CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG
perform additional obligations. For example, they may empower the monitor to monitor the debtor’s receipts and disbursements and assist the debtor in dealings with its creditors and in preparing the required cash- flow statements. In creditor-commenced CCAA pro - ceedings where no chief restructuring officer is being appointed, it is typical for the CCAA initial order to grant enhanced powers (including management pow - ers) to the court-appointed monitor. No LIT may be appointed as monitor if, within the two years preceding the commencement of the proceed - ings, the LIT was a director, officer or employee of the debtor, or the auditor, accountant or legal counsel of the debtor, or if the LIT is related to the debtor, or any director or officer of the debtor. Court-appointed receivers The BIA provides for the enforcement of security by a secured creditor and the appointment of a receiver on a national basis over all or part of a debtor’s property that is subject to the security. A receiver has broad power to market and sell a debtor’s assets with the oversight of the court. The receiver’s duties include: • giving notice of its appointment to all creditors; • issuing reports on a regular basis outlining the status of the receivership; and • preparing a final report and statement of receipts and disbursements when the appointment is com - pleted or terminated. A court-appointed receiver is an officer of the court, subject to the court’s authority and direction and accountable to the court. A court-appointed receiv - er has a fiduciary duty to act in the best interest of all interested parties, including the debtor. A court- appointed receiver takes instruction from neither security holder nor debtor, and generally retains inde - pendent counsel. A receiver must exercise prudence and reasonable care in the conduct of the receivership and in dealings with the receivership property. The BIA imposes the following statutory duties on receivers:
• to disclose and account for their conduct of the receivership; • to act honestly and in good faith; and • to deal with the property of the debtor in a com - mercially reasonable manner. Proposal trustees The role of a proposal trustee is like that of a moni - tor. A proposal trustee is an independent third party appointed by the OSB to assist the debtor with the fil - ing of its proposal and to monitor the debtor’s ongoing operations during the proceedings. A proposal trus - tee must be an LIT. During proposal proceedings, the debtor continues to be in possession of its assets; the assets do not vest in the proposal trustee. The duties of a proposal trustee include monitoring the business’s ongoing financial activities, reporting to the court on events that might affect the viability of the debtor, assisting the debtor in the preparation of its proposal, notifying the creditors of meetings of creditors and tabulating the votes at these meetings. The proposal trustee will also prepare a report on the proposal that is included in the mailing of the proposal to creditors. Proposal trustees must report on the reasonability of the cash flows filed by the debtor, on material adverse changes in the debtor’s affairs and on any proposal presented by the debtor. The proposal trustee must advise the court on the terms of the proposal and the conduct of the debtor. The proposal trustee’s recommendation on the pro - posal will typically include a statement advising that the proposal offers more to a debtor’s creditors than they would receive in a bankruptcy. If the proposal trustee cannot make this statement, it is likely that a court will refuse to approve the proposal. Inspectors In bankruptcy proceedings, unsecured creditors appoint inspectors whose role is to oversee the bank - ruptcy proceedings and approve certain actions of the trustee in bankruptcy, including the sale of most assets. Inspectors supervise the trustee in bankruptcy on behalf of creditors and instruct the trustee in bank - ruptcy to act in a manner that is appropriate in order
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