CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG
2. Creditors 2.1 Types of Creditors In an insolvency proceeding, creditors’ claims gener - ally rank as follows: • super-priority claims, including, in no specific order: (a) valid trust claims; (b) realty property taxes; (c) certain deemed trusts and super-priority pen - sion and wage claims; (d) qualified unpaid supplier or “30-day good” claims; (e) unremitted payroll deductions; and (f) court-ordered charges in CCAA, proposal and receivership proceedings; • secured claims; • preferred unsecured claims, including, in no spe - cific order: (a) limited landlords’ claims; (b) the amount of priority wage claims not paid out of secured assets; (c) amounts that would have been paid to a se - cured creditor but for the payment of wage and pension claims; and (d) certain workers’ compensation claims; and • general unsecured claims. Super-priority and secured claims are paid out of the proceeds from sales during the insolvency proceed - ings in accordance with their respective priority. Where there is a surplus following satisfaction of super-pri - ority and secured claims, the surplus is distributed to preferred unsecured claims and then rateably among general unsecured creditors. Claims of creditors have priority over equity claims. 2.2 Priority Claims in Restructuring and Insolvency Proceedings The BIA and CCAA provide the court overseeing the CCAA, proposal and receivership proceedings juris - diction to make orders granting super-priority charges that will rank ahead of existing secured creditors, to the extent that such creditors have received notice of the proposed charges. The charges may include the following:
to protect the interests of creditors and the bankrupt estate. Appointing an inspector is mandatory in corporate bankruptcy proceedings. Inspectors represent the interests of the creditors; they do not need to be LITs. Inspectors may also be appointed in proposal pro - ceedings; however, this is optional and infrequent. Selection of Officers In voluntary proceedings, the debtor will usually select the LIT firm that it recommends be appointed as court officer. If a creditor initiates the proceeding, that credi - tor will usually put forward its choice of LIT firm. The appointment of a monitor or court-appointed receiver is not official until the court issues an order confirming the appointment. With the exception of inspectors in bankruptcy pro - ceedings, statutory officers are restructuring profes - sionals with business and accounting qualifications who assist the debtor’s employees in managing oper - ations during an insolvency proceeding, as well as evaluating and making recommendations to the court (and in proposal and CCAA proceedings, the debtor’s board of directors) on restructuring alternatives availa - ble to the debtor. Trustees in bankruptcy and receivers displace the directors of the debtor. They may decide to continue to work with existing management. The debtor’s employees are not employees of the court- appointed officers, although they work under their supervision and many of the decisions to be taken in a proceeding will require the court-appointed officer’s consent. Only an LIT may act as a trustee in bankruptcy, pro - posal trustee, monitor or court-appointed receiver. Organisation of Creditors’ Committees Although permitted, there is no requirement under the CCAA or the BIA for the formation of creditors’ com - mittees. Creditors’ committees have been recognised by courts in limited circumstances and granted court- approved funding.
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