When faced with a cross-border or multi-jurisdictional filing, it is important to understand the key attributes of the restructuring legislation in all applicable jurisdictions. Where Canadian assets, creditors and/or operations are involved, the Canadian Companies’ Creditors Arrangement Act (CCAA) provides a restructuring regime that can be beneficial to debtors and creditors. Below are a few factors that are some of the many ‘arrows in the quiver’ to aid in restructuring under Canada’s CCAA. While there are many factors that will be considered when deciding if, when and where restructuring proceedings will be commenced, we hope that the factors above will assist parties in understanding some of the ways in which the CCAA is a favorable venue and can be beneficial to achieving a restructuring.
The test for whether a company may restructure under the CCAA requires it to be an insolvent corporation, with at least CDN$5 million of debt and with a head office, chief place of business or property in Canada.
Broad stay of proceedings
The initial stay granted generally includes all of the debtors and their property as well as directors and officers. Stays of proceedings under the CCAA can also extend to third parties (with certain limitations, such as guarantee actions) – such as a debtor’s non-insolvent affiliates or in respect of third party litigation.
Confidence in the Canadian courts
Where ancillary proceedings to a CCAA filing are required, the CCAA and the Canadian court’s jurisdiction is well recognized by courts in other jurisdictions who are able to reliably grant orders recognizing a CCAA proceeding as a foreign main proceeding.
Flexibility, cost and time efficiency
The CCAA provides a framework for debtors to restructure while also offering interested stakeholders rights in the proceeding. As the CCAA is not a “code”, there is significant room for creative solutions that benefit all parties. Court oversight and appointment of the court-appointed monitor provide creditors and stakeholders with comfort that all applicable interests are protected and with transparency of process.
Third party releases
The CCAA jurisprudence on the availability of third party releases is well developed, with Canadian courts having the jurisdiction to grant broad releases in the appropriate circumstances.
Specific restructuring tools
Restructuring in Canada also has some distinct options which are not available in other jurisdictions. One such option is the increasing use of the ‘reverse vesting order’ or ‘RVO’, through which a corporate entity may be preserved by “vesting out” unwanted liabilities and assets. The RVO has the added advantage of not requiring a creditor vote and only requires approval of the Court. The CCAA also does not restrict restructuring of companies carrying on business in the cannabis industry, which is distinct to other jurisdictions including, currently, the U.S.