The former directors and officers of Northstar are facing significant personal liability for costs in respect of a contaminated industrial site. The liability arose following a failed restructuring and, unless reversed, will serve as an alarming example for all directors and officers of companies operating in Ontario of their potentially enormous personal liability for environmental damage caused by their company's operations.
The Supreme Court of Canada recently released its much-anticipated decision in the Indalex Limited proceedings under the Companies' Creditors Arrangement Act. The decision is important for secured lenders, both in the context of an insolvency proceeding (ie, debtor-in-possession lenders) and outside such proceedings (ie, secured lenders).
The Supreme Court of Canada recently considered the difficult intersection of Canada's federal insolvency regime with provincial environmental protection laws. Lower courts administering Companies' Creditors Arrangement Act proceedings have observed that Canada's insolvency statutes and environmental legislation do not mesh very well; the Supreme Court's decision attempts to strike a balance between the two regimes.
A recent decision of the Ontario Superior Court of Justice refined the factors to be considered when determining the centre of main interests (COMI) of debtor companies which are part of a larger corporate group. The court identified three principal factors which, considered as a whole, will indicate whether the location in which the proceeding has been filed is the debtor's COMI.
The Ontario Superior Court of Justice recently considered the evidence required when seeking the appointment of a receiver and the approval of a 'quick-flip' sale of a debtor company's assets in circumstances where the debtor, secured party and proposed purchaser are related parties. If privately appointing a receiver appears to be viable, the applicant must show sufficient grounds for the court to intervene.
The Alberta Court of Appeal recently released the first Canadian appellate court decision interpreting a bankruptcy trustee's rights to assign a franchise agreement of a bankrupt franchisee over the franchisor's objections. Permission was granted pursuant to Section 84.1 of the Bankruptcy and Insolvency Act – a relatively new provision which was introduced into the act in 2009.
Recently, the Supreme Court of Canada granted leave to appeal the Ontario Court of Appeal's decision in Indalex Limited (Re). The appeal court's decision has potentially far-reaching implications for lending transactions and has also created uncertainty with respect to the extent of an employer's fiduciary obligations in its role as pension plan administrator.
In Canada, the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency was largely implemented in Part IV of the Companies' Creditors Arrangement Act. However, Part IV of the act does not address how to deal with corporate groups. In a recent Part IV case, the Ontario Superior Court of Justice addressed the concept of a corporate group filing.
In a recent decision the Ontario Court of Appeal ordered that certain reserved proceeds from the sale of Canadian entities, held in the context of cross-border proceedings under both the Companies' Creditors Arrangement Act (Canada) and Chapter 11 of the US Bankruptcy Code, be used to satisfy the deficiencies in two pension plans in priority to the holder of court-ordered priority secured claims.
As a result of a recent Ontario Court of Appeal decision, bidders seeking to submit an offer to a receiver to purchase assets of an estate will be well-advised not to submit a referential bid. So long as the sales process contemplates a fixed bid process and not an auction, the law in Ontario is now clear that referential bids will be rejected by the receiver as invalid and the referential bidder will lose its opportunity to bid on the assets.
The Ontario Superior Court of Justice recently ruled that leave of the court is required before a debtor can cross-examine an affiant on his or her affidavit filed in support of an application for bankruptcy order. The debtor must satisfy the court that the interests of justice will be satisfied by cross-examination, and that the debtor is not engaging in a fishing expedition to delay the bankruptcy proceedings.
The Court of Queen’s Bench of Alberta and the US Bankruptcy Court of the Southern District of New York recently approved a settlement reached between the Canadian and US Calpine estates, thereby effectively approving a plan of arrangement without providing the Canadian creditors with the opportunity to vote on the plan in accordance with the provisions of the Companies’ Creditors Arrangement Act.
In Canada, until recently, a corporation had to be insolvent in order to obtain protection from its creditors. However, in a recent decision the Canadian courts expanded the definition of 'insolvency' for the purposes of restructuring as opposed to liquidation under Canadian insolvency statutes.
A recent decision by the Supreme Court of Canada opens the door for the imposition upon receivers and trustees in bankruptcy of significant personal liability for pre-appointment obligations owed by an insolvent employer to its unionized employees if the receiver or trustee operates the subject business.
A stay of proceedings under the Bankruptcy and Insolvency Act (Canada) applies to any 'remedy' that could detrimentally affect or impair the ability of the insolvent person to put forward a proposal. In a recent decision a court held that the word 'remedy' in Section 69(1)(a) of the act should be given a broad interpretation that is purposive and in accordance with the objectives of the act in general.
Set-off rights have become controversial in restructuring proceedings in Canada under the Companies' Creditors Arrangement Act. Increasingly, corporations are including provisions restraining the exercise of set-off rights by their customers and creditors. This has resulted in controversy because the act expressly preserves set-off rights.
In the Royal Oak Mines Case it was held that the test for granting debtor-in-possession financing coupled with super priority security interests is based on balancing the interests of the various stakeholders. As a result, secured lenders in Canada are exposed to their security interests being primed in an insolvency proceeding with little or no objective standards.
This update focuses on the legal ramifications of the realization of assets relating to information technology companies. There are a number of aspects in the realization of such property (eg, domain names and software licences) that create legal issues different from realizing on other forms of property.
Including: Receiverships; Bankruptcy; Reorganization