Court
Who can make
the proposal
How to
Commence
Notice
File Case Flow
Statements
Inspectors
Monitors
Proposal
Timelines
Stay of
Proceedings
Limit on Stay
Classify
Creditors
Creditor
Meetings
Required
Approval
Results
Rejections
Revisions
Court Approval
Liability
Advantages
Disadvantages
Conversion
BIA
Not until approval phase
Insolvent person, bankrupt, receiver, liquidator, TIB. Person defined broadly:
partnerships, corporations, unincorporated associations. Not banks, insurance co’s.
Consumer: debts excluding mortgage debt on principal residence < 250k (see 4.1))
Debtor files “notice of intention” (NOI) or a proposal to creditors that states intention,
name, address of licensed trustee (consented to act as proposal trustee), names of
creditors w/ claims amounting to >250$
Proposal trustee must send copy of NOI to known creditors of debtor co w/i 5 days
Debtor has 10 days from NOI to prepare and file projected cash flow statements, report
that is signed by trustee. 4.4.3. If don’t make these within 10 days, deemed bankrupt
Creditors may appoint < 5 inspectors of the estate to assist and instruct the trustee
After NOI, debtor has 30 days to file proposal with official receiver. If fail, automatic
assignment in bankruptcy. Extensions available – see 4.6.2.
Automatic but does not apply against secured creditors who gave notice, taken
possession or debtor consent. Creditor may seek lifting of stay via application court.
Stay applies to Crown claims (tax, CPP, EI), claims against directors. If debtor accepts
goods/services during stay, must pay make immediate payment. Exception: Stay does
not apply to regulatory bodies, eligible financial contracts, aircraft
6 months max to file the proposal after the NOI
Must make proposal to unsecured. May make to secured. If based on classes, must
have “commonality of interest”.
Proposal trustee call meeting of affected creditors within 21 days of filing of proposal.
At least 10 days before meeting, proposal trustee must send proposal, assets/liabilities,
creditors names, notice of date and time, proof of claim, proxy, voting letter
Double Majority: # majority of voting creditors and two thirds majority in $ amount.
Creditors in each class vote separately. Related creditors: only against.
If unsecured do not accept: proposal refused: automatic bankruptcy
If unsecured approve but secured reject: deemed accepted but secured can enforce
their security
Ok prior to votes being cast
Once double majority, trustee within 5 days makes appointment with the court for
hearing to approve. Notice to creditors of hearing must be made > 15 days before.
Prepare report for court. Court can accept or refuse. Must refuse if unreasonable. May
refuse if offences. See 4.14. Approval binding on all creditors. Court can cancel if
debtor fails to honour, injustice, delay, fraud. See 4.17
Proposal trustee: None as long as good faith / reasonable care
Bind all creditors, low costs
CCAA
Yes – must apply to the court
Debtor company (incorporated or income trust) where total claims against > 5M$.
Debtor company, creditor, or trustee can make the proposal. No banks, insurance
companies etc. Can be in proximity to insolvency
Commence in province where debtor company has head office via initial application to
the court by notice of application to SCJ.
No notice but “comeback clause” allows creditors to come back to amend terms.
Notice to secured creditors must be given if relates to DIP financing, admin expenses,
indemnification of directors. Also Indalex (SCC) says notice to pension required.
Initial application is supported with cash flow statements, report, financial statements
etc see 5.3.2
Court appoints monitors who must be a trustee. Monitor must within 5 days of initial
order post copy on its website, send notice to creditors >1k, entitled to access books
n/a
Not automatic. Court ordered so it is discretionary and flexile. This stay can not exceed
30 days. Same as BIA wrt Crown, directors, goods/services, regulatory body, aircraft.
Creditor can seek application to lift stay via application to court.
No Time Limit: can be extended via test. Onus on applicant to prove. See 5.4.3
Plan does not need to be made to unsecured creditors. Can be made to secured
creditors. Place into groups via “commonality of interest”. Debtor prefers < groups
Application to court for meeting. Court has discretion to grant or not. If court thinks
plan isn’t in the best interest of the creditors, court won’t grant
Same Double majority but every class of creditors must approve. Related creditors
may vote against.
If unsecured do not accept: stay of proceedings is lifted, creditors can pursue claims
If secured do not accept, can’t continue – must have approval of all classes of creditors
to whom plan was made
Up to time of voting. After meeting if no adverse effect
Court makes initial order based on initial application via a blacklined version of the
Standard Form Template CCAA Order. Court is not required to approve the plan even if
creditors approved it. Test: strict compliance, fair reasonable, nothing bad done
Court can order priority charges for administrative fees, directors fees, critical suppliers
– see 5.5
Monitor: None as long as good faith / reasonable care
Used for complex restructuring where flexibility is needed, recognized internationally,
longer stays available, less stigma, not automatic bankruptcy if plan is rejected
All creditors in a class need to be treated equally, proposal must be filed within 6
Increase fees, costs, greater uncertainty bc of court discretion, increased publicity,
months after NOI or else automatic bankruptcy, double majority, less flexible
smaller debtors cant get relief bc of 5M$ threshold,
You can convert from BIA to CCAA
You can not convert from CCAA to BIA
You can have concurrent procedures in both