CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG
context, there may be a SISP. The proposal trustee appointed under the BIA to help the debtor will gen - erally be involved in any sale process and will help the board of directors and management of the debtor consummate a sale. If that sale process does not result in a transaction, it is likely that the court will be asked by creditors to convert the BIA proposal pro - cess into a receivership or a bankruptcy. Credit bids Secured creditors can, and frequently do, credit-bid in CCAA, BIA proposal and receivership proceedings. These can be structured as stalking horse bids. Sales under these regimes are all court-supervised, and as such there are no special rules for them beyond the test of the prudency of the sale used by court in that context. Unsecured credit bids are uncommon given the pro - pensity of Canadian secured creditors to take “blanket security” and given the significant shortfalls suffered by unsecured creditors. Pre-packs Pre-negotiated or pre-packaged sale processes are not uncommon. Most often, a pre-packaged sale process follows an informal SISP run prior to the proceeding, which lends credibility to an abbreviated process post-filing. The debtor enters the proceeding with either a stalking horse bid (requiring an abbreviat - ed post-filing SISP process) or a sale to be approved immediately following filing with compelling evidence to support the abridgement or complete avoidance of a post-filing sale process. Pre-packaged sales require either a significant pre-filing SISP process or some existential threat to the value of the business neces - sitating an expedited sale approval. 4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure Creditor Approval of a Plan or Proposal CCAA proceedings – plan of compromise or arrangement As noted, the principal objective of the CCAA is to enable a debtor to formulate a plan of compromise or arrangement in respect of the obligations it owes its creditors.
For a plan to be accepted by creditors, a meeting must be held for voting on the plan, and a majority in number of each class of creditors holding two-thirds in value of the total debt represented by that class must vote in favour of the plan. Once the requisite majorities of creditors in each class approve the plan, the court must sanction it before it becomes binding on all creditors. After the implementation of the plan and the conclu - sion of the CCAA proceedings, the debtor can resume its normal business operations. BIA proposal proceedings – proposal Both the debtor’s creditors and the court must approve a BIA proposal pursuant to the BIA. At least two-thirds in value and a majority in number of the creditors, including secured creditors to which the proposal was made, must approve the proposal. If a debtor’s pro - posal is rejected by the requisite majority of creditors, the debtor will be deemed to be bankrupt. Following the creditors’ approval, the court will approve the proposal if it is for the general benefit of the creditors. To this end, evidence must be adduced to show that the debtor’s creditors will be better off under the terms of the proposal than they would be if the debtor were liquidated pursuant to bankruptcy proceedings. When the debtor has fulfilled all of its obligations as set out in a BIA proposal, the trustee will issue a cer - tificate confirming the debtor’s full compliance. Once this is issued, the debtor is considered to have com - pleted its restructuring and may resume its normal business operations. Court Approval of a Plan or Proposal Proposals under the BIA and plans of compromise or arrangement under the CCAA are not binding unless approved by the court, even if approved by the req - uisite creditor double majorities. Before approving a proposal or plan, the court must be satisfied that the proposal or plan is fair and reasonable and that the provisions of the applicable insolvency statute and any prior court orders have been strictly complied with. In determining the fairness and reasonability of
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