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FORMAL RESTRUCTURING UNDER THE CCAA

Understanding whether CCAA is Right for You

The Companies’ Creditors Arrangement Act (“CCAA”) has been described as Canada’s equivalent to the U.S. Chapter 11 proceedings, which involves the debtor maintaining control of its assets and a stay of proceedings on all creditors’ actions, while a workable plan of reorganization is formulated for the creditor and ultimately court approval.

There are similarities to formal restructuring proceedings under the Bankruptcy and Insolvency Act (“BIA”) and under the CCAA. A CCAA Plan of Arrangement is very flexible and often includes a compromise of debt and/or an extension in time to pay same. It can also involve releases from certain contractual obligations. The CCAA plan must similarly be accepted by the creditors and subsequently approved by the Court. Failure to do so may result in the lifting of the stay and the revival of creditor collection remedies.

There are a number of differences between formal restructuring proceedings under the CCAA and the BIA which includes, but is not limited to, the following:

• CCAA proceedings are driven by applications to the Court. This sometimes gives greater flexibility than is available under the more codified form of the BIA.
• Lawyers play a more prominent role in CCAA proceedings. The LIT will act as a Monitor to oversee and report on the company’s financial affairs during the period of the stay of proceedings.
• CCAA proceedings are only available to federally or provincially incorporated companies with debts in excess of $5 million. There is no such qualifying minimum in Proposal proceedings pursuant to the BIA. It is typically used in more complex situations and may result in greater costs due to the cost of ongoing Court proceedings.

To find out whether restructuring pursuant to the CCAA is right for you, please contact one of the professionals at Crowe MacKay & Company. We are here to help.