CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG
New Money A debtor subject to CCAA or BIA proposal proceed - ings may obtain interim financing, referred to as debt - or-in-possession (DIP) financing. For a discussion on DIP financing, see 4.2 Statutory Restructuring, Reha- bilitation and Reorganisation Procedure . 4.5 The Position of Office Holders in Restructuring, Rehabilitation and Reorganisation See 1.3 Statutory Officers . 4.6 The Position of Shareholders and Creditors in Restructuring, Rehabilitation and Reorganisation Stay of Proceedings In CCAA and BIA proposal proceedings, creditors are subject to the stay of proceedings, subject to limited exceptions. For instance, if the ten-day notice peri - od indicated in a pre-filing 244 Notice has elapsed, a secured creditor will not be subject to the stay of proceedings in a proposal proceeding. The stay of proceedings restricts counterparties from terminating or amending any agreement, including a security agreement, with the debtor, or claiming accel - erated payment or forfeiture of the terms of the agree - ment by reason only that the debtor is insolvent or has initiated restructuring proceedings. Certain exceptions apply to the operation of the stay of proceedings under statute or by the terms of the court order effecting the stay. For example, counter - parties in respect of an eligible financial contract may deal with or otherwise realise on financial collateral held under the terms of the eligible financial contract notwithstanding the stay of proceedings. In addition, counterparties may terminate agreements for other valid reasons or breaches (ie, apart from the debtor being insolvent or commencing restructuring pro - ceedings) that may arise, subject to obtaining a lift of the stay of proceedings to proceed. Roles of Creditors For the purposes of voting on proposals or plans under the CCAA, creditors are placed in classes. The voting requirements in proposals and plans (a major - ity in number and two-thirds by value of the creditors
present and voting at a properly constituted meeting) apply on a class-by-class basis. Proposals must be made to all unsecured credi - tors, classed as is appropriate, and may be made to secured creditors. As noted, creditors are organised into classes based on their commonality of interest (see 4.2 Statutory Restructuring, Rehabilitation and Reorganisation Procedure ). There is no statutory basis for creditors’ committees in Canada and they are not common. However, creditors do form ad hoc committees in some cases. Claims of Dissenting Creditors There is no provision permitting an inter-class “cram- down”. BIA proposals and CCAA Plans will be bind - ing on dissenting creditor minorities within a class if approved at a properly constituted meeting by the requisite majorities and subsequently sanctioned by the court. If court approval is not granted for a propos - al or plan, it will not be binding on an affected class. Existing Equity Owners Equity claimants may not vote at a meeting of credi - tors unless the court orders otherwise. Proposals and plans cannot provide for the payment of equity claims Insolvent debtors restructuring under the BIA or the CCAA are specifically empowered to disclaim execu - tory contracts, with certain exceptions. To disclaim a contract, debtors must obtain the approval of the applicable court officer and provide notice in the pre - scribed form to the contract counterparty. Contract counterparties may object to the disclaimer of their contracts within 15 days of the giving of notice, and apply to the court for an order giving effect to their objection. A court will consider whether the proposed disclaimer is approved by the court officer, whether it will enhance the prospect of a viable proposal or plan being made, and whether it is likely to cause signifi - cant hardship to the contract counterparty. The following contracts are not subject to disclaimer: unless all other claims are paid in full. Disclaimer of Contracts by the Debtor
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