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Vancouver Business Bankruptcy, Insolvency and Restructuring Law Blog

Shareholder disputes: Oppression remedies

Most businesses are carried on through incorporated companies, and when those companies have more than one shareholder, the relationship between the shareholders can go through difficulties. Disagreements about the direction of the business, or external challenges faced by the business, can give rise to shareholder disputes that can threaten the company's business and even its existence.

In this situation, achieving the best and fairest resolution of disputes is vital to all parties.

Redwater Case Update: Court of Appeal upholds l seek leave to appeal to Supreme Court of Canada

When an oil well operator becomes insolvent, a significant liability will often exist for "orphan wells," wells with environmental remediation costs which exceed any remaining value. Under provincial legislation, such remedial costs must be paid before even secured creditors recover any money. But does this legislation, having the goal of environmental protection, conflict with the priority regime under the federal Bankruptcy and Insolvency Act("BIA")?

Can a trustee in bankruptcy sell oil wells subject to this environmental regime for the benefit of secured creditors while disclaiming the orphan wells, or must the proceeds of sale go towards the costs of remediation?

Asset sheltering basics for business owners

The fruits of a business owner's lifetime of hard work can vanish almost instantly with the insolvency of a company. Unfortunately, in the heady, frantic days of business startup, many owners may be too focused on success to think about protecting themselves and their assets from the possibility of failure.

Asset sheltering strategies are designed to insulate entrepreneurs from the worst impacts of a business failure. Those strategies have the best effect if implemented at the start of the business venture as opposed to when a company is teetering on the brink of failure. In some cases, attempting to shelter or protect assets when the business is insolvent or near insolvency may be legally prohibited. Accordingly, early planning may make the difference in protecting the entrepreneur's investment from some creditors.

Shareholder dispute resolution

Most companies start out as closely-held entities, with a few principals holding all the shares and the key executive positions. Many successful businesses continue in this mode through decades of growth and change.

When serious shareholder disputes arise, they can be life-changing for company founders and for the business. In this situation, achieving the best and fairest resolution is vital to all parties.

Pursuing claims in bankruptcy

In a bankruptcy, the bankruptcy trustee is in charge of collecting on any claims held by the bankrupt, and is also given additional powers under the Bankruptcy and Insolvency Act (BIA) to attack transactions entered into prior to bankruptcy. But what happens when the trustee fails or refuses to pursue a claim?

Geoffrey Dabbs provides commentary on failed music festival.

Geoffrey Dabbs was interviewed by CTV News and the Vancouver Sun and Province for expert commentary on the recent bankruptcy of the Pemberton Music Festival.
See the CTV story at http://bc.ctvnews.ca/ontario-festival-offering-free-passes-for-pemberton-ticket-holders-1.3421452 and the Sun story at vancouversun.com/business/local-business/pemberton-producers-embroiled-in-lawsuits

Bankruptcy and creditors' rights

Subject to the provisions of the Bankruptcy and Insolvency Act (BIA), one or more unsecured creditors of a debtor may apply to the court for a bankruptcy order in respect of the debtor if:

  • The debt or debts owing to the creditor or creditors by the debtor is $1,000 or more; and,
  • If debtor has committed an act or bankruptcy in the six month period prior to the filing of the application with the court.

Restructuring proposals for smaller companies

In some circumstances, an insolvent company may be able to resolve its financial issues without resort to bankruptcy; where this is possible, the debtor and all stakeholders are usually better served through a restructuring than a bankruptcy. In general, a restructuring provides a better return to creditors than a bankruptcy, and permits a company to continue operating for the continued benefit of its creditors, customers, and employees.

Director liability during bankruptcy

When a company faces insolvency or bankruptcy, the directors (and sometimes officers) of the company can face personal liability for the company's debts. Although a properly incorporated company is a separate legal person and as a general rule its creditors have no personal claim against the company's directors, there are many exceptions to this rule.

Acquiring a distressed business

While a failing business may be burdensome to its current owners, acquiring the entity or its assets can be very attractive to onlookers. Such a purchase takes a competitor out of the market, enables substantial instant growth and ensures a negotiated cost that may be much lower than “organic” growth. Offsetting these attractions are the risks of distressed-business acquisition, including lack of recourse, which should be addressed through due diligence, valuation and negotiation.

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