doing business in canada - Davies Ward Phillips & Vineberg LLP

appoint a receiver on a national basis. There are no statutory criteria establishing which entities may be subjectto receivership proceedings. As a result, it is largely a function of the court's discretion.CCAA PROCEEDINGSLarge insolvent entities generally attempt to restructure under the CCAA. A significant number of Canadianinsolvency restructurings are initiated under the CCAA because of its flexibility, which allows the insolventcorporation to design its restructuring plan to fit its particular circumstances. The CCAA permits debtors tomake compromises or arrangements with their creditors, both secured and unsecured.The CCAA is available to any company incorporated in Canada or with assets or business activities in Canadathat is insolvent or has committed an act of bankruptcy and whose total creditor claims exceed $5 million (aloneor as part of a corporate group), with the exception of banks, insurance companies, loan companies, trustcompanies and authorized foreign banks.The purpose of the CCAA is to facilitate the making of a compromise or arrangement between an insolventdebtor company and its creditors in order that the company can continue in business. Recently, the CCAA hasalso been used, in limited circumstances, for complex liquidations. When a company has availed itself of theCCAA, the court is called upon to play a supervisory role to preserve the status quo and to move the processalong to the point where a compromise or arrangement is either approved, or it is evident that the attempt isdoomed to failure.A proposed restructuring under the CCAA is commenced by an application to a court for an order stayingproceedings against the debtor company and granting such relief as is within the discretion of the court. Thecourt is required by the CCAA to appoint a monitor to monitor the business and financial affairs of the companywhile the stay order remains in effect. Because of the broad discretion given to the court supervising a CCAArestructuring, there is no fixed form of stay order prescribed by the CCAA, although in some provinces templateorders have been endorsed by the court. The CCAA contains provisions outlining the process which must befollowed in connection with such things as the right of a debtor to disclaim or resiliate contracts, the availabilityand terms of any super-priority debtor-in-possession financing, and the circumstances in which all or part of thedebtor company's assets may be sold before the presentation of a plan.Among other things, the court's initial order will include the right and obligation of the debtor company to file aplan of arrangement within a given time. The plan of compromise must be submitted for creditors' approval at ameeting of each class of creditors. The creditors' approval required is the same as for a proposal under the BIA:a majority of the number of creditors' voting and two-thirds of the value of the claims of the creditors voting.Once the creditors have voted in favour of the plan, an order of the court must be granted to sanctioning theplan if it is proven to be fair and reasonable under the circumstances. However, if the creditors or the courtrefuse to approve the plan, there is no automatic bankruptcy.WURA PROCEEDINGSAlthough it is also possible for most insolvent corporations to be liquidated under the WURA (but notcorporations incorporated under the Canada Business Corporations Act), in practice this statute is used almostexclusively for the winding-up of insolvent regulated financial institutions under the supervision of theirregulators, in conjunction with the Canada Deposit Insurance Corporation Act (the "CDIC Act") and the Bank Act.Under the CDIC Act, an order can be made vesting all the shares and subordinated debt issued by a bank in theCanada Deposit Insurance Corporation or appointing the latter as a receiver. The Bank Act includes provisionsallowing the Superintendent of Financial Institutions to take control of the assets of a bank and manage thewinding-up process. In practice, these steps are combined with WURA proceedings, as it provides the statutoryframework for dealing with creditors' claims.76 Bankruptcy and Insolvency Proceedings