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Corporate Solutions
The Staff at Credit Solution have extensive experience in dealing with companies in financial difficulties. We can assist business owners in reviewing their various options to resolve their financial difficulties.
These options can include:
Informal Workouts
An informal workout is a contractual agreement by a company in financial difficulty with all or some of its creditors to compromise its debt or extend the terms of repayment. The terms of the agreement are not restricted by any particular law or statute and therefore are only limited by the imagination, expertise, and creativity of the participants and their advisors.
One of the key elements to successful financial reorganizations is recognition at an early date of your financial difficulty. As well, the use of experienced and competent insolvency professionals will increase creditor confidence, expand the restructuring options, and increase the likelihood that a successful plan will be implemented and ultimately succeed.
Proposal to Creditors
It is not always possible to implement an informal workout. There are formal options available under the provisions of the Bankruptcy and Insolvency Act which may assist you in saving your business.
An insolvent business can file a Notice of Intention to Make a Proposal. The filing of that notice will give your company an absolute Stay of Proceedings against all claims by creditors against your company, including:
The Stay of Proceedings will give you a minimum of 30 days to come up with a plan to deal with your creditors. The time period can be extended by applying to Court for a further 45-day extension to a maximum of 6 months. The purpose of the Stay is to give your company the "breathing’ room that it needs to develop a plan to save your business without the threat of garnishees or legal actions.
A Proposal can take any number of forms; however, a number of factors are required before any restructuring can be implemented:
The process of implementing a successful Proposal is obviously more complex than we have described and involves a detailed review and assessment of your company’s financial position.
Bankruptcy
After consulting with our professionals, you may come to the conclusion that the only option available is for the Company to make an Assignment in Bankruptcy.
Although this means the end of your business, it maybe advantageous to take steps to liquidate your business before it deteriorates to the point where there are insufficient assets to cover your debts to the secured creditor or to any government creditor that has Directors obligations (Canada Revenue Agency) or to any creditor that may hold a personal guarantee as this would leave the guarantors with personal obligations.
In a bankruptcy, all of the assets of the business are turned over to the possession and control of a Bankruptcy Trustee. The Trustee takes steps to preserve, protect, and evaluate the business and reports on the assets of the business at the first meeting of creditors.
At the first meeting of creditors, the creditors will generally appoint Inspectors (a creditor committee) to assist the Trustee in dealing with the assets and undertakings of the business. The Directors of the company are required to attend the meeting and may be called upon to explain the causes of the company’s financial difficulties or other matters relating to the assets.
Ultimately the companies’ assets are sold and converted into cash, accounts receivable are collected, and other assets dealt with. A dividend is paid to the proven creditors on a pro-rata basis and the Trustee obtains its discharge.
Receiverships
A Receiver or Receiver-Manager ("Receiver") may be appointed by a secured lender under a General Security Agreement ("GSA") covering all of the security of the debtor, under a specific mortgage such as a mortgage of an office building or apartment block, and may be appointed by the Court.
In the most common form of receivership, that is under a GSA, the Receiver is appointed to take possession of the assets, to manage them in such a manner that provides the secured lender will be paid out, or to liquidate them for the same purpose.
The Receiver acts primarily for the secured lender, but also has a fiduciary relationship to the debtor. The Receiver must act in good faith and preserve the assets of the debtor, but is not obligated to consider the long term objectives of the debtor. If the Receiver can realize sufficient funds to pay out the secured lender in the short term, then the Receiver will most likely be there only for the short term. Once the secured lender is paid out the surplus assets are returned to the debtor to be managed by its directors.
Before the secured creditor can call your loan and appoint a Receiver, it must provide you with statutory ten day Notice of Intention to Enforce Security pursuant to the provisions of the Bankruptcy and Insolvency Act.
Only after the expiry of the 10-day period can the secured creditor enforce its security. Prior to the expiry of the 10-day Notice, your Company would be able to file a Notice of Intention to File a Proposal to Creditors, which would stay the secured creditor from enforcing its security for a 30-day period.
If your Company receives the ten day notice from your bank or secured creditor, it is essential to consult with our insolvency professionals immediately. Otherwise the ability for you to restructure your financial affairs may be severely limited.
Debt Restructuring
Our Reorganization and Debt Restructuring practice assists the financially troubled or under-performing company in tailoring a business solution and in the implementation of that solution. We are "hands-on" in our approach and strive to enhance shareholder value. We work in partnership with you.
This part of our practice has evolved to respond to small and mid-sized businesses. These businesses often do not have available in-house resources or expertise to pinpoint and analyze the financial and/or operational problems. We work in partnership with the debtor to implement a business solution. During the course of the process, we bring a high degree of objectivity, independence and credibility to the matter at hand when dealing with the many stakeholders involved, including shareholders, lenders, unions and others