Corporate Bankruptcy

The first step in the process is to determine if the corporation is eligible to file for bankruptcy.

In order to qualify, the corporation must:

• be a legal entity,
  • such as a corporation or limited liability company, and
• must owe more debt than it can repay.

Additionally, the corporation must have a permanent establishment in Canada, meaning it must have a physical presence in the country.

★★★★★ We did everything possible to keep the business going but it was no use.  My friend suggested YanchDey to get some advice.  I called and they were very helpful and informative, they even told me I could buy some of the assets back from the company that I wanted.  The process was straight forward and the trustee took care of everything for me.  If your considering a business bankruptcy give them a call.  Paul Vorvis, Ajax

Once eligibility is determined, the next step is to choose the type of Insolvency event that is best for the corporation.

There are two types of insolvency events that corporations can file for in Canada: a bankruptcy or a proposal also known as a Division I proposal.

• A corporate bankruptcy: is similar to a Chapter 7 bankruptcy in the United States. In this type of bankruptcy, the corporation’s assets are sold off to repay creditors. This is the most common type of bankruptcy for corporations in Canada.

• A Division 1 proposal: is more or less a “reorganization”, and is similar to Chapter 11 bankruptcy in the United States. In this type of insolvency event the corporation is able to keep its assets and continue operating while it restructures its debt. This type of bankruptcy is often used by larger corporations in Canada.

The initial step prior to filing a Division 1 Proposal in some cases is to file a notice of intention (NOI) with the official receiver.
The official receiver is an officer of the Office of the Superintendent of Bankruptcy (OSB).

When filing the Notice of Intention it must include:

• the statement of affairs,
• a list of the corporation’s creditors and
• the amount of their claims,
• a list of the corporation’s assets and liabilities

The NOI stays (stops) all collection proceedings against the corporation and allows them to structure the proposal they are going to offer to their creditors.

Once the proposal is filed, the corporation must meet with the Trustee and its creditors to discuss the proposal for restructuring its debt.

The creditors have an opportunity to vote on the proposal and may also propose their own plan.

If the proposal is accepted by the majority of creditors, it must then be approved by the court.

The final step is to obtain a certificate of completion from the OSB.

This certificate is issued once the corporation has fulfilled all of its obligations under the bankruptcy process, such as the sale of assets and payment of debts.

Once the certificate is issued, the corporation can emerge from bankruptcy protection and continue operating as a going concern.

When a corporation files for bankruptcy, it will be subject to the oversight and direction of the trustee.

The trustee’s role is to ensure that in a bankruptcy  a corporation’s assets are sold and the proceeds are distributed to creditors in a fair and efficient manner.

Bankrupting or filing a proposal for an incorporated company in Canada is a legal process that requires the corporation to:

• meet certain eligibility requirements, and
• can involve the filing of a notice of intention,
• meeting with creditors and obtaining a certificate of completion.

We suggest that owners of corporations call to discuss their business and learn how our licensed insolvency trustee can help.  We’ll guide your corporation throughout the process to ensure that all legal requirements are met for a successful outcome.

Bankruptcy Trustee Kelly Dey

Kelly Dey is a licensed trustee in bankruptcy throughout Ontario.

As a Licensed Insolvency Trustee, she is licensed and regulated by the Superintendent of Bankruptcy to administer proposals and bankruptcies for incorporated companies. She continues to actively consult and provide guidance to those seeking to file a bankruptcy or consumer proposal in Ontario.

Yanch Dey & Associates Ltd. offers a wide range of bankruptcy and debt management services in the GTA, Durham Region and County of Northumberland.