Case Alert!! Decisions Which Will Affect Financing of Companies with Pension Plans and Potential Environmental Liability Expected from Supreme Court of Canada This Fall

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Supreme Court of Canada is considering two key insolvency related cases where their findings could have significant ramifications on the financing of companies with pension plans and/or potential for environmental liability.

In Re: AbitibiBowater Inc. the Supreme Court of Canada grapples with the effect of provincial government orders requiring companies under bankruptcy protection to remediate contaminated properties regardless of the court ordered stay of proceedings. The provincial environmental agencies argue that the ministerial orders are not monetary orders; they are merely directives to complete remediation of the contaminated properties and thus must be complied with during the restructuring proceedings. The debtors argue that the ministerial orders are monetary orders disguised as ministerial directives and that to permit these orders to stand is effectively allowing the provincial government to jump the queue of creditors (including senior secured lenders).

In Re: Indalex Ltd. the Supreme Court of Canada will consider two issues relating to underfunded pensions of companies in bankruptcy protection. The first issue is when does the underfunded portion of a pension plan become “due” or “accruing due”; and the second is whether a debtor’s breach of fiduciary duties as a pension plan administrator gives rise to a priority claim in a restructuring. In Re: Indalex the debtor companies (among others) argued that the underfunded portion of a pension plan is not “due” or “accruing due” until the end of the time provided for payment under the Pension Benefits Act and that the fiduciary obligations, if breached (which was not admitted), do not permit a payment to the pension plans ahead of other creditors. The Ontario Court of Appeal disagreed with the debtors and ordered that the entire underfunded portion of the pension plans be paid in priority to all other debts, including the debtor in possession financing.

 

Topics:  Environmental Liability, Financing, Insolvency, Pensions

Published In: Bankruptcy Updates, Business Organization Updates, Environmental Updates, Finance & Banking Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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