The company is unable to continue to operate “as is” due to cash flow constraints, creditor pressure, withdrawal of funding or other issues.
In order to protect the value of the business and its assets, restructuring through a formal insolvency process is necessary.
How we can help
Generally, one of the primary objectives of a formal insolvency process is to improve the returns to a distressed company’s creditors. This may be from the continued operation of the business while the company restructures under the supervision of a court-appointed officer and/or from the liquidation of some or all of the company’s assets. Through our formal insolvency services, we act in various court‑appointed capacities, including:
Monitor under the Companies’ Creditors Arrangement Act
Interim receiver, receiver or receiver and manager under the Bankruptcy and Insolvency Act or provincial statute
Trustee under the Bankruptcy and Insolvency Act
The potential benefits
The involvement of the court and a court-appointed officer adds transparency and credibility to the process. We offer extensive experience acting in a wide range of formal insolvency appointments.
The stay of proceedings in a formal insolvency process provides immediate relief from creditors and may create additional short-term liquidity for a company continuing to operate under court protection.
A formal insolvency process offers greater flexibility in restructuring. The company may, among other things, repudiate certain contracts and real property leases. As such, management may be able to restructure the business at a significantly lower cost than would be possible outside a formal insolvency process, thereby stemming operating losses and potentially restoring the business’ viability as a going concern.
Certain claims against directors of the company may be compromised during a formal insolvency process.