While there are a number of ways to restructure and/or liquidate insolvent companies through a court supervised process, the primary processes used can be found in the Bankruptcy and Insolvency Act (“BIA”) and the Companies’ Creditors Arrangement Act (“CCAA”). The authority to liquidate a company’s assets through bankruptcy or receivership resides in the BIA. The authority for court supervised, debtor in possession, or restructurings, resides in both the BIA (by way of a “proposal” process) along with the CCAA.
The courts have regularly approved the transition from one restructuring proceeding to another (for example converting a BIA “proposal” proceeding into a CCAA proceeding). Likewise, receivers often seek, and obtain, the power to assign a company into bankruptcy. However, in the last 18 months, two court proceedings have made it even easier for insolvent entities to transition between restructuring and liquidation proceedings as circumstances warrant.
White Oak Commercial Finance, LLC v Nygard Holdings (USA) Limited et al.
In White Oak Commercial Finance, LLC v Nygard Holdings (USA) Limited et al. (the “Nygard Proceeding”), certain Canadian companies obtained creditor protection pursuant to proposal provisions of the BIA (the “BIA Proposal Process”). Days later, a receiver was appointed over the property, assets, and undertaking of four US companies that had received financing (the “White Oak Financing”) from White Oak Commercial Finance, LLC (“White Oak”), together with Canadian Debtors who had guaranteed the White Oak Financing but were already the subject of insolvency proceedings.
While the Court saw the merit in appointing a receiver over the Receivership Entities, it was faced with a conundrum of either terminating the BIA Proposal Process (which would result in a bankruptcy of the Canadian Debtors by operation of law) or permitting the BIA Proposal Process to continue (which was practically untenable). Ultimately, the Court ordered a “stay” of the NOI Proposal Process. While the BIA does not provide for a stay, the Court held it had the authority to do so citing the decision of the court in Re: Dondeb Inc., a proceeding commenced under the CCAA wherein a party sought the appointment of a receiver.
Re: EncoreFX Inc.
In Re: EncoreFX Inc. the debtor, a foreign exchange risk management company, assigned itself into bankruptcy in March 2020. Given the nature of the business and the international constituency of the stakeholders, the bankruptcy became exceedingly complicated to administer. By March 2021, the trustee in bankruptcy had determined that both the recoveries available and the complexities of the issues militated in favour of proceeding with a restructuring under the CCAA. The net effect of the request (from a legal perspective) would be to breathe life back into a company that was (legally) dead.
As in the Nygard Proceeding, the court “stayed” the existing insolvency proceeding in favour of the new proceeding (in this instance a proceeding under the CCAA). In EncoreFX Inc. the court opted for the “stay” as an annulment of the bankruptcy was inappropriate in the circumstances. In doing so, the court was aware that it had not resolved how to conclude or otherwise address the ongoing bankruptcy proceeding. The Court knew that by granting the “stay” of the bankruptcy proceeding it has merely deferred how to conclude the bankruptcy proceeding.
Both decisions above demonstrate the insolvency court’s desire to do what is best for an insolvent company’s stakeholders. These cases are tacit acknowledgements (and testaments) to the flexibility of insolvency proceedings and the ability to craft creative solutions to complex business problems. Both decisions also highlight procedural quandaries that can arise when creative solutions are implemented by a court. As with most insolvency proceedings, the procedural quandaries can be resolved with creative thought, cooperation of the parties, and timely interventions by the Court.
 sections 42 through 49 of the BIA
 section 243 of the BIA
 sections 50 through 66 of the BIA
 2020 MBQB 58
 Five Canadian entities, namely, Nygard International Partnership, Nygard Enterprises Ltd., Nygard Properties Ltd., 4093879 Canada Ltd., and 4093887 Canada Ltd. (collectively, the “Canadian Debtors”).
 The US Companies that were the principal obligors to White Oak are Nygard Holdings (USA) Limited, Nygard Inc., Fashion Ventures Inc., and Nygard NY Retail, LLC (collectively, the “US Debtors” and together with the Canadian Debtors are the “Receivership Entities”)
 2012 ONSC 163
 2021 BCSC 750
 Re: EncoreFX Inc., supra at para 72