In Cliffs Over Maple Bay Investments, Justice Morawetz reinforced the view that the CCAA is flexible legislation, says Tony DeMarinis in Law Times

Insolvency Update: Licensee Protection, Cross-Border Filings and CCAA Liquidations

March 22, 2010

The use of the CCAA to sell all or substantially all of the assets of a distressed business in the absence of a plan or proposed plan of arrangement has for some time been a matter of controversy. The issue peaked in the 2008 case of Cliffs Over Maple Bay Investments Ltd. v. Fisgard Capital Corp., when the B.C. Court of Appeal refused a CCAA stay order to an insolvent real estate development because "the debtor company does not intend to propose a compromise or arrangement" to its creditors.

"But in Ontario, liquidations have been an increasing focus of CCAA proceedings," says Tony DeMarinis. "The Nortel case involved separate auctions for the company's key divisions, the GM restructuring was organized as a sale, and other CCAA auctions took place in proceedings like SkyPower and Grant Forest Products."

The Nortel Networks proceeding is particularly important; in it, Justice Geoffrey Morawetz of the Ontario Superior Court of Justice took the opportunity to consider the court's power to approve substantial asset sales in the absence of a restructuring plan. He noted that such sales had occurred previously under the CCAA, citing the insolvencies of Stelco, Canadian Red Cross and Consumers Packaging. He distinguished Cliffs Over Maple Bay by pointing out that the assets, consisting of a real estate development, did not include an operating business.

"Morawetz reinforced the view that the CCAA is flexible legislation to which the courts must give a liberal interpretation, and that the overreaching purpose of the CCAA is to preserve a business as a going concern without regard to a change in the ownership of the business," says Tony.

Read the full article here.

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