You are Owed Money —
The Companies' Creditors Arrangement Act
- What is the CCAA?
- What happens in a CCAA filing?
- Role of the monitor
- Role of the OSB in CCAA proceedings
- Who do I contact if I am impacted by a CCAA filing?
- How do I keep informed of developments during CCAA proceedings?
- Where can I find CCAA filing records and court documents?
- Complaints and enquiries
What is the CCAA?
The Companies' Creditors Arrangement Act (CCAA) is a federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs. The CCAA has a broad remedial purpose, allowing a company to continue in business while it seeks to develop and obtain the approval of compromises or arrangements with its creditors. Canadian courts have held that the main purpose of the CCAA is to avoid, where possible, the social and economic consequences of bankruptcy, and to allow a company to carry on business. CCAA proceedings are carried out under supervision of the Court and the statute offers more flexibility and greater judicial discretion to deal with complex issues that may arise during the restructuring process than the more rule-based Bankruptcy and Insolvency Act (BIA).
What happens in a CCAA filing?
Commencement of proceedings
The process begins when a company makes what is known as an "initial application" to the Court for protection under the CCAA. It is important to note that there is no requirement for the debtor company to give notice to creditors, employees or stakeholders of its intention to file an initial application.
If the application is accepted, the Court then issues an order ("initial order") that typically gives the company 30 days' protection from its creditors ("stay of proceedings"). The stay typically prohibits collection proceedings against the company to enforce existing debts, and the company is prohibited from making most payments to existing creditors in respect of loans or other forms of credit. While the stay is in place, the company can continue to operate, pay its employees and service its customers under Court supervision, with the goal of emerging from CCAA protection as a viable business.
The initial order may also provide for provision of "debtor-in-possession" financing, which will allow the company to operate while under CCAA protection, and the priority of this financing over existing debts of the company.
The initial order usually allows for payment of wages during the ordinary course of business. With respect to suppliers, the initial order usually prohibits payment of arrears by the company. Suppliers are usually bound by existing contracts with the debtor company and are not permitted to terminate their relationship with the company without Court approval.
The stay also gives the company time to prepare a Plan of Compromise or Arrangement (similar to a proposal under the BIA). If the company needs additional time to prepare the Plan of Compromise or Arrangement, the Court can be asked to grant an extension of the stay. There is no time limit on how long a stay can be extended. However, interested parties may apply to the Court to have the stay varied or lifted altogether.
Debtor's financial statements
At the time of filing an initial application with the Court, the debtor company is required to file a projected cash-flow statement. It is also required to file with the Court copies of all financial statements for the year before the application. If no financial statements were prepared in that year, the debtor company must provide a copy of the most recent statement.
Because CCAA proceedings begin without notice being given to creditors and other stakeholders, the CCAA mandates that a "comeback hearing" be held before the same judge no more than 30 days after the initial order is issued. Creditors and other affected stakeholders are given notice of the hearing and will have an opportunity to challenge the initial order, or parts of it, and to seek other relief from the Court as appropriate.
The Plan of Compromise or Arrangement
The debtor company typically begins negotiating with its creditors and stakeholders immediately after the initial order is issued. In doing so, it may terminate or assign unwanted contracts, lay off employees, sell assets, negotiate new credit terms, change its corporate structure and take other steps to allow it to move towards a viable business model. The Court is normally asked to approve all major actions.
A Plan of Compromise or Arrangement (the "Plan") is a proposal the company presents to its creditors on how it intends to deal with the issues facing the company. A "compromise" involves some settling of the amounts owed to creditors, while the term "arrangement" is broader and includes any plan for reorganizing the affairs of the company. In practice, the distinction between "compromise" and "arrangement" is of little significance as there are no statutory restrictions on the structure or content of the Plan.
The Court establishes the process by which the claims of creditors will be reviewed and approved. The Court may appoint a claims officer to adjudicate disputed claims.
Part of the monitor's role is to inform creditors about the claims process and to provide Proof of Claim forms and instructions on completing and filing proofs of claim. The Proof of Claim filed by a creditor sets out what is claimed to be owing to the creditor and is reviewed by both the monitor and a representative of the debtor company.
It is important to note that creditors are responsible for proving their claims. If you are a creditor in a CCAA proceeding and have not received a Proof of Claim form, contact the monitor.
To be able to vote at a meeting of creditors, a creditor must file a completed Proof of Claim, along with supporting documents, before the start of the meeting. If your claim is filed after the start of the meeting or at a later time, you may not be able to vote at the meeting of creditors, but your claim could still be considered for payment purposes in accordance with the distribution provisions of the Plan.
In some cases, there may be a deadline for filing Proofs of Claim ("claims bar date"). If a creditor does not file a Proof of Claim before the claims bar date, the creditor's rights could be severely and irreversibly affected.
Approval of the Plan by creditors
Once a proposed Plan has been negotiated by the parties, the debtor company or a creditor will request the Court to order a meeting of creditors to formally vote on the Plan. Creditors may be separated into various classes for the purpose of voting on the Plan. For a Plan to be accepted, it must be approved by a majority of creditors in each class that are present and voting (either in person or by proxy). In addition, creditors voting to accept the Plan must represent at least two thirds of the total value of the creditors' claims in that class.
If the Plan is accepted (and sanctioned by the Court—see below), creditors will be paid or treated in accordance with the terms of the Plan.
If the Plan is not approved, the stay—and, therefore, protection from creditors—is usually lifted. However, the debtor company does not automatically become bankrupt if creditors reject the Plan.
Court approval of the Plan
While the CCAA does not specify who is to bring the application to have the Plan sanctioned (i.e., approved) by the Court, ordinarily the application will be brought by the debtor company after the vote by creditors to accept the Plan. In determining whether to sanction the Plan, the Court considers whether the Plan is fair and reasonable, whether it complies with all statutory requirements and whether it respects any previous orders of the Court. If the Court determines that the Plan is not feasible, it can refuse to sanction the Plan even if it has been accepted by the required majority of creditors.
Role of the monitor
A monitor is a Licensed Insolvency Trustee (LIT) licensed by the Office of the Superintendent of Bankruptcy (OSB) who is appointed by the Court in the initial order. As an officer of the Court, the monitor's role is to monitor the company's business and financial affairs to ensure compliance with the law, the Court orders and the terms of the Plan. The monitor assists the debtor company with preparation of the Plan, prepares reports for the Court, provides information to creditors regarding the claims process and creditors' meetings, etc., and oversees voting at meetings. Reports, Court orders and a list of creditors must be posted on the monitor's website.
For information about a monitor appointed for a specific proceeding, see the Public Registry.
Role of the OSB in CCAA proceedings
In relation to CCAA proceedings, the OSB
- Maintains a registry of prescribed public records.
The OSB maintains a list of all companies that have been granted protection under the CCAA since September 18, 2009. These public records are retained for a 10-year period.
- Is the final repository of all CCAA proceedings files.
The OSB maintains a National Repository which holds CCAA records for CCAA proceedings following the discharge of the monitor. These records are retained for a 10-year period.
- Receives, records and, where appropriate, investigates complaints regarding the conduct of monitors.
The duties and functions of the OSB are outlined in theCCAA.
Who do I contact if I am impacted by a CCAA filing?
For any questions related to a specific proceeding, you should contact the monitor. The monitor's name, telephone number and email address are available in the Public Registry.
The monitor's website contains the most up-to-date information pertaining to the proceeding. If you are looking for information regarding the CCAA proceeding, please check the information posted on the monitor's website.
How do I keep informed of developments during the CCAA proceedings?
The monitor will provide periodic updates on the progress of the proceeding and inform stakeholders of any key developments. The monitor has a duty to make certain documents such as the monitor's reports and court orders available on their website. They are also available to answer questions you may have regarding the proceedings.
Where can I find CCAA filing records and court documents?
As of September 18, 2009, CCAA filing records are kept in the Public Registry. The Public Registry keeps track of certain information regarding the CCAA proceeding, including information regarding the debtor company at the time of the initial application and information regarding the monitor.
During a proceeding, the monitor's reports, Court orders and often written communications sent to creditors are available to the public on the monitor's website. Once a proceeding has been finalized, the documents are archived with the OSB and are available to the public upon request.
Complaints and enquiries
If you believe a monitor has failed to fulfill his/her functions and duties pursuant to the CCAA, contact the CCAA national team at the OSB. The monitor's duties are listed in the CCAA. The OSB is responsible for recording and, where appropriate, investigating and responding to complaints concerning the conduct of monitors.
CCAA national team contact information
Office of the Superintendent of Bankruptcy
Innovation, Science and Economic Development Canada
300 Georgia Street W, Suite 2000
Vancouver, British Columbia V6B 6E1
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