Business Bankruptcy

If a business is no longer viable and creditors compete for the best recovery, a Bankruptcy and/or Receivership will ensure an orderly liquidation.

The purpose of a bankruptcy is to provide a borrower, overburdened with debt, an opportunity to properly terminate a non-viable business. A business is defined as being insolvent when it can no longer pay its debts as they become due. Bankruptcy is a legal process administered under the Bankruptcy and Insolvency Act that provides the business with immediate protection against any further legal action by its unsecured creditors and provides a mechanism to liquidate the assets and provide a final accounting to the creditors.

A receivership is a process available to creditors secured against all (or substantially all) assets of a business. If the business defaults under the loan agreement, a receiver may be appointed to realize on the assets of a business. A receiver may temporarily operate the business to maximize realizations. The creditor can appoint a receiver if the loan agreement includes provisions for the appointment of a receiver (“private appointment”). In a private appointment, the receiver’s authority to realize on the assets is provided in the loan agreement. Alternatively, the creditor can apply to Court for an Order appointing a receiver (“Court appointment”). In a Court appointment, the receiver’s authority to realize on the assets is derived from the Order appointing the receiver. A Court appointment may be necessary if several creditors hold competing interests in the assets.