Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50880
Bill C-12, "an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act, the Wage Earner Protection Program Act, and chapter 47 of the Statutes of Canada, 2005," was modeled after bill C-55, which died on the order paper when the 2005-2006 federal election was called. Aside from amending the Bankruptcy and Insolvency Act, the new legislation seeks to create guidelines for the Companies' Creditors Arrangement Act. The CCAA allows financially trou- bled corporations to restructure their financial affairs through a formal plan of arrangement. This can aid a company in avoiding bankruptcy and allow the companies' creditors to receive some form of payment in the process. The CCAA is seen as the Canadian coun- terpart to the United States Chapter 11 bankruptcy code. However, it has become a common refrain that the CCAA is like Chapter 11 without rules. It is a criticism that is not entirely off base, though some of those involved in the field view this as a positive aspect of the Canadian law. Jay Carfagnini, a partner with Goodmans LLP and head of the firm's corporate restructuring group, says he has seen an evolution of laws covering financially embattled companies mainly through court decisions. "The courts, the profession, and the business [have] kind of led the practice to those practical results and the law caught up to it after- wards, certainly in the large restructur- ings," he says. "The latest amendments to the CCAA and the Bankruptcy and Insolvency Act mirrored what the law was in Canada, because it mirrored the judge-made law, the benefit of course in putting it into the legislation is that in one sense it codifies it so there [are] no misunderstandings, so you can't leave it to the interpretations of a single court to affect a different result if they wish to." That, says Carfagnini, puts him in two minds about the latest amendments. On the one hand, they create guidelines to follow, and do not leave the decisions up to individual judges. On the other hand they take away the flexibility of Canadian law. "Whenever you codify in this arena you run the risk of making the statutes a little less flexible, maybe that is what they are trying to achieve, or the balance they are trying to achieve. So there would be proponents of both views depending on the circumstances including myself. I think there is a benefit to articulating certain things clearly and codifying them, and I also think that you don't need to. "Because that is where the creative- ness of the Canadian practice [is] and really has been one of our stalwart quali- fications, we have been able to fashion results that might not have been able to have been achieved, to the benefit of all stakeholders." Jeffrey Carhart, a partner with Miller Thomson LLP, says the amendments awaiting proclamation into force gener- ally fall into three different categories. First, as Carfagnini says, there are rules that codify judicial decisions. Secondly, Right-sized Thinking. It Fits. Our experience makes us exible and our expertise makes us passionate. We're driven by your challenge, not by our billable hours – meaning you nd an end-to-end solution that's just the right size and t for you. So, if tting in is what matters most to you, call Pallett Valo and discover the difference Right-sized Thinking makes. Your Authority For: Business Law • Commercial Litigation • Commercial Real Estate Construction • Insolvency and Corporate Restructuring Labour and Employment • Tax • Wills, Estates and Trusts 16 • JUNE 2009 Untitled-5 1 INHOUSE 5/5/09 10:41:12 AM