RECEIVERSHIP Receivers may be appointed privately or by a court, but, for a variety of reasons, court appointments are far more common. A receiver will realize against the assets of the debtor and will distribute the proceeds in accordance with the relative priorities of the creditors. A receiver may be appointed as receiver and manager with the authority to operate the debtor’s business as a going concern, or simply as a supervisor. A secured creditor may appoint a private receiver over the business and assets of a defaulting debtor under a contractual power granted by the debtor to the creditor in security documents. In all circumstances, the secured creditor must demand repayment of outstanding amounts and must give a statutory notice of intention to enforce its security to the debtor at least 10 days prior to the receiver’s appointment. In a court-appointed receivership, the court order appointing the receiver will grant a stay of proceedings. There is no stay of proceedings available in a private receivership. Although receiverships initiated by secured creditors are by far the most common, other stakeholders such as regulatory bodies or unsecured creditors may also apply to a court to appoint a receiver if it is “just or convenient to do so” under its equitable jurisdiction. A court-appointed receiver is not an agent of the debtor or of any creditors. As an officer of the court, the receiver has duties and obligations that are prescribed by statute and the appointment order. There are no statutory criteria establishing which entities may be subject to receivership proceedings. As a result, the terms of the appointment of a receiver are largely in the court’s discretion.
An arrangement under the Canada Business Corporations Act or other Canadian corporate statute is similar to a CCAA restructuring in providing great flexibility for a balance sheet restructuring of a corporation’s debt and equity securities. Such reorganizations can often be completed quickly and with less impact and cost compared with a full insolvency proceeding.
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Doing Business in Canada
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