CANADA Trends and Developments Contributed by: Larry Ellis, Kyla Mahar, James Reid and Pavin Takhar, Miller Thomson LLP
pany could litigate against its largest creditor within the CCAA proceedings rather than by arbitration, despite the existence of an arbitration agreement (In the Matter of the Compromise or Arrangement of Mercy Falls BC Inc, “Order Made After Application”, 8 September 2025). Expedited litigation is often essential in insolvency proceedings where funds are in short supply. The expansion of the Petrowest test allows debtor com - panies to both defend against, and to commence, actions efficiently within insolvency proceedings. Continued use of reverse vesting orders Reverse vesting orders (RVOs) were once a unique and controversial transaction method in Canadian insolvency proceedings, reserved for transactions involving assets, such as government licences, that could not be purchased from a debtor company but were essential to the going-concern value of the busi - ness. RVOs continue to be a popular tool in com - mercial insolvency and restructuring proceedings in Canada.
While RVOs are increasingly popular, Canadian courts still warn that RVOs are only meant to be used in “unu - sual or extraordinary” cases. The fact that an RVO may be convenient for the debtor company or a pur - chaser may not be sufficient justification for its use.
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