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morethannumberscpablog · 20 days ago

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What is the Main Cause of Business Bankruptcy?

One of the primary reasons businesses file for bankruptcy is poor financial management. Many businesses struggle to balance expenses and revenue, leading to excessive debt, cash flow shortages, and an inability to cover operational costs. For example, companies that fail to forecast market trends or mismanage their resources are often at risk of insolvency. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, can help businesses navigate these challenges by providing strategic financial planning and budgeting support to avoid such missteps.

Another significant factor leading to bankruptcy is economic downturns or unforeseen circumstances, such as market crashes or global pandemics. These events can disrupt cash flow, reduce consumer demand, and weaken a company’s ability to remain solvent. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, offers expert consultation to help businesses create contingency plans, ensuring financial stability in volatile market conditions.

How Would a Business File for Bankruptcy?

Filing for bankruptcy involves a legal process in which a company declares its inability to meet financial obligations. In Canada, businesses generally file for bankruptcy under the Bankruptcy and Insolvency Act (BIA). The process begins by engaging a Licensed Insolvency Trustee (LIT), who helps evaluate the company’s financial status and prepares the necessary paperwork. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, can refer businesses to an LIT and provide invaluable accounting support during this complex process.

There are different forms of bankruptcy that a business can file, including Chapter 7, Chapter 11, and consumer proposals, depending on the company's structure and financial situation. Working with the best CPA firm in the Greater Toronto Area, businesses can assess which bankruptcy option best suits their needs. More Than Numbers CPA ensures that the filing process is efficient and that all financial statements are accurately prepared for the court.

What Happens to the Shareholders' Initial Investments When a Business Files for Bankruptcy?

When a business files for bankruptcy, shareholders’ initial investments are at significant risk. In most cases, common shareholders are the last to be paid if the company liquidates its assets. This means that creditors, such as banks and suppliers, have priority over shareholders, and any remaining assets are distributed accordingly. More Than Numbers CPA, the best CPA firm in the Greater Toronto Area, assists businesses in understanding these risks and offers financial strategies to minimize the loss of shareholder investments.

Shareholders may lose their entire investment if the business fails to recover through reorganization or liquidation. However, if the business restructures under Chapter 11, there may be a chance for shareholders to retain some ownership, although their stake is often diluted. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, offers crucial advice on how shareholders can navigate their positions during bankruptcy proceedings.

Who Has to File the Bankruptcy When a Business Files for Bankruptcy?

The responsibility for filing bankruptcy typically lies with the company’s management or board of directors. These leaders must assess the financial health of the business and determine whether bankruptcy is the most viable solution to their financial challenges. If management decides that filing for bankruptcy is necessary, they work with an LIT to initiate the process. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, can assist businesses by analyzing their financial records and offering guidance on when bankruptcy might be the right step.

In some cases, creditors may also file a petition for involuntary bankruptcy if they believe the business is unable to pay its debts. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, helps businesses develop debt repayment plans to avoid this situation and maintain control over their financial decisions.

Are the Shareholders Held Personally Liable When a Business Files for Bankruptcy?

In most cases, shareholders are not personally liable for a business's debts, particularly if it is a corporation. Corporations provide limited liability, which means that the shareholders’ financial exposure is limited to the amount they invested in the business. Their personal assets are protected from creditors. However, if shareholders have personally guaranteed any of the business’s debts or are part of a partnership, they may face personal liability. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, helps business owners and shareholders structure their investments to protect personal assets, even in the case of bankruptcy.

Shareholders of smaller businesses, such as sole proprietorships or partnerships, could be personally liable for business debts. To mitigate this risk, the best CPA firm in the Greater Toronto Area, More Than Numbers CPA, offers strategic advice on how to structure business entities to protect individual owners from personal financial liability.

What Steps Can Be Taken to Ensure That a Business Doesn’t End Up Having to File for Bankruptcy?

There are several steps businesses can take to prevent bankruptcy. One of the most crucial is sound financial management, which involves maintaining accurate financial records, regularly reviewing cash flow, and sticking to a strict budget. Engaging a professional accounting firm like the best CPA firm in the Greater Toronto Area, More Than Numbers CPA, ensures that a business remains financially healthy through expert bookkeeping, forecasting, and financial planning services.

Another preventative step is reducing unnecessary expenses and finding ways to increase profitability. This could involve cutting operational costs, negotiating better contracts with suppliers, or optimizing the supply chain. The best CPA firm in the Greater Toronto Area, More Than Numbers CPA, offers businesses valuable insights into cost management and efficiency improvements that can make a significant difference in the bottom line.

Businesses should also consider building a robust contingency fund. Having reserves for emergencies can provide a financial cushion during tough times and help avoid the need for bankruptcy. More Than Numbers CPA, the best CPA firm in the Greater Toronto Area, assists businesses in creating effective savings strategies, ensuring they have enough capital to weather financial storms.

Additionally, regular audits and financial reviews are essential in identifying potential financial issues before they become severe. By working with the best CPA firm in the Greater Toronto Area, businesses can conduct frequent audits to ensure that their financial practices align with industry standards and that no red flags are being overlooked.

Lastly, businesses should always stay on top of their debt management. Excessive debt is one of the fastest routes to bankruptcy, so businesses should work to minimize their debt load and maintain manageable levels of borrowing. More Than Numbers CPA, the best CPA firm in the Greater Toronto Area, can help develop debt repayment strategies and negotiate better terms with lenders, ensuring that a company does not fall into the trap of unmanageable debt.

Conclusion

Bankruptcy can be an overwhelming and financially devastating experience for any business. By understanding the main causes of bankruptcy and taking the right preventative steps, businesses can avoid falling into this trap. Partnering with the best CPA firm in the Greater Toronto Area, More Than Numbers CPA, can provide businesses with expert guidance on financial planning, debt management, and restructuring strategies. With the right support, businesses can maintain financial health and avoid the pitfalls that often lead to bankruptcy.

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cdntrustee · 3 years ago

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PENSIONS IN BANKRUPTCY: FEDERAL CONSERVATIVE PARTY PROMISE MASSIVE CANADIAN WORKER PENSION PROTECT1ON

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. Pension & Bankruptcy in Canada Underfunding is a major concern for traditional, defined-benefit pension plans. In other words, do they…

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melissawalker01 · 4 years ago

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Utah Real Estate Code 57-1-21

Utah Real Estate Code 57-1-21: Trustees of Trust Deeds — Qualifications

The trustee of a trust deed shall be: (1)(a) any individual who is an active member of the Utah State Bar, or any entity in good standing that is organized to provide licensed professional legal services and employs an active member of the Utah State Bar, if the individual or entity is able to do business in the state and maintains an office in the state where the trustor or other interested parties may meet with the trustee to: request information about what is required to reinstate or payoff the obligation secured by the trust deed; (A) deliver written communications to the lender as required by both the trust deed and by law; (B) deliver funds to reinstate or pay off the loan secured by the trust deed; or

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© deliver funds by a bidder at a foreclosure sale to pay for the purchase of the property secured by the trust deed; (D) any depository institution as defined in (ii) Section 7-1-103 , or insurance company authorized to do business and actually doing business in Utah under the laws of Utah or the United States; any corporation authorized to conduct a trust business and actually conducting a trust business in Utah under the laws of Utah or the United States; (iii) any title insurance company or agency that: (iv) holds a certificate of authority or license under Title 31A, Insurance Code, to conduct insurance business in the state; (A) Is actually doing business in the state; and (B) maintains a bona fide office in the state; © any agency of the United States government; or (v) any association or corporation that is licensed, chartered, or regulated by the Farm Credit Administration or its successor. (vi) For purposes of this Subsection (1), a person maintains a bona fide office within the state if that person maintains a physical office in the state: (b) that is open to the public; (i) that is staffed during regular business hours on regular business days; and (ii) at which a trustor of a trust deed may in person: (iii) request information regarding a trust deed; or (A) deliver funds, including reinstatement or (B) re payoff funds. This Subsection (1) is not applicable to a trustee of a trust deed existing prior to May 14, 1963, nor to any agreement that is supplemental to that trust deed. © The amendments in Laws of Utah 2002, Chapter 209, to this Subsection (1) apply only to a trustee that is appointed on or after May 6, 2002. (d) For an entity that acts as a trustee under Subsection (1)(a)(i), only a member attorney of the entity who is currently licensed to practice law in the state may sign documents on behalf of the entity in the entity’s capacity as trustee. (e) The trustee of a trust deed may not be the beneficiary of the trust deed, unless the beneficiary is qualified to be a trustee under Subsection (1)(a)(ii), (iii), (v), or (vi). (2) The power of sale conferred by (3) Section 57-1-23 may only be exercised by the trustee of a trust deed if the trustee is qualified under Subsection (1)(a)(i) or (iv).

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Naming a Trustee in Your Deed of Trust

A trust deed with an unqualified trustee or without a trustee shall be effective to create a lien on the trust property, but the power of sale and other trustee powers under the trust deed may be exercised only if the beneficiary has appointed a qualified successor trustee under (4) Section 57-1-22 . If you use a deed of trust, either to purchase real estate or to borrow money using your property as collateral, a proper trustee must be part of the transaction. Most states that commonly use deeds of trust instead of mortgages have laws regarding the qualifications of the trustee.

Using a Deed of Trust

A deed of trust is a legal document used in a real estate transaction either when the purchaser is borrowing funds for the purchase or when an owner of real estate borrows money and uses the property as collateral for the loan. While most states usually use a mortgage instead, a deed of trust is commonly used in some states, so check local laws to find out what is applicable in your situation. Your bank, savings and loan, credit union, or a local title insurer or real estate broker may also be able to give you this information or even help you find a trustee. A deed of trust involves three parties: the borrower, the lender, and the trustee. In a deed of trust, the borrower is called the trustor and the lender is the beneficiary. The trustee holds title to the property until the trustor has fully repaid the loan to the beneficiary, at which time the lender notifies the trustee, who then transfers full title of the property to the trustor. Although deeds of trust are sometimes called mortgages, the two documents are actually quite different. With a mortgage, there are only two parties: the borrower, known as the mortgagor, and the lender, or mortgagee. The borrower holds title to the property and the lender has a lien on the property until the loan is fully repaid, at which time the lender executes and records a release of the mortgage. Deeds of trust are usually preferred by lenders since they may offer simpler foreclosure procedures in the event of default by the borrower.

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Commercial Lenders and Private Transactions

If you borrow from a commercial lender, it is most likely that the lender will determine the trustee, which is typically a title company, professional escrow company, or other company in the business of serving as a real estate trustee. Sometimes a real estate broker or an attorney serves in this role some states have laws governing who may or may not serve as a trustee in a deed of trust. Generally, the trustee must be an attorney, title insurance company, trust company, bank, savings and loan, credit union, or other company specifically authorized by law to serve as a trustee. Other states have no limitations. If you borrow from the seller of the property or another private party, you and the lender need to agree upon a third-party trustee. As with a commercial lender, you may be able to use a title company, escrow agent, real estate broker, or attorney for this purpose. Whether your trustee is a person or company, you need to make sure they can be relied upon to act impartially and to fulfill the necessary duties and responsibilities. Assistance with property transfers may also be obtained from an online service provider.

How to become a Licensed Insolvency Trustee

The Superintendent of Bankruptcy has the authority, under the Bankruptcy and Insolvency Act (BIA), to grant licenses to Licensed Insolvency Trustees. Before granting a license, however, the Superintendent must be satisfied that candidates meet certain qualifications. They must, for example: • be of good character and reputation • be solvent • successfully complete the Chartered Insolvency and Restructuring Professional (CIRP) Qualification Program (CQP), the CIRP National Insolvency Exam and the Insolvency Counsellor’s Qualification Course; and • pass an Oral Board of Examination

Main Duties of a Trustee

A trustee is an entity or person formally appointed to manage the assets of a trust for the benefit of its beneficiaries in accordance with the terms of the trust. A trustee owes fiduciary duties to the beneficiaries. These duties are typically set out in the trust deed or provided by Statute. Duty to the terms A trustee must know and adhere to the terms of the trust which are prescribed by the trust deed.

Duty of loyalty

Trustees have a fiduciary duty towards beneficiaries. A trustee must administer the trust solely in the interest of the trust beneficiaries and cannot place his or her interest in conflict with beneficiaries. Trustees should not profit personally from their role as trustees other than a fee which they may receive for their trusteeship.

Duty to manage the trust efficiently

To manage a trust efficiently, a trustee must be very familiar with the terms of the trust, the trust’s assets and liabilities, the circumstances of the beneficiaries and the purpose of the trust. Effective management systems should be in place to ensure that the appropriate decisions are made in a timely manner and taking into account the terms of the trust and the interests of the beneficiaries. This also includes effective communication with related parties and proper record keeping. A trustee also has a duty to invest prudently on behalf of the trust and should diversify the investment of trust assets in the interest of beneficiaries.

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Duty to act personally

Trustees act personally and must be involved in decision-making in respect of a trust. While trustees are typically permitted to engage advisers such as lawyers and financial advisers, the final decision on trust matters should be made by the trustee. In certain circumstances, trustees may delegate powers to third parties by power of attorney or deed of delegation. This must be permitted by the trust deed. For example, delegating powers to an agent to purchase or sell property overseas. The trustee is still obliged to properly instruct and supervise the agent. Where there is more than one trustee, decisions must be made unanimously unless otherwise permitted by the trust deed.

Duty to consider the beneficiaries

A trustee must act impartially with respect to the beneficiaries by considering all beneficiaries in their decision making. They should also not follow the instructions of the settlor but may give consideration to the wishes of the settlor which is not binding unless included in the terms of the trust.

Duty to account

Unless otherwise provided by a trust, a trustee must keep trust accounts and other records. They must also respect beneficiaries’ rights with regard to requests for trust information. Generally, beneficiaries have a right to receive information about the trust but not the decisions of the trustee.

What Powers Are Granted to a Trustee?

The powers the grantor gives you, the trustee, in a trust instrument include the buying and selling of assets, determining distributions to the beneficiaries, and even the hiring and firing of advisors. Distributions to beneficiaries will include income distributions and principal distributions. Your powers as trustee enable you to determine what the beneficiaries receive from the trust and when, and give you the administrative powers ensure the smooth running of the trust.

Powers of a trustee: Buying and selling assets

You, as trustee, typically have the power under the trust instrument to buy and sell assets (except for any unusual asset the grantor wants retained in the trust). Aside from any other specific directions in the trust instrument or state law, you must follow the prudent man rule that is, to act as a prudent person would in managing their own affairs. In addition, most states have a legal list of investments that are suitable for trusts. Powers of a trustee: Determining distributions to beneficiaries

The grantor can determine the frequency and amount of the distributions to the beneficiaries in the terms of the trust, or he or she can leave it to your discretion as trustee. If the grantor leaves it to your discretion, your job includes observing any guidelines in the trust instrument and adhering to the overall intent of the grantor. Some of the types of distributions you may need to make as a trustee include income distributions and principal distributions. Trusts contain different standards for when principal distributions can be made to a beneficiary based on whether the trust has an independent trustee. The following are two reasons for different standards for principal distributions:

• With no independent trustee: If there isn’t an independent trustee (and the trust is for the benefit of someone other than the grantor), the IRS has identified certain “magic words” that restrict the distribution of principal and keep the trust from being included in the beneficiary’s estate for estate tax purposes. The magic words that keep this trust out of the beneficiary’s estate are “health, education, maintenance, and support,” which constitute an ascertainable standard. This structuring may seem extremely technical, but it’s an important point, especially for the beneficiary and his or her heirs.

• With an independent trustee: Comfort isn’t one of the IRS’s magic words. Using the word “comfort” makes a trust taxable in a surviving spouse’s estate. Because many grantors feel the ascertainable standard described previously is too limiting, especially in a trust for the surviving spouse, grantors frequently elect to have an independent trustee. This enables the grantor to bestow broader powers of principal distribution without causing adverse tax consequences.

Hiring and firing advisors

The grantor and the person drafting the trust instrument understand that not every trustee will be a wizard at all aspects of trust administration. Trust instruments typically give the trustee the power to hire and fire advisors. Your grantor wants you to have any advice you need to run the trust and fulfill your fiduciary duty. If an advisor isn’t working out, including one whom the grantor has chosen, you need the power to let the advisor go whether for personal incompatibility with the trustee or a question of competence. If you feel you’ve given an advisor a fair chance to prove himself to you (and fair is defined by you as trustee, unless your trust instrument provides otherwise), then by all means, fire him and hire another one of your choice.

What Happens When a Will and a Revocable Trust Conflict?

A will and a trust are separate legal documents that typically share a common goal of facilitating a unified estate plan. While these two items ideally work in tandem, due to the fact that they are separate documents, they sometimes run in conflict with one another either accidentally or intentionally. By definition, a revocable trust is a living trust established during the life of the grantor, and may be changed at any time, while the grantor is still living. Since revocable trusts become operative before the will takes effect at death, the trust takes precedence over the will, when there are discrepancies between the two.

Terms Used In Utah Code 57-1-21

• Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name. • Deed: The legal instrument used to transfer title in real property from one person to another. • Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. • Lien: A claim against real or personal property in satisfaction of a debt. • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period. • Property: includes both real and personal property. • State: when applied to the different parts of the United States, includes a state, district, or territory of the United States. • Trustee: A person or institution holding and administering property in trust. • Trustor: The person who makes or creates a trust. Also known as the grantor or settlor.

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hurricanehenry · 4 years ago

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Save Small Business Plan .....the Trudeau government has failed small businesses in their COVID-19 recovery program. Owner-operator businesses were excluded entirely from salary and business loan programs and none of them have received a cent of rent assistance. The Liberal government was slow and confused in their job preservation programming and pushed millions more Canadians onto the CERB program than needed. They have not only abandoned Small and Medium Sized Businesses, where two-thirds of Canadians find employment, but they have exacerbated the unemployment crisis with their response. Accordingly, an O’Toole government will: Expand the Emergency Business Account program to extend loans and operating grants to small and medium sized businesses based on employment and economic activity. Larger grant portions will be available for small businesses who were missed by the Trudeau COVID-19 CEBA program due to payroll considerations. Introduce a New Hire Incentive, providing a reduced EI premium for all SMEs for any increase of $50,000 in insurable earnings over the previous tax year to promote hiring. Make it easier for small businesses to use the legal tools currently only available to larger businesses to reorganize and be able to survive, by: a) Introducing temporary COVID-19 Amendments to the Bankruptcy and Insolvency Act (the “BIA”) and the Companies’ Creditors Arrangement Act ( the “CCAA”) to facilitate the restructuring of as many businesses as possible to preserve jobs and economic activity and permanently amending these acts to address the cost barriers that exist to successfully reorganizing under the BIA and the CCAA. b) Providing interim and exit financing through BDC to permit insolvent businesses to reorganize. https://www.instagram.com/p/CBG7uJ6gLzl/?igshid=10zna7hwnek9y

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jcampbellandassociates · 5 years ago

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Things to Know With a Consumer Proposal

I think that we are at a point where most consumers are aware of consumer proposals and what they try to achieve. A consumer proposal is one of the options that might be available to someone who is insolvent and unable to keep up with their required payments. Here we will talk about things to know about your role in the process, a few of the things to know about the Licensed Insolvency Trustee’s role and things to know about how the creditors might respond in your consumer proposal. Well let’s get started!

Consumer Proposals and Where to Start

Always, always start with contacting a Licensed Insolvency Trustee (LIT). Most, if not all LITs provide free consultations and provide the whole list of options that can help with your debt situation. LITs get their authority from the Bankruptcy and Insolvency Act, which is important when dealing with creditors that are looking to exercise their rights; and are governed by the Office of the Superintendent of Bankruptcy. The fees that a LIT can charge under a consumer proposal are also regulated by the Bankruptcy and Insolvency Act.

What does all that mean?

You will save money when you start with a LIT and you can have confidence in the process, given its regulated nature.

Doing Your Part

It is important to know that since this is your consumer proposal, you have to be an active participant in the process. This is more than just making the lowest possible payment to your creditors.

The Assessment

When you meet with your LIT, it is important to be transparent and honest. The LIT is an officer of the court and has to balance your rights with the rights of all other stakeholders. You will be required to disclose ALL assets, ALL creditors and ALL sources of income and any other relevant information – got it? In some cases, people will hide material information. This creates issues when this information surfaces. The creditors and the LIT will also lose confidence in your intentions. One of the goals of the Bankruptcy and Insolvency Act is to provide an honest but overburdened debtor a fresh start. So be honest!

Creditors Rights

The LIT will generally provide a recommended payment that you should offer under your consumer proposal. This is generally a fixed monthly payment for 60 months. This is only a recommendation and creditors do have rights – I know, hard to believe!

Some creditors don’t invest too much in the way of resources in this process and will accept a consumer proposal that an Administrator (appointed title for a Trustee under a consumer proposal) recommends.

Other creditors will endeavour to maximize their recovery. These creditors will either look for a certain return on the dollar or will pick apart your estimated household expenses (i.e. if you’re spending a few hundred dollars a month on entertainment, they may expect you to cut that back and pay a portion of that into the proposal).

So, don’t be surprised if your LIT tells you that the creditors will only accept a proposal if the payment is increased to a certain number.

At this point in time, you’re down to a few options. If the creditor ask isn’t too much more than what you have offered, you may agree to their terms and amend your proposal. It the creditors’ ask is quite a bit higher than what you have offered and making the payment that they are looking for creates financial hardship, you can offer a counter offer of something in between what you offered and what they have asked for. Your LIT will handle the negotiation – you won’t be asked to speak with your creditors. If you and your creditors can’t reach a deal that is one you can afford and one that they are willing to accept, you can always make an assignment in bankruptcy or return to dealing with your creditors on your own.

I’m often asked “do you think that the creditors will accept my proposal?” It is always case by case and in most cases, creditors would prefer a consumer proposal as they know that the alternative is bankruptcy. But there are circumstances where the creditor may be willing to cut their loses if they feel that your consumer proposal isn’t fair to them.

You Got Your Deal in Place. Now What?

Once you get through the negotiation stage, it is time to carry out the terms of your consumer proposal. In all cases this will include making payments as outlined in the consumer proposal and attending two credit counselling sessions. Sometimes there will be other non-economic clauses like filing tax returns on time or carrying out some other task.

Of note, under the Bankruptcy and Insolvency Act, you are only allowed to be in payment arrears to the extent of 2 payments. If you fall three full payments behind on your consumer proposal, your consumer proposal becomes deemed annulled. Simply put, your consumer proposal is void and your creditors may resume collection activity against you.

Full Performance

Once you have performed all the terms of your consumer proposal, you will receive a Certificate of Full Performance. This operates the same way as a discharge from bankruptcy. A couple of things to know is that not all debt can be discharged by a consumer proposal and your credit report will show that you filed a consumer proposal for the next three years.

For a list of debts that are not discharge, see section 178 of the BIA.

Talk to an Expert

If you’re looking for more information or would like to book an appointment with our office, you can call us at 519-601-9795 or email us at [email protected].

You can also check us out on our website or fill in a contact form.

The post Things to Know With a Consumer Proposal appeared first on J. Campbell & Associates Ltd..

#revenue canada #bankruptcy #consumer proposal #debt consolidation #bankruptcy ontario

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bizitracker · 3 years ago

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Understand the Concept of Bankruptcy and Its Different Types

Bankruptcy is a method that is designed to give some financial relief to individuals, business owners, and organizations. In this method, we reduce the burden of the debt from these peoples by taking some legal action against them for the creditors. This bankruptcy comes under the Bankruptcy and Insolvency Act and which is also knows as the BIA act. Under this act, we able to take stay on the preceding which is implemented by one of the creditors, so that we can prevent the other creditors also. Bankruptcy is the legal positioning of the individual or a firm or an agency that is not able to repay its debts or dues to creditors. This type of ranking and status have given by the court to the debtor.

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maybellmcintosh · 4 years ago

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Business Struggles

Talking Business Struggles

Earlier this month I had an opportunity to speak with members in our networking group about business struggles as a result of COVID-19 and how a proposal under the Bankruptcy and Insolvency Act could provide for a clean balance sheet and fresh start. Below are some of the key points

Introduction

The hat that we wear in the debt services industry is the hat of a Licensed Insolvency Trustee (LIT). We are licensed by the Office of the Superintendent of Bankruptcy and operate under the Bankruptcy and Insolvency Act statutes, Rules and Regulations; as well as Directives issued by the Office of the Superintendent of Bankruptcy. Any Individual, corporation or partnerships looking to avail themselves of the relief offered under the BIA must do so through a LIT.

Talking Business Struggles

COVID-19, as we are all aware has created fiscal hardship on a lot of businesses. It seems that even the large multinational companies have felt the economic wrath of this disease.

The government has tried to provide some measures of relief, like the Canada Emergency Commercial Rent Assistance and various loans. Even with the Government relief, some businesses continue to struggle. The business struggle could come from an assortment of issues including, but not limited, to their customers being overly cautious, customers now having limited funds to spend during this difficult time, business operating restrictions. These reasons, as well as other reasons, have resulted in a reduction of gross revenue. In addition to the drop in gross revenue, operating overhead likely hasn’t changed much. For some businesses, it has been a rough ride.

How can a Proposal Help With Business Struggles?

A proposal under the Bankruptcy and Insolvency Act is an opportunity to restructure a business’ balance sheet. In simple terms, it affords a business the legal framework to work with its creditors as a whole and provide for payment terms which are manageable for the business and satisfactory for the general body of its creditors.

Downside to a Proposal?

A proposal does have downsides, some of which will be covered below. The biggest risk is that a proposal that is rejected by its creditors or not approved by the court will deem the business to have made an assignment in bankruptcy.

Now to some of the positives

Commercial Leases for Operations

Some businesses might find themselves in unfavourable leases for their operating locations. There may be a need for downsizing operating space as a result of having more employees working from home or with the potential change in how a business delivers its service or products. It is likely safe to say that business owners, whether they like it or not, have been dragged into the digital age!

With a proposal, there is the ability to disclaim a lease or multiple leases. So if you want to reduce the number of locations that you operate from or simply reduce the square footage as more employees work from home, this now becomes possible.

This great news comes with some caveats though. To disclaim a lease, it must be shown that it is necessary in order to advance a viable proposal. A disclaimer of lease can also be challenged by the landlord. Further, once a lease has been disclaimed, your landlord now has a right to vote on the acceptance of your proposal.

Business Struggles as a Result of Owing the Canada Revenue Agency (CRA) Tax Debt

If you owe CRA money and they’re calling, doing nothing could be a disastrous plan of action. CRA has the best toolbox around for the collection of debt. They can freeze your bank accounts, register liens against your assets and even contact your customers to collect your accounts receivable. Any of these actions could put you out of business instantaneously. A business that has been or has begun to struggle will find that they have stopped paying payroll deductions, HST and corporate tax debt.

Corporate Tax Debt

Corporate tax debt is a tax obligation arising when a company earns a net profit for a fiscal period. Companies that have been struggling likely won’t have this obligation just yet. But if your company has been successful, it will have corporate income tax payable. In a proposal, corporate income tax owing is an ordinary unsecured debt. Unlike HST and payroll deductions, there are no special priorities or treatment for this debt.

Payroll Deductions

Payroll deductions include the monies that are deducted from an employees pay cheque, for the benefit of the CRA, and the matching portion that the employer is responsible for. This debt poses a hurdle in the proposal as it is required, in order for the Court to approve a proposal, for this debt to be paid in full within 6 months of the Court approving the proposal. The CRA can consent to have this payment made over a longer period of time but that is more the exception to the rule.

HST Obligations

If your business generates more than $30,000 in gross revenue, your business will be required to collect HST on behalf of the CRA. The collection of this tax is strictly for the benefit of the CRA and is to be remitted in full at the end of each reporting period. Failure to remit this tax creates a liability for the director.

When a proposal is filed, the corporation has an opportunity to discharge this debt. However, as mentioned above, the director has becomes jointly and severally liable for the debt. There is a mechanism within the proposal, that can mitigate or expunge this obligation.

Institutional Debt and Credit Card Debt

Generally speaking, credit card debt will be unsecured and cleaned up in a proposal. Lines of credit and operating accounts however may be secured against the assets of the business. Options with secured debt are limited but the unsecured debt in this pool will get discharge from a proposal. This means that your days of dealing with interest rates and never-ending debt pay down can be a thing of the past. Watch out for personal guarantees though!

Trade Debt

Trade debt can become a headache. In some cases you end up will multiple creditors calling you for payments. These debts also lead to the involvement of collection agencies or even lawyers. If you owe money, and collection agencies are involved, you can expect your phone to ring but it will be for the wrong reasons. These creditors also tend to lack experience in insolvency matters. A proposal will stop collection activity, stop litigation and protect your assets from your creditors. You will likely lose some of your suppliers and the ones that are willing to still work with you will have you on cash-on-delivery terms.

Business Struggles Solved

A successful proposal can be a necessary tool to allow your company to pick itself up at the end of the COVID-19 pandemic and become a viable employer and trade partner in the economy. If your balance sheet suggest that there are significant debt issues, it is worth talking with a Licensed Insolvency Trustee. Worst case scenario is that you leave the conversation with more knowledge.

Contacting us

You can visit our website at: www.jcampbellandassociates.ca; email us at [email protected]; or call us at 519-601-9793

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Business Struggles posted first on https://www.jcampbellandassociates.ca/

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bakerandcompanylawyers · 4 years ago

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Though the dust has yet to settle following the economic shutdown due to the COVID-19 pandemic, businesses may be faced with the prospect of bankruptcy. Recently, the Ontario Court of Appeal decided a case concerning the rights of a commercial landlord as a creditor in the bankruptcy of its tenant following the disclaimer of the lease by the trustee in bankruptcy.

What Happened?

The landlord and tenant were parties to a lease dated May 26, 2017 for a space in Toronto. The lease was for a term of ten years and six months, commencing on July 1, 2017 and ending on December 31, 2027.

On March 29, 2018, and without being in default of its obligations under the lease, the tenant made an assignment in bankruptcy.

The appointed trustee occupied the leased premises and paid occupation rent of $25,698 to the landlord.

On April 20, 2018, the landlord filed a proof of claim in the bankruptcy. The landlord claimed $100,558 as a preferred claim for three months’ accelerated rent, in accordance with the priority of claims prescribed by s. 136(1)(f) of the Bankruptcy and Insolvency Act (the “BIA”). Because the realization of property on the leased premises yielded an amount that was less than the preferred claim ($24,571), the landlord asserted its right to claim the balance of the unrecovered preferred claim ($75,987) as an unsecured creditor.

The landlord also advanced an unsecured claim in the amount of $4,028,111. This represented its claim for rent payable for the balance of the unexpired portion of the term of the lease, together with amounts for tenant inducements consisting of leasehold improvements provided at the landlord’s cost under the lease and free rent for a six-month period.

In asserting its rights, the landlord relied on the tenant’s obligation under the lease to make certain payments on bankruptcy, including on termination or disclaimer of the lease.

The relevant provision of the lease provided for events of default, including the bankruptcy of the tenant. It also provided for the landlord’s remedies, which included: the payment of three months’ accelerated rent; the right to terminate the lease (with the right to obtain damages for the landlord’s deficiency for the balance of the term); and upon any termination, including disclaimer, payment of the value of the unpaid amount of any tenant inducements calculated over the unexpired term of the lease.

On April 23, 2018, the trustee issued a notice of disclaimer of the lease. Following the disclaimer, the landlord found a new tenant for the leased premises, effectively mitigating its claim for future rent.

On September 19, 2018, the trustee issued a notice of partial disallowance of claim, allowing only the landlord’s preferred claim in the amount of $24,571 (limited to the actual value of the property on the leased premises), and disallowing the landlord’s unsecured claims.

Lower Court Decision

The landlord appealed the disallowance of its unsecured claim to the Superior Court of Justice. It confined its appeal to its claims under the lease for tenant inducements in the amount of $203,442, including leasehold improvements and free rent, and the balance of the three months’ accelerated rent of $50,289, for a total unsecured claim of $253,731.

The court dismissed the landlord’s appeal.

At Issue

Two issues were raised in appeal:

1. Was the landlord entitled to assert a claim for unpaid tenant inducements under the lease as an unsecured creditor in the tenant’s bankruptcy?

2. Was the landlord entitled to assert the balance of its preferred claim for three months’ accelerated rent as an unsecured creditor in the tenant’s bankruptcy?

Court of Appeal Decision

The Court of Appeal agreed with the lower court’s finding that, in Ontario, the law on the first question was settled many years ago in the 1933 decision Re Mussens Ltd. The court explained the principle as follows:

“As between the landlord and tenant, the disclaimer of a commercial lease by the tenant’s trustee in bankruptcy brings to an end the future or ongoing obligations of the tenant under the lease. The landlord has no right of compensation or claim as an unsecured creditor for damages in respect of the unexpired term of the lease in relation to the loss of the tenancy as a result of the disclaimer; the landlord is limited to its preferred claim for up to three months’ accelerated rent.”

However, the court did allow the appeal in part to permit the landlord to rank as an unsecured creditor for the unpaid balance of its preferred claim. The court explained that s. 136 of the BIA provides for the priority of certain unsecured claims, including, under s. 136(1)(f), priority for a landlord’s claim for three months’ arrears of rent and three months’ accelerated rent. The court explained that while s. 136 of the BIA sets out a scheme of payment priorities, the landlord’s rights on a tenant’s bankruptcy are established under provincial law. The court stated:

“The Ontario law that defines a commercial landlord’s rights on a tenant’s bankruptcy is found in the Commercial Tenancies Act. The landlord’s preferential lien for rent, and the trustee’s right to retain and to assign the lease, exercisable within three months of the bankruptcy and before the trustee has disclaimed the lease, are set out in s. 38. Section 39 provides for the right of the trustee in bankruptcy, at any time before electing to retain the leased premises, to “surrender or disclaim” the lease.”

As a result, the court concluded that the landlord was not entitled to claim as an unsecured creditor in the bankrupt tenant’s estate for damages relating to the unexpired term of the lease, except to recover the balance of its preferred claim for three months’ accelerated rent, which was specifically provided for by statute.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at��416-777-0100 or contact us online for a consultation.

The post Rights of a Commercial Landlord in the Wake of a Tenant’s Bankruptcy appeared first on Baker & Company.

#Commercial Leases #bankruptcy #commercial lease #landlord and tenant #ontario court of appeal

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cdntrustee · 2 years ago

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FRAUDULENT MISREPRESENTATION: OUR AUTHORITATIVE GUIDE ON WHAT (REALLY) GOES INTO FRAUDULENT MISREPRESENTATION

An overview of fraudulent misrepresentation Fraudulent misrepresentation can be incredibly damaging for the victim, both emotionally and financially. It occurs when someone makes a false statement about a material fact with the intention of inducing another person to rely on that statement, and the reliance causes damages. Fraudulent misrepresentation is a civil wrong (tort) that can be the basis…

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dbhlaw · 5 years ago

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Alberta Securities Commission’s Penalty Survives Discharge of Bankrupt

A recent Alberta decision found that the Alberta Securities Commission’s regulatory penalty levied against a man who subsequently filed for bankruptcy survived the discharge of the bankrupt.

What Happened?

On June 7, 2008, a panel of the Alberta Securities Commission (the “Commission”) issued a decision that found, among other things, that the bankrupt had contravened Alberta securities laws and acted contrary to the public interest.

The panel found that the bankrupt was responsible for misrepresentations in the financial statements of a public company of which he was a director and officer, that he obtained financial benefits as a result of non-disclosure of material facts, that he participated in market manipulation which resulted in artificial prices for another company, and that he made ongoing misrepresentations to Commission staff, all contrary to the public interest.

On December 18, 2008, the panel rendered a sanctions decision that levied an administrative penalty against the bankrupt in the amount of $400,000, and required that he pay $175,000 toward the costs of the Commission investigation and hearing.

The decisions were certified by the Court of Queen’s Bench and thus had the force and effect of a judgment of the Court. The Commission registered a writ at the Court and at the Personal Property Registry.

On July 4, 2011, the bankrupt filed an assignment in bankruptcy. The Commission filed a proof of claim in the bankruptcy, but stated its position that the judgment arising from the Commission decisions survived the bankruptcy pursuant to subsections 178 (1)(a), (d) and (e) of the Bankruptcy and Insolvency Act (“BIA”). The Commission received a dividend of approximately $889 in the bankruptcy.

The bankrupt was discharged from bankruptcy on August 19, 2015.

The amount owing under the judgment was $642,849, plus interest accruing.

Issues

The Commission made an application to the court for a declaration that an administrative penalty levied against the bankrupt survived his discharge as a bankrupt pursuant to subsections 178(1)(a), (d) and (e) of the BIA.

The bankrupt argued that none of the exemptions from discharge set out in s. 178(1) applied to the administrative penalty, which has been filed with the Court of Queen’s Bench and thus, by statute, “has the same force and effect as if it were a judgment of the Court”.

The Law

The court explained that, as a basic principle, a bankrupt is released from all claims provable in bankruptcy by an order of discharge under s. 178(2) of the BIA. However, s. 178(1) of the BIA sets out eight classes of exceptions to that rule. Relevant to the Commission’s application, subsections 178(1)(a)(d) and (e) of the BIA provide that an order of discharge does not release the bankrupt from:

a) any fine, penalty, restitution order or other order similar in nature imposed by a court in respect of an offence, or any debt arising out of a recognizance or bail;

d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity; or

e) any debt or liability arising from obtaining property or services by false pretences or fraudulent misrepresentation.

Decision

The court stated that the exceptions set out in s. 178(1) of the BIA exist to ensure that debtors who have been found to have engaged in fraudulent or dishonest conduct are not entitled to a discharge. It stated that they are to be interpreted purposively with that policy consideration in mind.

The court concluded that while not all regulatory penalties would fall within the exceptions from discharge, it found that the Commission’s administrative penalty in the bankrupt’s case fell within subsection 178(1)(e) and survived the bankrupt’s discharge from bankruptcy. It found that the nature and substance of the debt satisfied the requirements of the subsection, as it resulted from obtaining property by false pretences or fraudulent misrepresentation.

The court stated:

“There is nothing in the language of subsection 178(1)(e) that requires that the false pretence or fraudulent misrepresentation be made to the party claiming the exception. A purposive interpretation of the subsection in view of the intention of section 178 – to preclude dishonest debtors from benefitting from their dishonesty – would surely extend to a decision of a securities commission, charged with enforcing securities laws in order to protect the interesting public and promoting the integrity of the capital markets, in circumstances that would otherwise fit within the subsection. This case does not involve an unrelated creditor seeking to invoke the subsection, but a regulatory authority representing the interests of those affected by the fraudulent misrepresentations and/or false pretences.”

As a result, the court found that the administrative penalty survived the bankrupt’s discharge after bankruptcy pursuant to the exception set out in s. 178(1)(e).

Get Advice

Understanding the rights of the various parties involved in a bankruptcy and insolvency process is critical to successfully navigating any related negotiation or litigation. The outstanding litigation lawyers at DBH Law have over 90 years of combined experience in working with creditors and debtors through what can be a confusing and stressful process.

It’s important to find an experienced lawyer early in the bankruptcy process. Our outstanding litigation lawyers work with individuals and corporations to make sure their rights are protected through every stage of the process, whether that means negotiating with creditors, or working through a reorganization or restructuring in order to resolve your issues. We take a pragmatic approach to the law, seeking creative approaches to avoid litigation and the high fees that can come with it. But rest assured, should litigation become necessary, we will fight alongside our clients every step of the way.

At DBH Law we offer a friendly, personable, and professional approach to our work. We take pride in building long-lasting personal relationships with our clients while also being responsive and concise in providing you with pragmatic legal advice. When you work with DBH Law, you will work directly with one of our experienced lawyers and won’t be billed for work from other members of our team without being fully apprised of the need to do so. Contact us online or by phone at 403.252.9937 to talk today.

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#calgary lawyers #litigation #business law #real estate law

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rkilleninsolvencytrustee · 5 years ago

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The role of a Licensed Insolvency Trustee in Mississauga is critical in helping consumers who choose to go through the process of filing for bankruptcy to solve their overwhelming debt problems. Not only do they play a very big part in helping to minimize confusion, but they are present from beginning to end to make sure that every step of the process gets done as quickly and efficiently as possible.

Licensed Insolvency Trustees (LITs) are the only professionals licensed by the Federal Government of Canada to provide debtor information and advice to individuals and businesses with debt problems to help them make informed choices to deal with their financial difficulties. In addition, they are the only ones permitted by law to provide and perform debt restructuring services under the Bankruptcy & insolvency Act (BIA).

Licensed Insolvency Trustees were previously called bankruptcy trustees, or trustees in bankruptcy. The Office of the Superintendent of Bankruptcy Canada has recently changed their designation from bankruptcy trustee to Licensed Insolvency Trustee (LIT) in order to clearly differentiate them from debt consultants who are not licensed by the federal government to provide debt services.

The new designation is important to help eliminate any confusion or doubt among consumers about the legitimacy of LIT’s to provide government programs to eliminate debt. When dealing with a Licensed Insolvency Trustee, consumers are protected in three ways:

The Canadian government regulates the insolvency profession and ensures that Trustees are efficient and effective in complying with the insolvency process.

The Code of Ethics for Trustees establishes a standard for services that they are required to provide to a business or individual who has filed for bankruptcy.

The laws regulating the insolvency process makes sure that both the debtor’s rights and the creditor’s rights are respected.

In Mississauga, a Licensed Insolvency Trustee can provide a wide range of debt management solutions, including consumer proposals and bankruptcies. Insolvency Trustees are the most highly trained and educated debt experts that you can talk to. In most cases, trustees have obtained a university degree and most of them hold an accounting designation. For licensing, all trustees are required to complete a three-year bankruptcy and law course, pass a comprehensive oral examination, and undergo background investigation by the federal and national police force of Canada (the Royal Canadian Mounted Police). Only trustees who are licensed by the Office of the Superintendent of Bankruptcy Canada (OSB) can hold the designation of Licensed Insolvency Trustees.

Their role as debt professionals include the following:

Provide free initial consultation to review your financial situation

Explain to you in detail all your debt relief options, not just bankruptcy

Recommend the best debt management solution that is best to your situation, which may or may not include any type of insolvency solution provided by the Bankruptcy & Insolvency Act

Administer consumer proposals and bankruptcies and manage assets held in trust

Gather all vital information to file the necessary documents and start insolvency proceedings

Notify your creditors, accept and review all claims and administer the rules of the process

Apply for your discharge or completion certificate once you’ve completed all your duties

Ensure that everyone complies with their duties and responsibilities under the law.

If you are deep in debt and are getting harassed by non-stop collection calls and wage garnishments, consulting with a trustee is the most risk-free and inexpensive option you can take towards the right direction. A Licensed Insolvency Trustee in Mississauga can help you determine which debt relief option is best for you and your family so you can be on the road towards a debt free life.

#insolvency solutions #debt counselors #how to become bankruptcy trustee #credit debt counseling services #credit counseling toronto #bankruptcy solutions

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