mydeck Flashcards

Question

Perfection of security per PPSA, within lesser of:

Answer 1

-15 days of knowledge of move -60 days of actual movie

Answer 2

* where a person transfers assets/dividends to a non-arm’s length party at a time when they owe tax debt to CRA * CRA can raise an assessment against the transferee for lesser of: o Tax debt or o FMV – consideration paid * Trustee needs to alert debtor of possibility of an assessment under ITA 160 * This provision is mostly for shareholders, but CRA can go after directors if they’re also shareholders section 160 assessments are not subject to a time limit and bankruptcy of the original taxpayer will not cancel your section 160 assessment

Answer 3

* BIA permits Trustee to go after directors for any amount paid (termination/severance), redemption of shares, or dividends distributed within 1 year before initial bankruptcy event. * Stock dividends don’t count. * Trustee applies to court, court grants judgement against director (or shareholder related to director) * Court looks at following: o If transaction occurred when company was insolvent or transaction rendered company insolvent

Answer 4

* Director can say they formally objected to dividend * Director had reasonable grounds to believe corporation was not insolvent nor did transaction render company insolvent * Dividend payment happened under ordinary course of business * Relied in good faith on financial statements or advice of CFO

Answer 5

-have a written agreement -report on preliminary report to creditors, EIS, a note on FSRD -trustee must ensure funds aren’t from debtor’s own resources, get written declaration -deposited into separate trust account

Answer 6

* instances where Trustee can be substituted via special resolution always unless Div I rejected (then its ordinary resolution) * Creditor has to call formal motion to substitute trustee * Special resolution threshold: ¾ in value of proven claims and majority in number * Trustee may vote it’s proxy against being substituted, but trustee can’t vote on their remuneration nor conduct * New trustee needs to consent to act and needs to be in attendance by phone or in-person * Trustee can’t assign its trusteeship to another LIT.

Answer 7

* Turn over all estate assets, books + records to new trustee * Provide description and valuation of any property not realized * Prepare FSRD * Apply for taxation to court (court follows 7.5% of realization for ordinary administration after secured creditors have been paid; it’s used where trustee remuneration is not fixed by ordinary resolution) * Obtain no-objection letter from new trustee, letter needs to be inspector approved. * Practically wait 3 months from substitution before applying for discharge. New trustee *go over SOA with debtor * To file with the court a copy of the minutes of the meeting of creditors that substituted him as trustee; * To notify the Superintendent of his appointment; * If required by the inspectors, to register a notice of the appointment in the land register of any land titles or registry office where the assignment or bankruptcy order has been registered; and * As soon as funds are available, to pay the former trustee his remuneration and disbursements as approved by the court.

Answer 8

* Actual losses or lesser of: * 1 year rent after lease ends + 15% of remaining rent * 3 years rent Only for div I

Answer 9

-owes over 200K and CRA debt is 75% of total unsecured debt -not eligible for automatic discharge -apply to court hearing after normal length of bankruptcy (9m for first timer below threshold or 21 months for above threshold or 24m for second timer..etc) -court looks at COEF ->circumstances when tax debt was incurred ->effort by bankrupt to pay off tax debt ->if other debts were paid instead of tax debt ->future financial prospects of bankrupt

Answer 10

* Child/spousal support * Child care expense * Medical expense * Court fines or penalties * Employment expenses like union dues, tools, uniform. * Post bankruptcy tax remittances

Answer 11

* Source deductions (ee portion of income tax, cpp, ei) * GST * 6 month wages * 12 months vacation pay * Pension deducted but not remitted * Environmental liabilities For environmental liability, it’s a DL that cannot be compromised for post-filing act. You can’t get directors charge for a negligent act.

Answer 12

*. BOD delegates management authority to file before they resign. • Bank (creditor) makes application for CCAA proceeding. • Resigning after debt exists doesn’t remove director liability (DL). • Liability continues after resigning — directors can be pursued up to 2 years. • CRA must file claim within 6 months of commencement of proceeding. • DL is triggered by bankruptcy, liquidation, or judgment left unsatisfied. • Stay provision can be contemplated in initial order. • Plan can contemplate compromise of DL (clause for source deductions specifically as Gst can be compromised but source cannot bia s.86(1)) [Directors are liable for source deductions, reduced by recovery from DT so CRA can go after them for the shortfall (2 yr limitation from when they resign. Unlike GST, source cannot be compromised unless you put a clause in the proposal. ] • Immediate payment of DL is preference. ---these are all tax competency (F) points except the last preference point which is E.

Answer 13

-Trustee is protected by BIA unless creditor obtains leave of court -This is to protect Trustee’s from frivolous/harassing lawsuits -Applicant needs to file motion in bankruptcy court, with affidavit -Trustee’s defence is that actions were in good faith and within statutory authority

Answer 14

an individual who’s principal occupation is fishing, farming or tillage of soil -individual who is employed and earns less than $2,500 per year -banks, trust companies and insurance companies

Answer 15

-farmers have recourse under FDMA -need to give farmer 15 day’s NOITES against farmer’s assets -advise farmer they have right to make application under FDMA for a stay of proceedings

Answer 16

* Fines, penalties, restitution order, * Damages for bodily harm or sexual assault * Child or spousal support * Fraud, embezzlement * Undisclosed debts in SOA * Student loans (EOS<7 years) * Interest on all above debts

Answer 17

1. Conclusion – cash flow is deficient on several levels 2. Cash Flow needs to be accompanied by representations of Debtor. CF should be signed by Trustee. 3. Notes should indicate purpose of cash flow 4. CCAA (weekly; 13 weeks); Proposal (monthly; up to court approval atleast) 5. compilation errors: ending cash doesn’t equal opening cash 6. compilation error can be traced to “total receipt” line which isn’t added properly 7. It shows we’re paying suppliers every 45 days, that is unrealistic as they’re going to want payment on COD basis unless court designated them a Critical Supplier. 8. COD is fine for retail, but not realistic for manufacturing. Expecting quick payments there could disrupt cash flow and reduce sales. 9. If receipts based on non-consolidated amounts, then that’s an overstatement of revenue. 10. Revenues and expenses appear constant, notwithstanding decreasing no. of locations and seasonality. 11. non-cash item Depreciation/amortization, deferred income tax, allowance for doubtful accounts, bad debt expense, 12. unrealized gains/loss 13. ITC’s (GST refund) and sales tax /GST payable should be netted 14. Pre-filing GST refund is unlikely as government typically sets off any tax refunds against payables 15. Paying pre-filing GST is inappropriate as that would be a preference rather than a payment in the normal course of business. 16. Payment of post-filing GST should be every 30 days of month end 17. Need to indicate terms of Interim Financing like quantum, source, etc. 18. Interest and payment on pre-filing debt should be suspended at least at the initial stage (unsecured) 19. Decrease in locations: list expense associated with closure 20. We need to show restructuring costs/professional fees 21. Income must be broken down 22. CRA remittances must be showing 23. Cash flow looks positive but may not be once adjustments are made 24. cash flow forecast did not specify that numbers are rounded to the thousands

Answer 18

* Meeting needs to be arranged with lawyers. * Their advice is impacting the restructuring since we need BOD resolution to file CCAA. * Objective of meeting is to get them to modify their advice through discussion. * We cannot override the lawyers’ advice – the change needs to come from them. * We cannot be perceived as providing legal advice (A). * If directors still adamant resign then we can do following to get around BOD resolution: o Board can delegate their authority to management before they resign o Creditor/Bank can sponsor the CCAA proceeding o We can put stay provisions in the initial order or plan for compromise of directors liability. Directors are liable for source deductions, reduced by recovery from DT so CRA can go after them for the shortfall. Unlike GST, source cannot be compromised unless you put a clause in the proposal. * Advice received by directors is incorrect; resigning doesn’t remove potential director’s liability * CRA can pursue directors up to 2 years after resigning so potential DL still exists after resigning * CRA hasn’t assessed the directors for liability yet, it’s just a contingent debt at this point. Also, nothing has occurred to trigger the DL at this point like a bankruptcy, liquidation or unsatisfied judgement. * Immediate payment of director liability is inappropriate as it would be a preference.

Answer 19

* Preparation of cash flow has to be exclusive responsibility of debtor company. * Monitor can assist in the cash flow but it is not the Monitor’s cash flow. * Debtor is responsible for choosing appropriate assumptions. * Monitor is responsible for reviewing the assumptions and the cash flow for reasonableness. * Mintor is responsible for determining what constitutes a MAC.

Answer 20

* ROEs need to be processed quickly (within 5 days) so they can claim EI benefits. * Need to notify employees and Minister of Labour at same time. * WEPP doesn’t apply to CCAA – only to bankruptcy or receivership. But court can declare WEPPA applies to proposal so application to court necessary. * CCAA can’t terminate a collective bargaining agreement (CBA), Monitor will need to negotiate with labour union. * CBA allows for immediate termination of employees.

Answer 21

* Calculate eligible wages to each employee. * Issue ROE and provide Service Canada with list of effected employees and eligible wages; also provide this information to employees. * Inform Service Canada of POC’s received. * Provide Service Canada with name of D&O and person responsible for payroll. * WEPPA benefits can’t be assigned. * If WEPPA pays employees, then WEPPA/government gets the right to collect from the company instead/employee wage claims paid by WEPPA are subrogated to the government * WEPPA is 7 times max weekly EI or $8,844. * Amount of 2K reflects an employee’s super priority claim, not what is received under WEPP. * Covers wage, vacation, termination and severance pay incurred within 6 months prior to bky/receivership. Bonuses and pensions not included. * One can apply for WEPPA even if they quit before company went insolvent as long as they’re owed wage/vacation earned in 6m preceding date of bankruptcy. They wouldn’t be eligible for severance or termination. * To be eligible the individual’s employment should have ended for a reason prescribed by regulation. * Individual must be owed eligible wages * Former company is in a bankruptcy or receivership * If it’s a div I or CCAA then need court approval for WEPP to apply. * Employee on temporary lay off are deemed to be terminated after 90 days in Alberta. At that point, the employee becomes entitled to termination pay (severance) as if they were dismissed. *WEPP earnings are considered employment earnings under EI.

Answer 22

-D&O -someone with controlling interest -someone with a managerial position -someone who was not dealing at arms length with the above 3 parties (if their employment is also not at arms length)

Answer 23

* Skillset: o appropriate skills/competence o sufficient knowledge of industry to carry out engagement o appropriate staffing (qualified staff)/resources. o Are we licensed to operate * Indemnity: o Make sure to include in engagement letter (protects LIT from being personally liable) * Risks: (mitigate: discussions with safety net: partners) o operations in foreign jurisdiction o many locations o many employees o regulated industry with products consumed by public o potential security issue o creditor relationships (they may vote down, lawsuit, delays, reputation risk) o are there any litigations that can complicate the file o problem with security could result in significant damages for trespass * Conflict: debtor, creditor D&O and other stakeholders * Reputation: * Potential for adverse publicity

Answer 24

Scope & source Involvement boundaries Fee arrangements Responsibilities & reporting Termination/acknowledgements S = Source & Scope * Identify who the engagement is from (e.g., Bank) * scope of services (based on case facts, summary review/reporting to Bank) * Leave flexibility for changes in the scope without entering a new engagement I = Involvement and indemnity * not managing or interfering with management * expectations around confirmations with third parties (creditors, landlords) * Indemnification for acts properly undertaken within the engagement; If you suffer a loss or incur costs because you did your job properly and within your mandate, someone else will cover those costs like the bank F = Fees & Financial Terms * Basis of calculation of remuneration/estimate of fees * Responsibility for fees R = Responsibilities & Reporting * relying on HPI’s info/reporting * HPI’s responsibility → provide info on a timely basis * Reporting expectations → timeframe, frequency, and contents; period that’ll be covered by the review T = Termination & Acknowledgements * Provisions regarding termination/notice by either party * Acknowledgement/agreement from debtor to minimize trespass risk * Acknowledgement/agreement from guarantors consultants report should not be distributed to or relied on by other parties unless they have consultant’s written consent

Answer 25

* Preserves going concern value of company * Better chance for company to sell when as a going concern rather than idle * Preserving key/experienced employees further preserves company value * Tax losses only preserved in restructuring (proposal); not bankruptcy * Can obtain interim financing with a court approval

Answer 26

-reassess need for marketing team -reduce administrative staff and other general overhead expenses -renegotiation with landlord -don’t gross up GST to your expense, that overstates the cash outflow since we do get GST refunded. Gst is just a temp. outlay -insurance needs to be listed net of GST, it’s GST exempt -sell redundant asset -find a new investor -inject equity

Answer 27

-obtain an independent legal opinion on the validity and enforceability of the security -problem with security could result in significant damages for trespass 1. issue a Notice of intention to enforce security (NOITES) a. NOITES must provide minimum 10 days’ notice b. Debtor can consent to waive 10 day notice c. Debtor can only waive after notice is issued d. Uncooperative debtor is unlikely to waive a NOITCES (G) 2. Forbearance a. Provides time to explore changes to normalize relationship b. May provide for more frequent reporting 3. Wind-down a. Winddown is orderly, less expensive than formal restructuring b. If orderly then you can prevent losses and bank gets maximum recovery 4. CCAA a. A creditor driven CCAA b. Provides a structure for a search for a purchaser or orderly distribution In a CCAA proceeding: -the company continues operating -management usually stays in control -a monitor oversees and reports, court supervised -creditors are stayed -the debtor tries to restructure debt Possible outcomes include: -plan of arrangement / compromise -refinancing -recapitalization -sale of the business (if necessary) -conversion to bankruptcy (if it fails) 5. Receiver a. Delayed process, value of security could erode 6. Interim Receiver a. Can appoint if NOITES issued or about to be issued, bankruptcy order application field or NOI/proposal filed b. Court must believe this is necessary for protection of asset c. Temporary solution to protect collateral from eroding 7. Apply for Bankruptcy Order a. Need to prove “act of bankruptcy” b. Owes over 1K in preceding 6m before application c. There’s a delay, not as quick so value of security could erode Recommendation: explore cooperative process if possible Foreclose if it’s real property but then they’ll incur foreclosure judicial costs which varies province to province

Answer 28

* 30 day notice needs to be given to lessor/cocontracting party announcing the disclaimer (via registered mail or courier) * Cocontracting party or lessor has 15 days to appeal to court * If they don’t contest then contract is disclaimed at end of notice period * If court has to order a resiliation or address a contestation, the court will consider the following factors: o Approval by Monitor o Whether this increases likelihood of a viable proposal o Whether significant hardship faced by lessor

Answer 29

1.Similarity of debt BIA mentions that the debts have to be substantially the same in order to do a joint filing 2.Conduct Issues If one spouse has potential conduct issues and not the other spouse then they should file separate 3.Impact on creditors -If both debts are joint and in same names, then do a joint filing. -However, if one debtor earns more and other debtor is jobless then Mr. Brown’s creditors would get a smaller dividend because they’d have to share it with Mrs. Brown’s creditors. -filing a joint bankruptcy helps Mrs. Brown because she has no assets nor income, if she filed alone, she’d have to provide a third-party guarantee for the fees. -OR may dispute if they think debts aren’t substantially the same Recommendation: x

Answer 30

* 5% on first 1M * 1.25% on 1M-2M * 0.25 on over 2M (only OA) $200 on SA 5% on CP

Answer 31

* inform OSB immediately once NRV exceeds $15k *from realizations set aside some funds for cost of administration to finalize estate, including trustee fees * apply to osb to have file converted from summary to ordinary OR cap your fees * provide reason for converting from summary to ordinary (eg. Complexity/increased time spent) * once approved, provide notice to OSB, creditors and bankrupt * If converting to OA, then transfer all funds from consolidated bank account to separate Trust account * If converted to ordinary then BIA provisions of trustee fee calculation for ordinary admin will apply. Create report of time expended on administration based on all levels of staff and billing rates. * Include explanatory footnote on FSRD if Trustee has opted to limit their fee *levy $200 in SA and 5% in OA See Susan snowmobile answer as well.

Answer 32

3 Certainties: -Intent (agreement) -Subject matter (what's being held? property or money; cannot be comingled, must be clear what is part of Trust) -Object (beneficiaries clearly identified) Elements (AST-PT) 1. Agreement (obtain copy of trust agreement) 2. Settlor – person who intends to form trust for benefit of beneficiaries 3. Transfer from settlor to the trust 4. Purpose 5. Trustee who agrees to hold and manage the property -conclusion: there are shortcomings in the characteristics of a trust therefore this is property of bankrupt which is property of bankrupt estate. -release action to creditors under s.38

Answer 33

AFHC Assets & Records 1. 50c BTL 2. Books (failed to keep proper books within 3 years preceding bky) 3. Traded while insolvent 4. Loss – missing assets/unexplained Frivolous behavior 1. Recklessness – neglect/gambling/overspending/extravagance DAPD 2. Defence (put creditors through unnecessary expense through frivolous defence) 3. Action 3m 4. Preference 3m 5. Debts – debts incurred to make assets equal 50c of liabilities (disguise financial decline, propping up balance sheet) History & Misconduct 1. Priors 2. Offence 3. Fraud Compliance (m) non-pmt of surplus income (n) able to file a viable proposal (o) non-compliance of bankruptcy duties s.158

Answer 34

1. -We must report this section 173 fact on the 170 report. 2. -LIT will oppose discharge. 3. -Advise debtor that he is not eligible for automatic discharge. 4. -Advise creditors and debtor that there will be a court hearing to determine discharge conditions. 5. -Court can grant conditional, suspended or refused discharge. 6. -Bankrupt guilty of a s.173 fact is not eligible for an absolute discharge.

Answer 35

1. apply for a court hearing as an opposition to discharge has been received. 2.give notice of court hearing to debtor and creditors. 3. Inform debtor that they must attend court hearing. 4.. inform debtor that they cannot receive an automatic discharge 5. ensure debtor understands the Trustees role and that the Trustee does not represent the debtor (A). 6.let the debtor know that they can retain legal counsel to represent them in court 7. court may issue conditional, suspended or refused discharge. 8. Trustee can give a recommendation for a conditional discharge (E); however, court has discretion and may order different conditions (D)

Answer 36

*Help out Inventory list Realization Sign docs *Hand it over c/c assets books and records *Stay in touch Address change *Show up Examination meeting *Tell the truth SOA (5 days) 1 year disposal of asset 5 year (TUV) Claims False Change in finances

Answer 37

-trading while insolvent and not telling other party of sine die status -borrowed over 1K without disclosing to other party that you’re an undischarged bankrupt These are diff from s198 in the sense that they’re after the person has become bankrupt where as s198 are for one year preceding DOB

Answer 38

-fraudulent disposition of assets with intent to defraud -lies during examination, refuses to answer questions -false entry or material omission in records -hide, destroy, conceal records within 1 year of bky -obtain credit 1 year of bky by false representation/lying -conceals or dissipates assets over $50 within 1 year of bky -Within 1 year before initial bankruptcy event, sells something they bought on credit (and hasn’t paid for yet) Punishable by summary conviction or indictment Summary: fine upto 5k or prison upto 1 year or both Indictment:fine upto 10k or prison upto 3 year or both Offences in 198 are 1 year preceding DOB 🟩 FLF HCCS F — Fraudulent disposition Fraudulent disposition of assets with intent to defraud. L — Lies Lies during examination or refuses to answer questions. F — False entry False entry or material omission in records. H — Hide records Hides, destroys, or conceals records within one year of bankruptcy. iC — Obtain credit Obtains credit within one year of bankruptcy by false representation or lying. C — Conceal assets Conceals or dissipates assets over $50 within one year of bankruptcy. S — Sells on credit Sells something bought on credit (and unpaid for) within one year before bankruptcy.

Answer 39

* Trustees are prohibited from buying estate assets for which they are Trustee. * But they can buy from another estate for which they’re not Trustee, as long as these three conditions are met: -same price as public -same time as public -during ordinary course of business * Trustees also cannot sell estate property to their employees, other trustees or their employees, or related parties (family) unless the above 3 conditions are met.

Answer 40

-claims for dividends -return for money you invested as share capital -claims arising from purchase of shares -a claim related to losses from owning, buying or selling shares. Shareholder advances are not equity claims. Law treats it like a unsecured claim if there was actual consideration or amount they loaned to company No voting rights in a proposal

Answer 41

-calculate ABIL from case facts (shareholder loan + LIT fees + employee claims + source deduction, all paid by shareholder) (F) -he can claim it as an allowable business investment loss on his personal tax returns if the company goes bankrupt (F); this will offset any taxable income. -payment for employe claims: He acquires the claim but not the rights of the employees.

Answer 42

-employees cannot vote for preferred portion of claim. They can only vote for unsecured portion -there’s no super priority in div I, that’s only in bky.

Answer 43

-NOI/proposal requires cash to keep operating -requirement to pay source deductions within 6 months of court approval unless CRA consents to extension -extension to file proposal after NOI is costly -court can grant or deny the extension -Interim Financing may be more costly than current financing arrangements -unsecured creditors must accept the proposal for it to pass -secured creditor must accept proposal to be bound by it.

Answer 44

-Trustee under no obligation to operate the business -mgmt. loses control of business.

Answer 45

can be secured through court approval -purpose is to compel supply of service or product -critical supplier must be critical to ongoing operations, not simply for convenience for trustee. -critical supplier may receive first ranking charge ahead of secured creditor -critical supplier terms of payment can be modified (COD) I

Answer 46

-12 months arrears is preferred -court ordered lump sum or formal voluntary agreement made anytime before DOB is preferred -no stay of proceedings; enforcement actions may continue -s178 non-dischargeable debt; any balance remaining after dividend paid from estate will survive the discharge -preferred under s.136 of BIA

Answer 47

-monitor company’s business and financial affairs -file report with Court on state of company’s business and financial affairs -file a report with Court forthwith upon ascertaining MAC in projected CF or financial circumstances -advise company as to what constitutes a MAC -be a mediator

Answer 48

1. lease arrears must have been paid 2. assignee must have ability to honour its financial obligations under the lease 3. their business cannot be more hazardous or objectionable than business previously conducted in the premises by the bankrupt lessee -Get release from landlord for any future liability under the lease -or obtain court order providing such relief before completing transaction -new lessee must agree to terms of lease

Answer 49

-3 months rent arrears or 3 months accelerated rent if lease agreement provides for it. -any occupancy rent paid reduces accelerated rent claim -preferred claim only up to NRV of assets on the leased premises, balance is unsecured No accelerated in a proposal. Formula for unsecured landlord claim only applicable in a Div I. Residential leases unsecured due to provincial exemptions.

Answer 50

-determine tax filing history (F) -ask debtor to provide the income and expense information (F) -file the outstanding returns or amended returns (F) -follow up with CRA regarding reassessment (J) -determine what total amount owing is and how much CPP has been withheld; based on this determine estimate of refund results (J)

Answer 51

-advise former spouse that we will investigate the information provided -identify confidentiality issues regarding disclosure to former spouse -can’t provide them info unless they’re a proven creditor, they must file poc

Answer 52

-obtain death certificate for the file -exemption rights lost on death -recover assets and arrange for sale as they’re no longer exempt -determine FMV of assets -apply for CPP death benefit; it’s an after acquired asset; vests with Trustee -post-bankruptcy return would be the death return, reasonable for Trustee to complete to ensure refunds by CRA are released -funeral expense is post-bankruptcy obligation; paid for by heirs/successors of bankrupt -Trustee can pay reasonable funeral expenses since all assets of debtor were disposed by Trustee

Answer 53

-apply for discharge of bankrupt whether or not all duties were completed prior to death -issue automatic discharge if bankrupt is eligible

Answer 54

-obtain engagement letter that requires prompt payments of fees -get third party indemnity in case debtor cannot cover trustee fee -get retainer and size it so you can pay occupancy rent in case the need arises -get third party retainer -review debtor cash flow to see if it provides for adequate disbursement for professional fees -obtain administrative charge from court Best practice -record time and expense on a timely basis -bill regularly/bill and collect before milestone such as sale

Answer 55

-OR may direct administrator to call a meeting of creditors at any time within 45 day period if requested by OR -at the end of the 45 day period if creditors holding 25% in dollar value of proven claims request meeting in writing or if 25% of proven creditors have voted against -we need a simple majority in dollar value for proposal to pass -up to 3 inspectors can be nominated -inspector can’t be involved in a lawsuit with the debtor -related party (sister) can’t vote on appointment of inspector without court approval

Answer 56

-normally CP is auto court approved within 45 days+15 days of filing -creditor must request Administrator to apply for court review of the CP -request must be made within 15 days from meeting of creditors -if no meeting, request must be made before proposal is court approved -Administrator has to prepare report to court summarizing pre proposal transactions related to conduct of debtor

Answer 57

Option 1: Revival via court Option 2: If 3 missed payments Process: Within 30 days of deemed annulment, send notice to the OSB and all creditors in the prescribed form. The proposal will automatically revive 60 days from the deemed annulment date. If no objection is filed, the consumer proposal is revived. If payments are less frequent than monthly, the annulment occurs when the equivalent of 3 months’ have been missed from when they were due. E.g For example, if payments are quarterly, for example, $900 due January 1st, April 1st, right, like every quarter, and you miss the January 1st $900 payment, then you're deemed annulled three months from January 1st. So January 1st, February 1st, March 1st, so that makes April 1st your annulment date.

Answer 58

* has a significant adverse effect on the projected cash flow; * impairs the ability of the debtor to carry on operations; * impairs the likelihood of success of a proposal; or * significantly prejudices the rights or interests of one or more classes of creditors.

Answer 59

(4) In deciding whether to grant the authorization, the court is to consider, among other things, (a) whether the process leading to the proposed sale or disposition was reasonable in the circumstances; (b) whether the trustee approved the process leading to the proposed sale or disposition; (c) whether the trustee filed with the court a report stating that in their opinion the sale or disposition would be more beneficial to the creditors than a sale or disposition under a bankruptcy; (d) the extent to which the creditors were consulted; (e) the effects of the proposed sale or disposition on the creditors and other interested parties; and (f) whether the consideration to be received for the assets is reasonable and fair, taking into account their market value. Marginal note:Additional factors — related persons (5) If the proposed sale or disposition is to a person who is related to the insolvent person, the court may, after considering the factors referred to in subsection (4), grant the authorization only if it is satisfied that (a) good faith efforts were made to sell or otherwise dispose of the assets to persons who are not related to the insolvent person; and (b) the consideration to be received is superior to the consideration that would be received under any other offer made in accordance with the process leading to the proposed sale or disposition

Answer 60

Disadvantages for the Debtor - NOI * Must have immediate access to capital to fund NOI process. * If proposal is rejected, debtor is automatically bankrupt. * If cash flow statement not filed within 10 days, debtor is automatically bankrupt. * Requires significant management resources for reporting and oversight. * Secured creditors unlikely to provide interim financing or consent to being primed. The court can authorize the priming charge even without the secured creditor’s consent * High professional costs (lawyers, advisors, monitors). -requirement to pay source deductions within 6 months of court approval unless CRA consents to extension -extension to file proposal after NOI is costly, court can grant or deny the extension -Interim Financing may be more costly than current financing arrangements -unsecured creditors must accept the proposal for it to pass -secured creditor must accept proposal to be bound by it.

Answer 61

* Time to develop a restructuring plan. * Management can retain control of the business. * Preserves tax losses, which may enhance value. * Retains experienced employees, preserving enterprise value and supporting potential sale. * May obtain interim financing with court approval. * Court can order KERP (Key Employee Retention Plans) to keep staff. -Stay -don’t need to pay pre filing unsecured debts until court approval -compromise of uneecured debts

Answer 62

* Must provide minimum 10 days’ notice. * Debtor can consent to waive the 10 days, but only after the notice has been issued. * An uncooperative debtor is unlikely to waive the notice period.

Answer 63

* The lump sum is spread out over the bankruptcy months. * The bankrupt keeps enough to “top up” their income to the allowed level. * Anything above that top-up goes to creditors. -debtor still eligible for 9 month auto discharge

Answer 64

yes, interest and penalties are included.

Answer 65

-calendar year prior to the date of bankruptcy -earlier years optional, if there's an advantage to the estate.

Answer 66

The tax amount owing during those three years of $40,000 contemplate that there is some income to result in that tax, which conflicts with the Bankrupt's statement to the Trustee that he hasn't been working during those years. I would ask for copies (from the Bankrupt or if not from CRA) of what he sent to CRA as "income and expense information" as well as the assessments he got from CRA. If the returns are unfiled, I would file the returns. (standard T1 return). This would replace the notional/arbitrary assessment with an actual return and adjust the balance. If they were amended returns, I would determine why they were not accepted and re-file them. (T1-ADJ Adjustment request). An adjustment is a reassessment to an individual tax return. This assumes he just did something wrong. Missed a decimal or missed some income or something. Changing a tax return - Personal income tax - Canada.ca If the returns were properly filed and there is an error in the assessment of them, I would file a Notice of Objection (T400A). This is typically 90 days from the notice of assessment. I would follow-up with CRA after the filing/adjustment/objection. If a proof of claim from CRA was already filed, we now know this to be incorrect. I would follow-up with CRA Insolvency Group on an amended claim. I would consider disallowing (in whole or in part) the existing claim if it is not adjusted based on the assessed values..

Answer 67

All statutory deemed trusts (including GST/HST under s. 222 of the Excise Tax Act) are extinguished upon bankruptcy basically — bankruptcy is the trigger than inverts GST to unsecured. What if receivership comes before bky? GST still unsecured. Bankruptcy is the trigger. As long as receiver never did a distribution before bankruptcy occurred.

Answer 68

Phase I Assessment ● Review Records ● Historical background ● Walk around ● Visual observation ● Qualitative in nature Phase II Assessment ● Quantify the contamination ● Sampling and analysis ● Done prior to remedy ● Report contains remedy recommendations Phase III Assessment ● Evaluate the extent of the environmental impact ● Liabilities under various acts ● The risk to human health ● Recommend and outline a plan of action

Answer 69

GST credits are exempt from seizure unless they are required to cover the trustee’s fees and expenses to a maximum threshold of the summary administration tariff. GST credits in excess of that threshold must be returned to the bankrupt. In OA and SA: put footnote to srd: return of gst to debtor (rule 59) Business GST credit vests with trustee

Answer 70

-chief restructuring officer -Creditors or monitor has concerns about mgmt capabilities -mgmt is unwilling to restructure -employees leave -severe cash flow difficulties CRO is responsible for operations of debt company restricted to specific aspects of reorganization plan.

Answer 71

-who controls the workers activities -who provides and pays for tools of employee -does worker assume risk in the job contract? -does worker have multiple clients or only works for one employer?

Answer 72

-In possession of trustee/receiver -identifiable -not fully paid for -same state as delivery -has not been party of an arms length sale

Answer 73

anyone who’s not a spouse & refuses to disclose is excluded by household #.

Answer 74

Don’t Trust Slutty Nuns (Distraint, terminate, Sue for o/s rent, Negotiate occupancy rent) Terminate: landlord must allow debtor to remedy the arrears per provincial law. Landlords cannot distraint and terminate at same time. They may first distraint then terminate. Landlord cannot distraint once lease has been terminated. Distraint: Landlord seizes goods on premises, enjoys priority over assets subject to security but only if arrears arose prior to giving security.

Answer 75

* Landlord is stayed from distraining and terminating lease. * As a trustee in a bankruptcy, you are permitted to occupy the bankrupt’s premises in Alberta for up to 90 days while paying occupation rent. If you need to occupy for more than 90 days then you can negotiate a new short-term lease with the landlord. * Trustee needs to determine if they’re going to assume, assign or disclaim the lease. * Landlord gets a preferred claim (s.136) for 3 months arrears rent and 3 months accelerated rent (if the lease provides for it) up to the net realizable value of property on the leased premises. If occupancy rent is being paid out then we subtract that from the accelerated rent claim, because the landlord cannot double dip. * Even if month to month lease, landlord can still claim preferred claim for 3 month rent arrears but no accelerated rent. * No preferred claim exists if the lease was terminated before the bankruptcy

Answer 76

: Receiver needs to pay rent arrears as part of receiver’s negotiation with a landlord to use the debtor’s premises (generally not required If you are a court-appointed receiver and court order provides for a stay )

Answer 77

* Trustee must give 30 day notice to landlord delivered via registered mail. Landlord has 15 days to appeal the disclaimer. Court assesses if disclaiming improves viability of proposal. * Landlord can vote in a separate class of similar claims or the class of unsecured claims. Landlord cannot vote for accelerated rent portion. * Calculation of claim in disclaimed lease: actual losses or lesser of: 1st year rent after disclaiming + 15% of remaining lease OR 3 years. * The above calc is only for disclaimed leases. * landlord can file preferred claim for 3m arrears. See email from Les. Remainder is unsecured. No accelerated.

Answer 78

Unable to Vote: ● Secured creditor for a claim not included in the Proposal ● Creditors related to the debtor - may vote against but not for ● Trustee as a Creditor ● Employees For Preferred Portion of Claim ● Landlord under Disclaimed Lease for Accelerated Rent *D&O (because they’re not creditors; they can vote against but it for in case they have a claim) *no voting rights for someone with equity claim (vote won’t count unless court allows it) *CRA for DT *shareholder loan that’s proper (actual consideration) can vote against but not for *preference excluded, provisions don’t apply, no clawback: cannot vote. A person whose only potential claim arises from a preference or reviewable transaction has no voting rights at the Division I meeting, because they are not a creditor unless and until the preference is recovered or valued by the court. *unliquidated (no judgement) and contingent can’t vote. Trustee or court must value their claims first. SRELES: Secured Related Employees Landlord Equity SH loan

Answer 79

Let employees know that this is not a continuation of their former employer, it’s temporary and subject to short termination notice. Open new source deduction account. Establish new payroll system – issue ROEs, T4s to employees and Service Canada.

Answer 80

-collective agreement continues unless renegotiated. -these are protected contracts and cannot be disclaimed. ………… Under an NOI or proposal, collective agreements stay in force and can’t be disclaimed. The company tries to negotiate lower wages or benefits with the union. If that fails, it gives five days’ notice and applies to court to reopen bargaining. This starts court-supervised negotiations aimed at making the restructuring viable.

Answer 81

* Bankruptcy automatically terminates employment * Consequently, the CBA effectively ceases to operate because the employer no longer exists as a going concern. * If the business continues operations under the trustee (e.g., for realization purposes), the trustee may: Negotiate a temporary agreement with the union. * Work with legal counsel to review the collective bargaining agreement and then with the help of counsel negotiate with union to revise current CBA prior to commencing operations. * if the court is satisfied, a notice to bargain can be issued, but the proposal cannot force a change.

Answer 82

Provides that claims referred to in S. 178 (non-dischargeable debts) are not released in a proposal unless specifically provided for in the Proposal AND the aﬀected creditor voted in favour of the Proposal

Answer 83

10 days 5M See chart sent by Isabelle

Answer 84

-secured creditor acquires right to enforce security -debtor becomes bankrupt -trustee is discharged -debtor fails to make a payment of post filing payroll remittance (cji point)

Answer 85

Subtract business expenses, taxes, and mandatory payments

Answer 86

When file starts and at the 8th (first time) or 23rd (second time) month

Answer 87

Refund it to bankrupt. On a situation where you’ve paid SI and creditors have already been paid in full, then the following applies: You impose 5% simple interest on surplus funds only after all creditors and costs are paid in full, calculated from the date of bankruptcy to the date of final distribution Summary Creditors get 5% interest after being paid in full if there’s still funds left in the estate Remaining surplus (after interest) goes to bankrupt.

Answer 88

Trustee fills out and signs confirming assessment was done Debtor signs it to confirm they understand options and merits of each option Efiled with OR

Answer 89

If you send something to the Division Office (like the OSB or a trustee’s office): • If it arrives after business hours but before midnight → it’s treated as received the next business day. • If it arrives on a Saturday or holiday → also next business day. • If it arrives between midnight and the start of business hours → it’s treated as received at opening time that same day. So basically: ➡️ Anything received outside office hours counts as received when the office is open again.

Answer 90

If the deadline is less than 6 days, don’t count Saturdays or holidays when you calculate the time.

Answer 91

Compliance certificate If mortgage registered before DT then mortgage ranks first.

Answer 92

Receiver’s charge is for their fees and expense. Ranks just behind receiver’s borrowing charge.

Answer 93

-Do not release -Tax returns are not estate docs -ex spouse is not a creditor -creditors are only entitled to estate books/records -Tax info is personal info -Tell creditor they’re not entitled unless court approves or bankrupt consents to release -complaint to osb won’t influence your decision -opposition to trustee discharge won’t influence your decision -alternatives: income and expense form, s170 report, bank stmt

Answer 94

-No levy -if creditor took formal legal steps to enforce a judgment before bankruptcy like sending a sheriff to seize property -and trustee benefits from those steps -then creditor can claim legal costs of execution as a preferred claim (s1.36)

Answer 95

-cannt act unless you get independent legal opinion of validity and enforceability of security -inform creditors of: the appt (receiver for secured creditor), provide copy of legal opinion, basis of remuneration

Answer 96

Super priority 30 days to file Delivered within last 15 days Security on all inventory except 30daygoods Farmers: Crops, grain, vegetables, fruits, dairy, livestock, etc. • Fishermen: Fish, shellfish, or other marine/lake/river products. • Aquaculturists: Fish or aquatic plants raised under controlled conditions (e.g., fish farms). Product of soil For business use not personal

Answer 97

Rights over its own asset only 30supplier15

Answer 98

them a commonality of interest, taking into account (a) the nature of the debts giving rise to the claims; (b) the nature and rank of the security in respect of the claims; (c) the remedies available to the creditors in the absence of the proposal, and the extent to which the creditors would recover their claims by exercising those remedies; (d) the treatment of the claims under the proposal, and the extent to which the claims would be paid under the proposal; and

Answer 99

SIL is related SIL is D&O Bia says I can’t take on insolvency engagement for file where I was related to D&O in preceding 2 years. Conflict of interest Inform bank that you personally cannot act. My firm can still act. We will need to disclose conflict and implement safeguards I can apply to court for permission to act At fmoc I must disclose conflict If it’s a dual mandate; Cannot act unless I get legal opinion on validity and enforceability of security. Must provide it to osb I need to inform osb and creditors of appt, basis of remuneration, result of legal opinion

Answer 100

Even though Creditor C missed the first (interim) dividend, they are still entitled to catch up — ahead of any further distributions — once they prove their claim. This ensures equal treatment among creditors under BIA s. 150.

Answer 101

Rule 128 provides that, with respect to Summary Administrations, the trustee may withdraw funds from the estate account as follows: • $250 at the time of mailing the notice of bankruptcy • additional $250 30 days after the date of bankruptcy • additional $250 4 months after the date of bankruptcy

Answer 102

CP Provision 1. Secured creditors shall be paid in accordance with present arrangement between debtor & secured creditor. 2. Preferred claims (like child support, spousal) paid ahead of unsecured. 3. Fees of administrator pursuant to Act. 4. Pay a total sum of X, monthly payment of X, payment terms. 5. Manner of distribution (typically once a year). 6. 3 missed payments & proposal fails (default terms). Pete the mighty pup dances silly. Priority, trustee fee, manner, secured creditor, default, payment terms

Answer 103

Report of Administrator of CP. form 48. 1. Cause 2. That you are of the opinion that the CP is fair & reasonable, / in proposal vs bankruptcy. That the administrator recommend the acceptance of the proposal. 3. Identification & evaluation of assets • Exempt assets 4. S.I. contributions 5. Other info / reviewable transactions

Answer 104

If a creditor (someone owed money) has a secured asset and wants the trustee in bankruptcy to decide whether they’ll take over the security (redeem it) or let the creditor sell it (release interest), they must send a written notice asking the trustee to make that choice. Once the trustee gets the notice, they have 30 days to reply in writing saying what they’ll do. If the trustee doesn’t reply within a month, they lose the right to take over the security. The creditor then gets full ownership of that security (the “equity of redemption” passes to them), and the creditor’s claim against the estate is reduced by the value of that security.

Answer 105

Unliquidated - not allowed to vote. Claim to be determined and valued by trustee. Contingent claim - has to have claim valued before it is able to vote (by trustee or court)

Answer 106

Sure — here’s an easy, everyday example 👇 ⸻ 🪑 Example: You go to a furniture store and buy a $2,000 couch. You don’t pay cash — instead, the store says: “Pay $100 a month for 20 months.” So, the store lets you take the couch home but keeps a security interest in it until you finish paying. That’s a Purchase Money Security Interest (PMSI) — the store’s legal right to take back the couch if you stop paying. ⸻ 💡 Why it matters: If you later go bankrupt and owe money to a bunch of creditors: • The store gets first claim on the couch (because of their PMSI). • Other creditors have to wait — they can’t touch the couch until the store is paid or it’s returned. ⸻ It’s the same idea with car loans or equipment financing — whoever helped you buy the thing gets first dibs on that thing if you default.

Answer 107

Let’s say you did renovation work on a property, weren’t paid, and you’re suing to enforce a lien. • You can file a Certificate of Lis Pendens on that property. • If the owner tries to sell it, any buyer doing a title search will see the notice — meaning they’ll know the property is tied up in a dispute, and most won’t buy until it’s resolved. A Certificate of Lis Pendens is not a lien — it is merely notice of litigation affecting land, whereas a lien creates a proprietary security interest in the property.

Answer 108

An RTP instructs the third party to send the money to the CRA instead of the taxpayer. 🧾 RTP = Regular (one-time) 🔁 ERTP = Extended (ongoing) If the CRA had issued a regular RTP, it would only apply to money BlueTech owed Sarah at that exact time (say, an invoice already due). But an ERTP keeps capturing all future payments as they come due — it’s ongoing until the debt is fully paid or the CRA cancels it.

Answer 109

Trustee can redeem security only if: ➡️ NRV ≥ debt or value of security (as per proof of claim/security). After redemption, trustee must file: 📄 Statement of Receipts & Disbursements (SRD) + Attestation, including: 1. 📥 Date proof rec’d 2. 💰 Debt + valuation 3. 📅 Sale offer/date 4. 💵 Gross sale price 5. 🧾 Trustee disbursements/fees 6. 🔚 Date of redemption

Answer 110

An employee has the right to collect severance pay if they have completed at least 12 consecutive months of continuous employment before their layoff or dismissal resulted in a termination of employment. They are entitled to 2 days’ regular wages for each full year that they worked for the employer before their termination of employment. The minimum benefit is 5 days’ wages.

Answer 111

🧾 Example: Let’s say John goes bankrupt. A few weeks before bankruptcy, he gives his car (worth $10,000) to his brother Mike for free — a void transfer under the BIA because it wasn’t for fair value. ⸻ Step 1: Mike sells the car Mike sells the car to Lisa for $9,000. Since the original transfer from John to Mike was void, the $9,000 proceeds from the sale are considered property of the trustee. ➡️ The trustee can demand that Mike hand over the $9,000 to the bankruptcy estate. ⸻ Step 2: If Lisa sells it again If Lisa (the second purchaser) bought it in good faith and paid fair value, she’s protected — the trustee can’t take the car from her. But if Lisa knew about John’s bankruptcy or paid way below market value, the trustee could recover the car from her as well

Answer 112

(a) was an officer or director of the former employer; (b) had a controlling interest within the meaning of the regulations in the business of the former employer; (c) occupied a managerial position within the meaning of the regulations with the former employer; or (d) non-arms length with above parties

Answer 113

A vendor take-back mortgage is just like a regular mortgage, except: • Instead of a bank being the lender, the seller (vendor) is the lender. • You still make monthly payments with interest. • And if you don’t pay, the vendor has the right to take back (foreclose on) the property — just like a bank would. So yes — 💬 It’s basically a mortgage where the seller acts as the bank and can take the property back if you don’t make your payments.

Answer 114

1) In a Division I proposal, Arrears-preferred-s.136-can be claimed only for the 3 months ,up to the realizable value of property on proposal will have to address these payments Accelerated rent No-not preferred-landlord cannot rely on statutory priority for accelerated rent if the lease accounts for it under s.136-as that statutory priority applies in a bankruptcy The land lord accelerated rent claim is not applicable, not provable. Landlords can claim regular unsecured; Actual loses OR 1 year +15% remaining on lease OR 3 years 2)-Bankruptcy Arrears s136 3 month for value of the property on premises ,preferred Remaining ordinary unsecured Accelerated rent ,s.136 Must be provided for in the lease and up to the value of goods on premise, preferred Remaining ordinary unsecured Occupational If the LIT occupies the space or continue on business to sell property (90 days per Alberta provincial laws) Reduces accelerated rent Assigning Lease If there is value ,LIT can assign lease ,with court approval Arrears need to be current New party must fulfill lease, use for same purposes 3)-Receivership If the LIT/receiver occupies the space or continue on business to sell property arrears s.136 3 month for value of the property on premises ,preferred Remaining ordinary unsecured Accelerated s.136 Must be provided for in the lease and up to the value of goods on premise, preferred Remaining ordinary unsecured This is a academic argument as there almost never more than the secured & priority claims Residential Yes,they are ordinary unsecured they could in theory claim a preferred status same as commerical,however provincial exemptions take priority and there are normally no assets worth any vlaue in residential. Secondly they have security by possession, renter has abondanoned the asset.

Answer 115

What to file with NOI 1.List of creditors owed over $250 (full name, address, estimated amount) 2.LIT Consent 3.Director's resolution if it's a corp. stating that person signing NOl has authority to act 4.Cash Flow (within 10 days) 5. NOI form

Answer 116

Background: -org structure, mgmt structure -private or public company -company history -cause of financial difficulties -swot (strength, weakness, oppt, threats) Management -depth and competence of mgmt -management remuneration -succession issues Operations: -recent results -business plan or restructuring plan -industry info and risks -major customers/suppliers -market share Financial analysis: -assist in development of forecasts and projections -assess if company will return to profitability -determine reasonableness of assumptions -will lenders position improve? -sensitivity analysis: extend to which projected results could be affected by specific changes in assumptions -calculate lender’s security position Assets and liabilities -check realizable value of major assets -whether inventory is saleable or obsolete -gov obligations that rank ahead of lender -value of IP -leases: upto date? At the end of the business review, consultant writes a report summarizing info gathered. Must have conclusion on company viability and recommendation of courts of action for lender. Risks to consultant: -trespass risk if security not valid. Get debtor’s consent for engagement. -negligent advice so ensure you have experience and expertise to accept engagement -third parties may rely on consultants representations: expressly state in engagement letter than consultant is not management, and that consultants report should not be distributed to or relied on by other parties unless they have consultant’s written consent -handle info in accordance with pipeda

Answer 117

Only counted as 1 vote number

Answer 118

No longer a related party so they can vote for the proposal

Answer 119

(a) the father, mother, child, sister, brother, uncle or aunt, by blood, adoption, marriage or common-law partnership, or the spouse or common-law partner, of the bankrupt; (b) where the bankrupt is a corporation, any officer, director or employee thereof; and (c) where the bankrupt is a corporation, any wholly owned subsidiary corporation or any officer, director or employee thereof.

Answer 120

Equity claim

Answer 121

Mr. L’s bankrupt, Mr. Moon has registered $150,000 mortgage on Mr. L’s property two months before date of bankruptcy because Mr. L owed him money. Per the PIA that can be challenged as a preference because it was done to an arm’s-length party within three months of initial bankruptcy event. if Mr. L does a proposal and the proposal says that preference is excluded or preference provisions do not apply then that means we are not going back the 150k, therefore Mr. M cannot vote on the proposal. If you say that preference provisions apply then we’re gonna claw back the 150 K from Mr. Moon in which case he should be allowed to vote on the full unpaid amount. Refined version of what I said: If a proposal excludes preference provisions, any prior preferential payment (e.g., a $150K mortgage granted before filing) is ignored — no clawback occurs, and the creditor cannot vote since they remain secured. If preference provisions apply, the trustee may claw back the $150K as a voidable preference. The creditor then becomes unsecured and may vote on the full claim amount.

Answer 122

Trustee can examine bankrupt and persons connected to bankrupt under oath Can happen without going to court upon ordinary resolution passed by creditors or if majority of inspectors request it Trustee can require these people to provide any records, documents, emails or papers that relate to bankrupt person or their financial dealingst

Answer 123

Fancy cars look way sleek and make landlords excited *Funeral expense *Cost of admin and legal fee *Levy *Wages not covered by s.81 upto 2k+1K for travelling salesman (accrued in last 6 months) *secured creditor claim that lost due to s.81 *alimony and child support (12 months arrears; lump sum under court order or agreement made before DOB) *municipal taxes (only if unsecured to real property) *landlord claims: 3m arrears upto nrv of value of assets on premises, accelerated rent 3m if lease provides for it. Can’t double dip with occupational and accelerated. *cost of first execution creditor

Answer 124

PUF DT WP Property claim 30 day goods/unpaid supplier Farmer/fisherman (15 days) DT (source deductions: ee portion of income tax, EI and CPP) Wages upto 2k + 1k travelling salesman accrued within last 6 months; secured against current assets Pensions deducted but not remitted

Answer 125

A Sales and Investment Solicitation Process (SISP) is a court-approved process used primarily in a Companies’ Creditors Arrangement Act proceeding to solicit offers from potential buyers or investors for a debtor’s business or assets. It is typically conducted by the monitor to ensure a fair, transparent, and competitive process. The objective is to maximize value for stakeholders and may result in a going-concern sale or investment transaction.

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