Canadian Lawyer InHouse

June/July 2021

Legal news and trends for Canadian in-house counsel and c-suite executives

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26 www.canadianlawyermag.com/inhouse FEATURE THE ONGOING COVID-19 pandemic dealt the final blow to many already struggling busi- nesses, forcing some into insolvency, while others have stayed afloat by negotiating restructuring deals. The energy and mining sectors, in particular, saw many restructuring projects last year due to existing financial problems that the pandemic crisis exacerbated. "Businesses that have never given any thought to what an insolvency or bankruptcy might mean are unfortunately having to pay more attention to it now — not just because of global COVID issues, but other interna- tional issues that are beyond the control of businesses," says Peter Rubin, a partner in the Vancouver office of Blake Cassels & Graydon LLP. As the largest independent producer of diamonds in Canada, Calgary-based Dominion Diamonds employed approximately 1,000 people — including Indigenous employees — when it had to file for creditor protection last year after the pandemic caused significant disruption to the global diamond industry. "It was the largest non-governmental employer in the north-west territory, so when a business like that goes insolvent, there are serious ramifications for a variety of stake- holders," says Rubin. "When you look at a business like that that is so ingrained in the fabric of the community, insolvency has a Canadian businesses forced to restructure amid economic collapse In-house counsel should seek creative alternatives to insolvency with pre-emptive strike dramatic impact on virtually every facet of the economy and people's lives." Dominion's potential insolvency would touch not only employees but contractors and other businesses that work with Dominion and the government and Indigenous groups that were receiving impact benefits. Blakes assisted Dominion by obtaining insolvency protection, allowing time to find a solution to restructure and save the business. Finding a going concern transaction was the main goal of the filing to avoid shutting down or liquidating the company. "The social consequences of not finding a going concern solution were enormous," says Rubin. "We needed to save the business — not just for the benefit of current employees and contractors, but also for the benefit of former employees that had pensions, for the benefit of the government and Indigenous groups." While an organization can sometimes find a solution outside of an insolvency filing, in-house counsel should not avoid talking about the consequences of a potential insolvency, Rubin says. "Don't try to bury the problem or pretend that it will go away, as that can be a recipe for disaster," Rubin says. "You need to understand what an insolvency filing might look like and to consider alternatives in terms of restructuring." In the current economic downturn, many companies are treading water and avoiding filing for bankruptcy as they hope for more lucrative times ahead, according to Rob Chadwick, a partner at the Toronto office of Goodmans LLP. "The key to having options for general counsel and for a company is to ensure that you have liquidity, so that is the fundamental driving factor for many companies," says Chadwick. Chadwick favours a pre-emptive approach, so he regularly talks to general counsel, CEOs and CFOs at companies with a difficult capital structure to determine alternatives well in advance of potential insolvency. "We spend a lot of time looking at liquidity and looking at the long-term documents and making sure that as you project your cash flows, you can see far enough ahead if you'll "The social consequences of not finding a going concern solution were enormous." Peter Rubin, Blake Cassels & Graydon LLP

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