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Business Restructuring and Workouts Archives

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.

Stay of proceedings reorganization proceedings - its effects and duration

A debtor company seeking to reorganize its financial affairs has two powerful tools by which it can hold creditors at bay and stay collection proceedings while it formulates its reorganization plan. For debtor companies with significant debt, initiating proceedings under the Companies' Creditors Arrangements Act ("CCAA") may be the appropriate course. For debtor companies with debt under $5,000,000.00 (the threshold requirement for application of the CCAA), or for which the CCAA process is not appropriate, a proposal under the Bankruptcy and Insolvency Act ("BIA") may be the better course.

Corporate restructuring under the BIA and CCAA – Key differences

Two major pieces of legislation govern insolvency and bankruptcy in Canada – the Bankruptcy and Insolvency Act (BIA) and the Companies Creditors Arrangement Act (CCAA). Both allow insolvent corporations to file proposals in an effort to make alternate arrangements for settling outstanding debts. The two statues have many similarities but also a number of differences that can make either one more advantageous than the other in a corporate restructuring.

When proposals fail

An insolvent business has options other than bankruptcy. One such option is to pursue a proposal under the Bankruptcy and Insolvency Act. This temporary shelter affords the business an opportunity to devise a new plan or proposal to make to its creditors to manage debt while working to regain financial stability. In a successful proposal, unsecured creditors achieve a better recovery, and the debtor company is able to continue operating and avoid bankruptcy. However, not all proposals are successful, and a number of factors can cause a proposal to fail.

Insolvent home building business seeks new lease on life

When a company becomes insolvent, the demise of the business is not a foregone conclusion. This is illustrated in the case of a 60-year-old B.C. home building manufacturer Viceroy Home. Despite filing for bankruptcy protection last June, Viceroy is seeking to restart operations following a change in its ownership structure.

Creditor wants debtor company to plan for potential liquidation

In a previous post we looked at Essar Steel Algoma and its plans to seek protection under the Companies' Creditors Arrangement Act, a business when facing financial difficulty. Now another Canadian steel company, U.S. Steel Canada (formerly Stelco), is in creditor protections while it looks for a new owner. A previous effort to sell the business was unsuccessful and it recently sought court approval for a new sales process. A contentious issue is the role to be played by the company's former parent U.S. Steel, which claims to be owed $2.2 billion. 

Reorganizing a business under the CCAA

Financial difficulties need not result in a company going out of business. Depending on the circumstances surrounding a company's financial situation, it is possible that a reorganization or restructuring may be used to address the issue. For larger companies, this is provided for under the Companies' Creditors Arrangement Act (CCAA).

Steel company seeks creditor protection under the CCAA

Any business could face financial difficulties at some point. While the reasons for this can vary widely, there are ways in which a business might approach the matters in order to remain solvent. This is illustrated in the situation faced recently by a Canadian steel company.

Business struggling? Consult a lawyer to learn about options

Throughout the province of British Columbia, businesses of all types provide goods and services as well as employment. While many businesses succeed, there are a variety of reasons why financial difficulties could arise. When that happens, the first inclination of the business may be to assign itself into bankruptcy.

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