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29-607: In 1990, the British Columbia Court of Appeal discussed the background behind the introduction of the CCAA in one of its rulings: The CCAA was enacted by Parliament in 1933 when the nation and the world were in the grip of an economic depression. When a company became insolvent liquidation followed because that was the consequence of the only insolvency legislation which then existed - the Bankruptcy Act and

58-497: A court is called a judgment creditor . The term creditor derives from the notion of credit . Also, in modern America, credit refers to a rating which indicates the likelihood a borrower will pay back their loan . In earlier times, credit also referred to reputation or trustworthiness . In accounting presentation, creditors are to be broken down into 'amounts falling due within one year' or 'amounts falling due after more than one year'... The financial statements presentation

87-430: A court-supervised attempt to reorganize the financial affairs of the debtor company is made. This is noted together with s. 11 of the CCAA, which states that a court may, "subject to the restrictions set out in this Act, . . . make any order that it considers appropriate in the circumstances". The decision notes the interrelated nature of proceedings under the CCAA and BIA: [77] The CCAA creates conditions for preserving

116-407: A more rules-based approach for resolving a corporate debtor's insolvency, which must be observed strictly. The CCAA, on the other hand, provides a more discretionary approach that is remedial in nature, which therefore must be broadly construed. Although the CCAA was originally enacted in 1933, extensive use of it only began in the economic downturn of the early 1980s. Recent legislative amendments of

145-456: A petition for CCAA relief appears to be more like a defensive tactic than a bona fide attempt to restructure, it may prefer to order receivership instead. Where no such compromise or arrangement has been negotiated, the court, on application, may issue an order, lasting for 30 days, any proceedings against the debtor company, while negotiations are held to secure a compromise or arrangement with creditors and shareholders. The court may extend

174-536: A reorganization or compromise or arrangement under which the company could continue in business. The Supreme Court of Canada did not have a chance to explain the nature of the CCAA until the groundbreaking case of Century Services Inc. v. Canada (Attorney General) in 2010. In that case, the Court gave a detailed explanation of the nature of insolvency law in Canada. The Bankruptcy and Insolvency Act (BIA) provides

203-508: A right to levy against a particular piece of property, or against the debtor's accounts in general, the rules governing creditors' rights determine which creditor has the strongest right to any particular relief. Generally, creditors can be divided between those who " perfected " their interest by establishing an appropriate public record of the debt and any property claimed as collateral for it, and those who have not. Creditors may also be classed according to whether they are "in possession" of

232-405: Is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption (usually enforced by contract ) that the second party will return an equivalent property and service. The second party

261-440: Is frequently called a debtor or borrower . The first party is called the creditor, which is the lender of property, service, or money. Creditors can be broadly divided into two categories: secured and unsecured . The term creditor is frequently used in the financial world, especially in reference to short-term loans , long-term bonds , and mortgage loans . In law, a person who has a money judgment entered in their favor by

290-406: Is this: Creditors' rights are the procedural provisions designed to protect the ability of creditors—persons who are owed money—to collect the money that they are owed. These provisions vary from one jurisdiction to another, and may include the ability of a creditor to put a lien on a debtor's property, to effect a seizure and forced sale of the debtor's property, to effect a garnishment of

319-417: The status quo while attempts are made to find common ground amongst stakeholders for a reorganization that is fair to all. Because the alternative to reorganization is often bankruptcy, participants will measure the impact of a reorganization against the position they would enjoy in liquidation. In the case at bar, the order fostered a harmonious transition between reorganization and liquidation while meeting

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348-624: The CCAA and are thus subject to stay. Subsequent jurisprudence suggests that determining the status of such orders will be case-specific. In addition, the court has broad discretion in administering any other issues that may arise. As the Act says, ...the court, on the application of any person interested in the matter, may ... make any order that it considers appropriate in the circumstances. This has allowed for very creative applications for resolving difficult scenarios, including: In order to assure that

377-467: The Winding-Up Act . Almost inevitably liquidation destroyed the shareholders' investment, yielded little by way of recovery to the creditors, and exacerbated the social evil of devastating levels of unemployment. The government sought, through the CCAA , to create a regime whereby the principals of the company and the creditors could be brought together under the supervision of the court to attempt

406-620: The secured or unsecured creditors — essentially creating a pre-packaged insolvency — the court may summarily order that it proceed to be voted on by each class of creditors concerned, and, where necessary, by the shareholders as well. Whether a creditor is secured or unsecured is governed by the BIA. However, the court is not bound to accept an application under the Act, and it can terminate previously granted orders (and even declare them to have been void ab initio ) where an applicant has not made full and fair disclosure of all material facts. Where

435-411: The BIA and CCAA have served to harmonize key aspects, such as the use of single proceedings, a common priority of claims structure, and encouraging reorganization over liquidation. The legislation is remedial in the purest sense in that it provides a means whereby the devastating social and economic effects of bankruptcy or creditor initiated termination of ongoing business operations can be avoided while

464-427: The CCAA by reason only that proceedings commenced under the CCAA or that the company is insolvent. Agreements can be assigned or disclaimed by the debtor company as a result of the proceeding, by following prescribed procedures. These provisions extend beyond being used only within restructuring plans, and the courts have held that there is "no reason…why the same analysis cannot apply during a sale process that requires

493-539: The Insolvency Practitioner and readily accept annual reports when submitted. Under the Companies Act 2006 , a company's creditors may apply to the court for an order summoning a meeting of the creditors or some of the creditors who fall into a specific category, in order to consider a compromise or " arrangement " between the company and its creditors. If a majority representing 75% in value of

522-790: The United States and to administration proceedings and company voluntary arrangements ("CVAs") in the United Kingdom. Differences between the various proceedings include the following highlights: British Columbia Court of Appeal Too Many Requests If you report this error to the Wikimedia System Administrators, please include the details below. Request from 172.68.168.150 via cp1114 cp1114, Varnish XID 878178285 Upstream caches: cp1114 int Error: 429, Too Many Requests at Thu, 28 Nov 2024 08:52:07 GMT Creditor A creditor or lender

551-500: The area of creditor's rights perform one or all of the following: In the UK, once an Individual Voluntary Arrangement (IVA) has been applied for, and is in place through the courts, creditors are prevented from making direct contact under the terms of the IVA. All ongoing correspondence of an IVA must first go through the appointed Insolvency Practitioner . The creditors will begin to deal with

580-501: The business and financial affairs of the company, who must be a trustee in bankruptcy under the Bankruptcy and Insolvency Act . The monitor is required to investigate and report back to the court on the company, advise the court with respect to any actions that need to be taken, and to carry out any other functions in relation to the company that the court may direct. Where a compromise or arrangement has already been negotiated with

609-521: The business to be carried as a going concern", In that regard: Negotiated compromises and arrangements may deal with any matter, including claims against directors and amendments to the articles of incorporation or letters patent incorporating the company. When they have been approved by each participating class of creditors (by a two-thirds vote by value of the claims involved) the court may then approve it, and it will be binding on all persons, including trustees in bankruptcy. They cannot be approved by

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638-447: The collateral, and by whether the debt was created as a purchase money security interest . A creditor may generally ask a court to set aside a fraudulent conveyance designed to move the debtor's property or funds out of their reach. Some lawyers have a specialized practice area focused on the collection of such debts . Such attorneys are frequently referred to as collection attorneys or collection lawyers. Attorneys who practice in

667-756: The company's operations will continue during the proceedings, the court has the power to declare that the assets of the company are subject to a security or charge with respect to certain matters, and may further order that such charges rank ahead of those of secured creditors. These include: This "super priority" status is construed broadly, and has been held to even defeat statutory deemed trusts (such as those concerning pension plan deficiencies and vacation pay that exist in Ontario), as well as in rem claims such as maritime liens that are found in maritime law . The court may also order: The CCAA has been described as being similar in nature to Chapter 11 proceedings in

696-406: The court for an order under the Act. This is normally the debtor company, but a creditor can also do so. The court having jurisdiction is the superior court for the province in which the company's head office or chief place of business in Canada, or, in the absence of that, where any of its assets are situated. When the application is made, the court is required to appoint a monitor with respect to

725-493: The court if provision is not made for settling "super-priority" claims (as they are known under the BIA) relating to: In addition, no amounts relating to "equity claims" may be authorized by the court under a compromise or arrangement until all other claims are first paid in full. "Equity claims" have been held to include any claims shareholders may have against third parties in certain circumstances. Any interested person may apply to

754-455: The creditors or class of creditors present and voting either in person or by proxy at the meeting agree a compromise, the meeting may apply to the court for the compromise to be enforced. The same provision would apply to members ( shareholders ) of a company seeking to make an arrangement with the company. The Corporate Insolvency and Governance Act 2020 makes similar provision where a compromise has been proposed between creditors or members and

783-443: The debtor's wages, and to have certain purchases or gifts made by the debtor set aside as fraudulent conveyances . The rights of a particular creditor usually depend in part on the reason for which the debt is owed, and the terms of any writing memorializing the debt. Creditors' rights deal not only with the rights of creditors against the debtor, but also with the rights of creditors against one another. Where multiple creditors claim

812-425: The objective of a single collective proceeding that is common to both statutes. The scope of the CCAA is quite broad. It applies to any debtor company (or group of affiliated companies) that owes more than $ 5 million, other than: and: No person may terminate or amend — or claim an accelerated payment or forfeiture of the term under — any agreement, including a security agreement, with any debtor company subject to

841-573: The protection for any period it sees fit. A stay may be lifted upon application to the court, but only in very restricted circumstances: Provision is made for such stays not affecting investigations undertaken by any regulatory body (other than with respect to any payment that may be ordered), but the court can order the cancellation of such exemption where: However, as noted in Newfoundland and Labrador v. AbitibiBowater Inc. , not all payments required under regulatory orders constitute claims under

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