LawDB.ca
When a company cannot pay its debts, Canadian law offers several routes. Two matter most for restructuring rather than liquidation: the Companies’ Creditors Arrangement Act (CCAA) and proposals under the Bankruptcy and Insolvency Act (BIA).
Two routes compared
The CCAA is generally used for larger companies and is court-supervised and flexible, with the court making orders tailored to the situation. A company usually has to owe at least a threshold amount to qualify. A BIA proposal is a more structured process with set steps and is often used by smaller businesses.
Both aim to give the company breathing room, through a stay of creditor actions, to put a plan to creditors.
Why Alberta matters
Alberta courts have handled many energy-sector restructurings. The Supreme Court of Canada’s 2019 Redwater decision, which came out of an Alberta case, held that an insolvent oil company’s environmental clean-up obligations have to be met before its assets are distributed to creditors, a ruling that changed how lenders and buyers assess oil and gas risk.
Priority disputes over security, including how the Personal Property Security Act applies, are also common in Alberta insolvencies.
If your customer or supplier is insolvent
Creditors should file proofs of claim on time, review whether they hold security or trust rights and be careful about continuing to supply on credit. Directors should get advice early, since personal exposure can arise in some situations.
If a customer or supplier is in trouble
- Review your security, trust and set-off rights right away.
- File a proof of claim by the deadline and keep the evidence of your debt.
- Be careful about extending more credit without protection.
- Directors should document decisions and get advice on personal exposure early.