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Bankruptcy and Insolvency

Extending a Notice of Intention to File a Proposal Beyond 6 Months Permitted in Covid-19 Pandemic

In trying to respond to the extraordinary circumstances of the Covid-19 pandemic, the court has had ample opportunity to utilize its inherent jurisdiction in the interests of justice. In Durham Sports Barn Inc. Bankruptcy Proposal 2020 ONSC 5938, the court used its inherent jurisdiction to extend the time that a debtor has to make a proposal to its creditors under s. 50.4(9) of the Bankruptcy and Insolvency Act ("BIA&").

British Columbia Court Grants Reverse Vesting Order in Contested Proceedings

In a recent decision of the Supreme Court of British Columbia, Quest University Canada (Re) 2020 BCSC 1883, the court became the second in Canada to grant a reverse vesting order in contested proceedings under the Companies' Creditors Arrangement Act, RSC 1985, c C-36, after another recent decision of the Québec Superior Court.

Restructuring of Insolvent Co-operatives

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.

Trustee’s Entitlement to Fees from Trust Property not Owned by the Bankrupt

The recent decision in Re Michie, 2020 BCSC 1611, addresses the entitlement of a trustee in bankruptcy to claim its fees and disbursements from property not owned by the bankrupt, in priority to the person entitled to the property, where such property has come into the trustee's possession and control in the course of the bankruptcy.

Extension of the Redemption Period in Foreclosure Actions and Dueling Valuations

After the expiration of the “usual” six month redemption period in a foreclosure action in British Columbia, the mortgagee will generally apply for an order for conduct of sale with respect to the subject property. However, where the mortgagor believes that the subject property has ample value to satisfy the mortgagee’s claim, the mortgagee may apply for an extension of the redemption period.

Creditor Forced to Continue Supplying Insolvent Customer

Suppliers deemed to be critical to the survival of an insolvent business can be compelled to continue supplying, even over their objections. In a recent British Columbia decision, Soccer Express Trading Corp. (Re), Adidas Canada was ordered to continue selling inventory to their struggling customer, a retailer and wholesaler of sporting equipment, apparel and related items.

Cannabis Troubles Continue

Cannabis-related businesses continue to struggle. Last week Destiny Bioscience Global Corp., an Alberta research and development company focused on the genetics and cultivation of cannabis, was placed in receivership by its main lender...

Director's Liability and COVID-19

Question: It seems likely that my business will fail, given the COVID-19 recession we’re in. Fortunately, the business was carried on through a corporation, but as a director do I face any personal exposure despite incorporation?

Cannabis Businesses and Insolvency – A Whole New Frontier

The legal cannabis industry is a relatively new addition to the Canadian economy since its introduction in November 2018. Until December 2019 there had been very few insolvency proceedings commenced by cannabis companies but 2020 has seen at least 6 such insolvency proceedings ranging from receiverships to BIA proposal proceedings to CCAAs. With the onslaught of the COVID-19 pandemic...

Bankruptcy, Secured Creditors, and the Superintendent's Levy

All distributions made out of a bankrupt estate are subject to a 5% levy payable to Superintendent of Bankruptcy pursuant to section 147 of the Bankruptcy and Insolvency Act. Generally, this does not impact secured creditors, whose rights are largely unaffected in bankruptcy. However, in Superintendent of Bankruptcy v Business Development Bank of Canada, 2019 MBCA 72, the Manitoba Court of Appeal recently confirmed that in certain circumstances, even a secured creditor's recovery can be subject to the levy.

Ontario Court provides guidance on non-arm's length transactions

A trustee in bankruptcy has special powers to investigate the affairs of a bankrupt estate, and among the greatest of those powers is the ability to review and potentially unwind transactions prior to bankruptcy under section 95 and 96 of the Bankruptcy and Insolvency Act ("BIA").

Transfers to family members upheld following bankruptcy

A transfer of a car to a family member, within one year of the transferor's bankruptcy. Such transactions are regularly set aside in bankruptcy. Even where the transfer was on account of a previous debt owed to the family member, such a transfer would normally be an invalid "preference" under s. 95 of the Bankruptcy and Insolvency Act.

Landlord rights in bankruptcy: Trustee's disclaimer of lease eliminates claim for unsecured damages

Where a tenant is in breach of a commercial lease, a landlord generally has the option to sue the breaching tenant for the unexpired portion of the lease (subject to the landlord's duty to mitigate). However, where a tenant goes bankrupt, the bankruptcy trustee has the power to disclaim the lease under section 30(1)(k) of the Bankruptcy and Insolvency Act ("BIA"). To the surprise of some landlords, this disclaimer will extinguish any right of the landlord to the unexpired term of the lease, save for a preferred three months' accelerated rent claim pursuant to section 136(1)(f).

Supreme Court of Canada finds bankrupt energy company cannot ignore environmental obligations

In a long-awaited decision, the Supreme Court of Canada has overturned the Alberta Court of Appeal, and determined that a bankrupt company does not have carte blanche to ignore its environmental obligations.

Fonts prove forgery

Mark Twain said, "If you tell the truth you don't have to remember anything." That wisdom was driven home in the recent Ontario case McGoey (re), in which a bankrupt tried to prove that two properties registered in his name were actually held by him in trust for someone else, and therefore were not available to his creditors. He produced two trust deeds showing this.

Landlords Must Take Issue with Assignment of Lease Before Court Approval

A recent case out of the Ontario Supreme Court, Re Aeropostale Canada Corp. (Notice of Intention) 2018 ONSC 1468, examined the question of whether a court ordered assignment of a commercial lease pursuant to s. 84.1 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (the "BIA") would include all terms of the lease, including those limited to the original lessee under the lease who was now bankrupt.

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