Insolvency 2025

CANADA Law and Practice Contributed by: Clifton Prophet, David F W Cohen, Virginie Gauthier, Thomas Gertner and Kate Yurkovich, Gowling WLG

its success. Key considerations include whether the parties to be released from the claims were necessary and essential to the restructuring, whether the claims being released are rationally related to the plan’s pur - pose, whether those parties are contributing to the plan, and whether the releases benefit both the debtor and the creditors generally. Preventive Restructuring Measures and Timelines CCAA proceedings As noted, the court will appoint a monitor that is an LIT to oversee the CCAA proceedings, report on the debtor’s business and financial affairs, and assist the debtor in formulating its plan. The debtor remains in control of its business and property; however, it remains subject to the monitor’s scrutiny. For example, if a transaction is outside the ordinary course of business or does not comply with any court order, the monitor will report such activities to the court. At the commencement of the proceedings, the court will issue an initial order prohibiting all persons from commencing or continuing any claims against the debtor and its directors and officers, without the prior consent of the debtor and monitor, or leave of the court. The initial order grants the debtor up to ten days’ pro - tection from its creditors. Before the expiry of that period, the debtor must return to court to request an extension. There is no limit on the length or number of extensions that a debtor may seek from the court, provided the debtor shows that circumstances exist that make the order appropriate and that it has acted and is acting in good faith and with due diligence. BIA proposals The OSB will appoint a proposal trustee to supervise the proposal. Its role is to monitor the debtor’s actions, assist it in developing the proposal, and advise the court if any material adverse changes occur. The debtor remains in control of its property; the pro - posal trustee does not control the debtor’s affairs.

Once a proposal or NOI has been filed, no creditors can bring or continue any proceedings against the debtor. The stay of proceedings prohibits creditors from exercising any remedy against the debtor or its property, or commencing or continuing any action, execution or other proceeding for the recovery of a claim provable in bankruptcy without leave of the court granted on motion on notice to the debtor and the proposal trustee. Secured creditors may enforce their security only if they have delivered a 244 Notice and the statutory ten-day notice period has lapsed or been waived by the debtor. All other creditors are stayed for an initial period of 30 days. The time for filing a proposal (and the stay period) can be extended by the court for a maximum period of six months (including the initial 30-day stay), in 45-day intervals. Classification of Claims In both CCAA and BIA proposal proceedings, credi - tors are classified based on their commonality of inter - est. Creditors are divided into classes of claims based on: • the nature of the debts giving rise to the claims; • the nature and rank of any security in connection with the claims; • the remedies that would be available to creditors in the absence of a plan of arrangement or proposal and the extent that those creditors would be able to recover on those claims; and • the treatment of the claims (under a BIA proposal), and the extent the claims would be paid under a proposal. Determining the Value of Claims and Creditors The BIA provides prescribed forms and procedures for creditors to formally prove their claim against the insolvent debtor in order to vote on and participate in proposals. Claims are adjudicated in the first instance by the proposal trustee, subject to rights of appeal to the court. A vote cannot be taken on claims not proven in advance of a creditors’ meeting. Claims not proven prior to the implementation of a proposal can - not be included.

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