wind up operations through a legal process, we act as either privately appointed or court-appointed Liquidator.
licensed insolvency trustee vaughan

Selecting The Right Licensed Insolvency Trustee in Vaughan

Experience and professionalism

You might not find the expertise to solve your financial difficulties with someone just around the corner. You can start your search for the right Trustee by visiting the website of the Canadian Association of Insolvency and Restructuring Professionals. Both Ira Smith and Brandon Smith are members of the Canadian Insolvency and Restructuring Professional Association. It shows an individual’s commitment to staying up to date with all the latest industry advancements by belonging to this organization. Check the website of the OSB to ensure that the Trustees you are considering are not suspended or under file management by the regulator.

Interacting with them on many levels is essential

As a beginning, they must be able to quickly understand your needs and desires, as well as provide you with a realistic plan that can be followed. If you have issues or concerns, they also need to be available to you. Look for their interest in you. How enthusiastic are they about their industry? Do you really feel their compassion for you? Do you feel you are going to get along on an inter-personal basis with this person?

That’s exactly how you measure enthusiasm. The most effective solutions and suggestions will be offered by a knowledgeable insolvency trustee. You may not find this type of person within walking distance of your home or workplace.

Licensed insolvency trustee Vaughan: Are you able to agree on the same concepts?

It is not a totally free service to engage a professional trustee. The complexity of your situation could affect the bankruptcy cost. Your trust in a bankruptcy trustee is diminished if you feel they view you as just another dollar sign. Look for those who seem to have similar values to you. It may not be the closest to your home to find such a licensed insolvency trustee.

Websites for licensed insolvency trustee Vaughan

Searching for “bankruptcy trustee near me” or “licensed insolvency trustee Vaughan” on a search engine today will bring up various websites to visit. How does the website make you feel? What bankruptcy FAQs do they provide? Can you see pictures of the people you would deal with? From their blog, do they demonstrate that they have a deep knowledge base?

You can meet with more than one Trustee

Unless you sit across the table from him or her, you won’t know which one is the right fit for you. Comparing two bankruptcy trustees is a good idea. You want to be able to compare two or more for your own validation purposes. The one you feel best about is the one to go with. Trust your gut!

3 Best Licensed Insolvency Trustees in Vaughan, ON

Throughout the years my firm has been inspected for 50 points, including reviews, ratings, reputation, history, complaints, satisfaction, trust, cost, and general excellence. The results have allowed us to rank consistently among the top 3 Best Licensed Insolvency Trustees in Vaughan, ON.

Licensed insolvency trustee Vaughan summary

I hope that you found this licensed insolvency trustee Vaughan Brandon Blog helpful in describing our role as debt professionals and my thoughts on how to go about choosing the one you think is the best fit for anyone in a financial crisis. Problems will arise when you are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt.

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

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

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

Call us now for a no-cost consultation.

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

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

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Brandon Blog Post

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

Post author By Brandon Smith
Post date August 2, 2021

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

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

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

Vesting order and reverse vesting order

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

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

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

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

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

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

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

reverse vesting order

Reverse vesting order as a third restructuring tool

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

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

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

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

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

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

Why is reverse vesting order important?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reverse vesting order and distressed M&A opportunities

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

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

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

Call us now for a no-cost consultation.

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

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

Tags 9354-9186 Quebec inc. c. Callidus Capital Corp., Appellate Court, Bankruptcy, Bankruptcy and Insolvency Act, Canadian insolvency, CCAA, CCAA judge, CCAA proceedings for distressed M&A transactions, CCAA supervising judge, commercial insolvency, Companies’ Creditors Arrangement Act, corporate insolvency, corporate reorganization, corporate restructuring, court-approved sale, covid-19 pandemic, debtor company, debtor corporation, distressed businesses, going-concern value, insolvency processes, insolvent, insolvent companies, Ira Smith Trustee, leave to appeal, Nemaska entities, Nemaska Lithium Inc., newly incorporated non-operating company, newly incorporated residual corporation, plan of arrangement, plan of compromise, plans of arrangement, receivership, remedial objectives, restructuring tool, reverse vesting order, Reverse vesting order as a third restructuring tool, Reverse vesting order issued by Québec Superior Court after first contested hearing, Reverse vesting order – A powerful tool for maximizing recovery in complex insolvencies, sale or investment solicitation process, secured creditors, SISP, Supreme Court of Canada, The decision and formal recognition of reverse vesting order, undesirable assets, unsecured creditors, unwanted assets, vesting order, vesting orders, Why is reverse vesting order important

Brandon Blog Post

WHAT IS A RECEIVERSHIP? OUR COMPLETE GUIDE TO RECEIVERSHIP SOLUTIONS

Post author By Brandon Smith
Post date April 14, 2021

what is a receivership?

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

What is a receivership?

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

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

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

What is a receivership? Examples of receivership in a sentence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Court Appointed Receivers vs. Privately Appointed Receivers

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

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

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

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

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

What is a receivership? Duties of a receiver

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

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

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

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

I want to summarize the difference between company receivership and bankruptcy

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

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

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

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

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

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

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

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

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

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

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

Call us now for a no-cost consultation.

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

Tags 10-day notice of intention to enforce security, bankrupt, Bankruptcy and Insolvency Act, court appointed receiver, duties of a receiver, Examples of receivership in a sentence, insolvent, Ira Smith Trustee, is receivership the right solution for you, legal proceeding, liquidating receivership, Lister v. Dunlop, operating receivership, privately appointed receiver, receivership, receivership and bankruptcy, secured creditor, what is a receivership, what is receivership

Brandon Blog Post

COURT APPOINTED RECEIVERSHIPS: THE EASIEST WAY TO AVOID COSTLY MISTAKES

Post author By Brandon Smith
Post date December 7, 2020

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

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Court appointed receiverships introduction

I have written several blogs before on receivership, be they court appointed receiverships or private appointments. The purpose of this blog is to discuss a recent court decision involving a big mistake made by a court-appointed receiver and why the court would not let them fix their error. That mistake cost them big time!

Some previous court appointed receiverships blogging

In reviewing the court case, three previous blogs of mine on court appointed receiverships came to mind:

The first one dealt with certain procedural matters in court appointed receiverships when the receiver sells real estate.

The second blog dealt with factors a court-appointed receiver must disclose to the court in seeking court approval for a sale of assets.

The third one was about what happens when a court-appointed receiver applies to the court for some relief without knowing all the details of the story they are telling the court! That is very embarrassing for receivers in court appointed receiverships!

The recent case I will shortly speak about reminded me of these three previous blogs. You will see the connection very soon, I promise.

What happens when a company goes into receivership?

When the company enters into receivership, senior management and the Directors shed most of their authority for decision making. The Directors’ general company obligations of preserving corporate records remain, yet any type of decision-making regarding the running of the business or its assets have vanished.

That is now the role of the receiver. This is true for a privately appointed receiver but it is especially so in court-appointed receiverships. That is because the court is now supervising all the company’s affairs and assets through its court officer, the receiver.

Responsibilities concerning the business in a practical sense stop upon the receiver being appointed. Their recommendations and help are only needed if requested by the receiver. They definitely will not be paid for any kind of initiative unless the receiver concurs in writing to make funds available for them in return for their services.

What are the duties of a receiver?

The receiver’s first task is to take possession of and control all of the assets, properties and undertaking covered by the secured creditor’s security in a private receivership. In court appointed receiverships, the receiver’s powers and actions come from the authority given to it by way of the court order appointing the receiver.

The receiver needs to make a decision whether it can get a greater amount for the assets if it runs the business. Conversely, the receiver may choose that the danger of operating the business is not worth it in terms of any type of upside value that may be gained from running the business.

The receiver after that creates a strategy for the running or the shuttering of the business as well as for the eventual sale of the assets. The kind of receivership appointment and the nature of the business operations and assets will dictate what approach the receiver will take. In the meantime, the receiver must protect and conserve all the assets, including making sure there is sufficient insurance coverage in place.

In a private appointment, the receiver requires to obtain the authorization of the secured creditor who appointed the receiver prior to implementing its plan and taking actions concerning the running of the business and the sale of the assets. In court appointed receiverships, the receiver requires the approval of the court.

The Court appointment case

This court case dealt with some very unique issues. The receiver was originally appointed by the court under the Courts of Justice Act (Ontario) and the Bankruptcy and Insolvency Act (Canada). The receiver was making a motion for advice and directions about it wanting approval for its fees and disbursements since the last approval order. It also wanted approval to make an interim distribution.

That seems pretty routine. It was the receiver’s fifth report to the court. The motion was opposed by the company whose assets were seized in the receivership. There was only one problem that caused that party to oppose the receiver’s motion. However, it was a humungous problem this receiver caused itself.

The problem is that the receiver obtained approvals from the court based on the information contained in its fourth report to the court and now the receiver was asking for something different!

***Court appointed receiverships*: A brief history of this court-appointed receivership**

The major secured creditor who made a secured loan against a real estate project under both mortgage security and a general security agreement began court proceedings by making an application to the Ontario Superior Court of Justice Commercial List for the court appointment of a receiver. On June 22, 2017, Justice Conway released an Order appointing the receiver in this matter (the Receiver).

The Order followed the model receivership order format and had the usual provisions. Specifically, it mentioned in paragraph 18 that “the Receiver’s Charge shall form a first charge in priority to all security interests, trusts, liens, charges and encumbrances, statutory or otherwise, in favour of any Person….”.

The Receiver performed its duties and filed reports with the court on a timely basis and received the necessary approvals along the way. So far so good with the first three court reports.

The fourth report was OK too

In November 2019 the Receiver brought a motion for Justice Dietrich to approve its Fourth Report and also its Supplementary Fourth Report. The same stakeholder currently opposing the Receiver’s motion for advice and directions also challenged certain of the Receiver’s recommendations contained in its Fourth Report.

It turns out that from the Receiver’s efforts and sale of the real property, there was not only enough money to pay out all the secured creditors, but there were funds left over. This is a very unusual situation. So the Receiver came to court. One of the approvals it was seeking was its proposal to pay the claims of the unsecured creditors. This company opposed that relief claiming the unsecured creditors were statute-barred. The reason the company opposed this is simple. Whatever the unsecured creditors are not entitled to would presumably be available to flow to the shareholders of the company.

Justice Dietrich looked for further written materials on this issue from the parties which were received on March 16 and 31, 2020. Justice Dietrich considered all the material and released her endorsement on this issue on June 19, 2020.

court appointed receiverships

***Court appointed receiverships*: Justice Dietrich’s decision**

Justice Dietrich’s Order approved the Receiver’s Fourth Report and Supplementary Fourth Report (the Fourth Approval Order) as well as payment to the Receiver of its fees of $373,960.75 plus HST plus an accrual of $25,000 plus HST to finish the management of the receivership. The Order additionally authorized the Receiver’s legal fees of $85,218.23 plus HST and an accrual of $15,000 plus HST for concluding the administration of the receivership.

The Fourth Approval Order approved making payment to the unsecured creditors in the amount of $190,800.71. Those payouts were made without delay by the Receiver even prior to the appeal time for appealing the Fourth Approval Order expired. The remaining funds were to be paid out to the company who opposed the motion, or as the company may direct.

The Receiver made all the payments except for one. The funds to be paid to the company involved in the receivership, which was more than $1 million, had not been paid out to the company as of the date the Receiver came to court with its Fifth Report.

***Court appointed receiverships*: OOPS – We need a fifth report to court**

The Fourth Approval Order was settled with the consent of all stakeholders. That order was obtained on the basis that there was not much work left to do and it would be covered off by the approved fee accruals. The Receiver and its lawyer were to finish its work and then file a certificate with the court to advise the work was finished. The Fourth Approval Order also said that when the Receiver files the certificate with the court, that is the trigger that discharges the Receiver and ends the receivership. This is all standard stuff.

There now is only one huge problem. Subsequent to the Fourth Approval Order being issued and entered, the Receiver requested more money for its fee and its legal fees, well above what it told the court already. The further amount it was seeking was pretty close to an extra $100,000.

The Receiver then delivered a Fifth Report laying out the added costs asked for and also documenting an added HST Refund and accumulated interest. The Receiver acknowledged that it made an error. The Receiver also acknowledged that it could have brought this to everyone’s attention before the Fourth Approval Order was settled, issued and entered and the appeal period already has expired.

Personally, I call that more than an error. That is a huge problem. It is a major blow to the firms’ revenue and cash flow. If not resolved in the Receiver’s favour, it will most certainly cause much angst among the partners in the licensed insolvency trustee firm.

Court appointed receiverships: The Fifth Report To Court hearing and what the two parties said

The Receiver’s position was fairly simple. They really didn’t have much they could say at this stage, other than, OOPS! The Receiver submitted that the Receivership Order appointing the Receiver is clear. Unless the Court orders otherwise, the Receiver will obtain its reasonable fees and costs and those of its legal counsel. Those fees and costs are secured by a first ranking charge against the assets being administered in the receivership.

All other amounts come after this first charge. The Receiver went on to say that the Appointment Order and the Fourth Approval Order were therefore in conflict and the Appointment Order must prevail.

The company in opposing the Receiver’s motion had some pretty simple facts on its side. The court agreed with these facts. The court stated that:

The Receiver only brought this motion on in response to the company’s attempt to set down a date for its motion to compel the Receiver to make the $1 million-plus payment to it as directed by the Fourth Approval Order.
The company agreed to the settling of the Fourth Approval Order based on the Receiver’s submissions to the court that what it put in its Fourth Reports was everything and there was. There was nothing else getting in the way of making all the payments approved in the Fourth Approval Order.
The Fourth Approval Order was intended to be final and for that reason
incorporates the provisions of the Appointment Order. That is, it is open to the court to find that the Receiver has no capacity to request more fees since the clear objective of the Fourth Approval Order is to wrap up all issues including the discontinuation of the receivership.

The Receiver conceded that the details pertaining to the extra fees was known at the time the Fourth Approval Order was being settled and also after that. However, the Receiver took no particular actions to request them prior to the Order being settled and entered. The only action taken by the Receiver was this Motion for Directions supplied in reply to the company’s motion request to get paid what was already approved by the court.

The Commercial List court understood that the Receiver has undoubtedly made an error. The question the court needed to answer was who should pay for it – the Receiver or the company? The court decided that it should not be the company who settled the Fourth Approval Order understanding what its terms were, including, there was nothing standing in the way of it getting its money as already approved by the court.

The easiest way to avoid costly mistakes

Court appointed receiverhips, by their very nature, are complex administrations. Being a receiver or a receiver manager is a tough role. A court-appointed receiver must be fair and neutral to all parties as an officer of the court. Everyone is scrutinizing the decisions being made. Once a court-appointed receiver serves its motion materials, everyone goes through the receiver’s report with a fine-tooth comb. And rightly so.

It is not a good place to be when you make any kind of error in a public document. It is embarrassing and it makes everyone else wonder what other mistakes have you made? It is especially tough when your mistake short changes your firm out of the money that it has earned. These are awful circumstances.

By now you probably realize that you don’t have to be a licensed insolvency trustee to know the easiest way to avoid costly mistakes. Check, double-check and triple-check everything before you sign and release the report. As my carpenter friend says, “measure twice and cut once”.

Court appointed receiverships summary

I hope you have enjoyed this court appointed receiverships Brandon’s Blog. A sick insolvent company’s business might be saved by a debt restructuring.

Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. 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 about 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.

Tags appointment order, approval order, court appointed receiverships, court proceedings, Court-appointed receivership, duties of a receiver, first charge, Ira Smith Trustee, private appointment, receiver manager, receivership, secured creditor, security agreement