Business Bankcrupty and Receivership
A receiver or receiver/manager, under the Bankruptcy and Insolvency
Act, is a person who has been appointed to take, or has taken possession
of all or substantially all of:
- the inventory;
- the accounts receivable; or
- the other property
- of an insolvent company pursuant to a security agreement or an order of the court.
The Receiver or Receiver/Manager will take possession of the assets covered under
the security or covered by the court order and will sell the assets. After paying
any priority creditors and the costs of the receivership, the balance of funds are
paid to the secured creditor.
In some cases there may be both a receivership and a bankruptcy, if it is advantageous
for the federal bankruptcy laws to be utilized.
Commercial Bankruptcy
A company can be placed into bankruptcy by:
- a creditor petitioning the company into bankruptcy through the courts;
- the directors assigning the company into bankruptcy;
- having a Proposal to the creditors defeated at the first meeting of creditors;
- having a Proposal annulled by the Trustee on creditor instructions for non-compliance.
Some reasons for placing a company into bankruptcy are:
- If a landlord distrains and seizes the company's assets the company must pay the
rent arrears or settle with the landlord. The landlord may sell the assets after
five days of the seizure. An assignment into bankruptcy or a notice of intention
to file a Proposal within the five day period causes a stay of proceedings which
stops the rent distraint.
- the company is no longer viable and has free assets (no security) which are available
for the creditors.
- the company would not be viable even if a Proposal to the creditors was filed.
- to rearrange the priority of statutory creditors.
In a corporate bankruptcy the Trustee takes possession of all the company's assets
and deals with all of the creditors. The directors cooperate with the Trustee and
might assist him in his duties but are relieved of all the pressures and frustrations
of operating the company and dealing with customers and creditors.
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