The CBCA is much more limited, says Michael Rotsztain in The Globe and Mail Report on Business

A Simpler Alternative

October 26, 2012

The Companies' Creditors Arrangement Act (CCAA) is the usual legislation under which insolvent companies with $5 million or more in outstanding debts are restructured.  In recent years, however, in order to save time and expense, some large companies have filed plans of arrangement pursuant to the Canada Business Corporations Act (CBCA) rather than the CCAA.

"Under the CCAA," says Michael Rotsztain, "if you're doing a plan of arrangement with your creditors, you can basically deal with all types of debts that you owe.  You can generally do a comprehensive cleaning up of your balance sheet.  The CBCA is much more limited."

The CBCA can be used only for dealing with financial indebtedness such as bonds, debentures and commercial notes.  "Often companies restructure because they have some huge and onerous financial obligation - such as supply contract or a long-term lease - and they want to repudiate the contract," says Rotsztain.  "You can't do that with the CBCA."

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