Last week, Urbancorp, a major Toronto property developer, announced plans to start restructuring proceedings under Canada's Bankruptcy And Insolvency Act. It's just one more case dotting the landscape of businesses navigating financial woes. But comments made by the company's CEO give struggling businesses pause for reflection on the critical choice between court-supervised and out-of-court alternatives.
In our last post, we discussed one of the biggest faux-pas in exercising the landlord's right to distress. In their zeal to recover arrears in rent, some commercial landlords have simultaneously terminated the lease and thus, by their own hand, have rendered their distress action illegal. This week, we examine yet more technical details that, if not carefully observed, risk jeopardizing the interests of landlords who turn to this self-help remedy.
When a tenant defaults on rent, one of the remedies open to commercial landlords is rent distraint. While landlords may know of the concept, the actual execution must be carefully handled. Otherwise, unwary landlords could easily see this self-help remedy turn into a double-edged sword rife with unintended and unfavourable consequences.
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.