In Canada, an “insolvent company” (or “person”) refers to an entity which is not bankrupt and which resides, carries on business or has property in Canada; and which is unable to meet or has ceased paying its obligations as they become due; or whose aggregate property is not, at fair valuation, sufficient to enable payment of all its obligations. In general, there are three options available to insolvent entities in Canada: restructuring, bankruptcy or receivership.


A Companies Creditors’ Arrangement Act (CCAA) restructuring process is available to insolvent companies having in excess of CND5 million of debt. In a CCAA restructuring, a company is granted a court-ordered protection period called a “stay,” during which no party can take any action against the company. Customers cannot terminate contracts or commitments to purchase services because of the filing and suppliers must continue to supply goods and services (provided they are paid going forward from the date of the stay). However, conventional lenders and suppliers cannot be forced to grant any further credit to the company.

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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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