Under the Companies' Creditors Arrangement Act it may be possible for a British Columbia business that carries debt of more than $5 million to establish protection from creditors. Among other things, that protection prevents creditors from petitioning the business into bankruptcy, seizing its property or otherwise trying to collect the money owed. While the stay that is issued is not permanent, it may be extended multiple times, provided certain qualifications are met.
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.
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).
Businesses of all sizes in Canada face financial difficulties and may need help in addressing them. The sudden insolvency proceedings engaged by Target Canada illustrates this.
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.