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.
Book a free, confidential consultation
Discuss more details about corporate bankruptcy, the Bankruptcy Insolvency Act and how Faber can help you determine if this is the right solution for you.See how we can help