Resources for Creditors
The Companies’ Creditors Arrangement Act
- What is the CCAA?
- The stay
- Debtor's financial statements
- The Plan of Compromise or Arrangement
- The role of the monitor
- The claims process
- The meeting of creditors
- Approval of the plan/Distribution of payment
- Complaints and enquiries
- CCAA national team contact information
What is the CCAA?
The Companies' Creditors Arrangement Act (CCAA) is a federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs. The main purpose of the CCAA is to enable financially distressed companies to avoid bankruptcy or foreclosure or seizure of assets while maximizing returns for their creditors and preserving both jobs and the company's value as a functioning business. CCAA proceedings are carried out under the supervision of the Court.
The process begins when a company makes what is known as an "initial application" to the Court for protection under the CCAA.
If the application is accepted, the Court then issues an order (called an "initial order") that typically gives the company 30 days' protection from its creditors (known as a "stay"). This is to give the company time to prepare a proposal called a Plan of Compromise or Plan of Arrangement. If the company needs additional time to prepare the Plan of Compromise or Arrangement, the Court can be asked to grant an extension of the stay. There is no time limit on how long a stay can be extended. However, interested parties may approach the Court to have the stay varied or lifted altogether.
Generally, a company will continue operating during a stay, but is shielded from creditors during that time (e.g., legal actions).
Debtor's financial statements
At the time of filing the initial application with the Court, the debtor company is required to provide a projected cash-flow statement. It is also required to provide the Court with copies of all financial statements for the year prior to the application. If no financial statements were prepared the previous year, the debtor company must provide a copy of the most recent statement.
The Plan of Compromise or Arrangement
A Plan of Compromise or Arrangement is a proposal the company presents to its creditors on how it will deal with the debts it owes as of the date of filing. Where applicable, it also explains how the company plans to restructure its business and operations. Typically, plans offer to pay a percentage on the amount owed, or exchange debt for shares in the company, or a combination of the two. There are no statutory restrictions on the structure or content of the Plan.
The role of the monitor
A monitor is a trustee licensed by the Office of the Superintendent of Bankruptcy who is appointed by the Court in the initial order. As an officer of the Court, the monitor's role is to monitor the company's business and financial affairs to ensure compliance with the law, the court orders and terms of the Plan. The monitor assists the company with the preparation of the Plan, prepares reports for the Court, provides information to the creditors regarding the claims process and creditors' meetings, etc. and oversees any voting at the meetings. The monitor's reports, and other public documents, must be posted on the monitor's website.
For information about a monitor appointed for a specific proceeding, see the CCAA Records for that proceeding.
The claims process
The Court establishes the claims process and may appoint a claims officer to adjudicate disputed claims.
An important part of the monitor's role is to inform the creditors about the claims process and provide Proof of Claim forms and instructions on completing and filing the proofs of claim. The Proof of Claim sets out what is owed to the creditor and is reviewed by both the monitor and the company.
It is important to note that, as a creditor, you are responsible for proving your claim.
If you are a creditor and have not received a Proof of Claim form, please contact the monitor.
To be able to vote at a creditor's meeting, a creditor must file a completed Proof of Claim and supporting documents before the start of the meeting. If your claim is filed after the start of the meeting or at a later time, you may not be able to vote but the claim could still be considered for payment purposes in accordance with the distribution provisions of the Plan.
In some cases, there may be a deadline for filing the Proof of Claim ("claims bar" date). If a creditor does not file a Proof of Claim before the claims bar date, the creditor's rights could be severely and irreversibly affected.
The meeting of creditors
Once the Plan has been prepared, it is presented to creditors for their review and consideration. The creditors may then be invited to attend a meeting to vote on the Plan (i.e., whether or not the Plan is acceptable to the creditors).
If the Plan is accepted, the creditors will be paid or treated in accordance with the terms of the offer contained in the Plan.
If it is not approved, usually the stay—and, therefore, the protection from creditors—is lifted. The debtor company does not automatically become bankrupt because the creditors have rejected its Plan.
Creditors may be separated into various classes. For a Plan to be accepted, it must be approved by a majority of the creditors in each class that are present and voting (either in person or through a proxy). In addition, the creditors voting to accept the Plan must represent at least two-thirds of the total value of the creditors' claims in that class.
Approval of the plan/Distribution of payment
Within days of the vote accepting the Plan, the debtor company applies to the Court for its approval (sanction).
In sanctioning the Plan, the Court must determine, among other things, that the Plan is fair and reasonable, that it complies with all statutory requirements and that it respects the previous orders of the Court. If the Court determines that the Plan is not feasible, it can refuse to sanction the Plan. The debtor company does not automatically become bankrupt if the Court refuses to sanction its Plan.
Complaints and enquiries
If you have questions about a CCAA proceeding, suspect wrongdoing or believe the process is not being handled properly, contact the CCAA Team at the Office of the Superintendent of Bankruptcy (OSB). The OSB is responsible for recording and, where appropriate, investigating complaints concerning the conduct of monitors.
CCAA national team contact information
Office of the Superintendent of Bankruptcy
25 St. Clair Avenue East, Suite 600
Toronto, Ontario M4T 1M2