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The proceedings of corporate bankruptcy in Vancouver under the Bankruptcy and Insolvency Act (“BIA”) can be commenced by debtors and creditors for the purpose of:
After carefully reviewing your company’s financial circumstances, you may determine that your company is not viable and accordingly decide that the best option is to end your business by way of an assignment into bankruptcy (“Assignment”).
In a voluntary bankruptcy, a company assigns all of its assets and liabilities to a Licensed Insolvency Trustee (“LIT”). The LIT files the Assignment documents with the Office of the Superintendent of Bankruptcy at which time the LIT will be named as Trustee of the estate on an interim basis. The LIT will immediately upon appointment take possession of all of the assets, undertakings and properties of the company.
A meeting of creditors will be called by the LIT to be held within 21-days of the effective date of bankruptcy. The purpose of the creditors’ meeting is to affirm the appointment of the Trustee, consider the affairs of the debtor company and appoint inspectors. Only creditors with claims against the estate that have been proven prior to the meeting may participate in the creditors’ meeting.
Once the assets have been liquidated, the Trustee adjudicates the claims received and then distributes the funds to the creditors.
Creditors have the option of petitioning a company into bankruptcy. The first step is for the petitioning creditor to obtain consent from a LIT to act as Trustee of the estate. The petition is then served on the company and there is a hearing after the expiry of a ten-day notice period. The company may challenge the application if it believes it is not insolvent. If the Court agrees with the petitioner, a Bankruptcy Order will be granted.
Once a Bankruptcy Order is made by the Court, the LIT will be appointed to take possession of the assets, undertakings and properties of the bankrupt estate. The LIT is obligated to complete its statutory duties, whether there are any assets available to cover the costs of administration. In most circumstances, the petitioning creditor would be required to provide a retainer to the Trustee or indemnify the Trustee for its fees and costs prior to the application to Court.
The LIT performs the same duties that it would under a voluntary assignment into bankruptcy except that it does not expect the same degree of co-operation since the bankruptcy would be involuntary.
To find out if bankruptcy is the right choice for you, please contact one of the professionals at Crowe MacKay & Company.