While the exceptional situation we’re in has already been going on for several months, it’s finally time for some of us to get back to work. For others, recent months have unfortunately forced them to restructure or cease operations.
In the next few weeks, some of you will be receiving notices that a customer has filed for protection under the Bankruptcy and Insolvency Act, or CCAA. Although a spirit of solidarity is making it possible for companies to achieve greater conciliation and flexibility in dealing with delays in the collection of accounts receivable, this situation serves as a reminder of the importance of protecting oneself even further.
What to do? How can I protect myself? What are the alternatives? Here are a few questions and answers to help you manage this new reality and minimize losses.
Your customer has filed for legal protection or bankruptcy. You receive a notice by mail.
Do I need to complete the proof of claim?
To be eligible for distribution, you must complete the proof of claim sent by the syndic or controller. You must include a copy of the invoices or a statement of account.
If you don’t file a claim, governments may reject your bad debt.
Should I continue to sell to him on credit?
No. In a restructuring context, a debtor cannot increase its liabilities. You can request payment on delivery.
Can I refuse to sell to him?
In very rare cases, a CCAA may require a sale without immediate payment. That said, in most cases the question to ask is: why refuse a sale if it’s C.O.D.?
Can I cancel a contract?
No, regardless of whether the debtor restructures under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act (C-36).
Can I hold on to his property?
Yes. This is the concept of lien, which applies up to the value of the goods.
Should I vote?
For a proposal to be accepted, 50% + 1 of voting creditors must vote in favor, and 66% (2/3) must vote against. The concept is similar in a C-36 context. A restructured company may be a loyal customer for many years, but the ultimate decision to vote rests with you.
This program will also be available to non-profit organizations (NPOs) and registered charities (RCAs).
Visit our website or contact our specialist directly for all your insolvency or bankruptcy questions.
