It is somewhat uncommon for a co-operative to seek protection from its creditors under the Companies' Creditors Arrangement Act, R.S.C. 1985, C. C-36, as amended (the "CCAA") but that is what the beloved Canadian outdoor retailer, Mountain Equipment Co-operative ("MEC"), did in Mountain Equipment Co-operative (Re), 2020 BCSC 1586.
Prior to seeking protection under the CCAA, MEC had first sought alternate sources of financing which was not successful. MEC then sought a sales and investment solicitation process for its assets over the course of approximately 100 days that resulted in 4 bids. The successful bidder, a US company, agreed to purchase substantially all of MEC's assets, assume certain of its liabilities and MEC entered into an asset purchase agreement with it. Three days later, MEC sought a formal restructuring of its affairs under the CCAA in order to be able to conclude the sale as MEC's senior lenders had formally notified it of defaults under its credit facility. MEC also had significant arrears to various landlords, suppliers and vendors.
MEC sought court approval of the sale of its assets to the successful bidder in the CCAA proceedings which was objected to by various parties. One of the parties, the steering committee of the "SaveMEC" campaign, objected to the immediate sale of MEC's assets as it hadn't first been approved by a special resolution of MEC's members as is required by s. 71(2) of the Cooperative Association Act [SBC 1999] Chapter 28. The court didn't agree, holding that co-operatives are able to avail themselves of the CCAA if they are insolvent and otherwise meet the requirements. Per s. 36(1) of the CCAA, shareholder approval of the sale of the assets of the insolvent entity is not required before the court may authorize that sale. The court noted numerous benefits from the sale to various persons in the community. While the sale wasn't "wrapped in the Canadian flag", the court concluded that an order approving the sale should be made in the circumstances.