Granting a CCAA initial order to a bankrupt

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In the recent case of EncoreFX Inc. (Re) 2021 BCSC 750, the Court considered an application by a bankrupt to initiate a Companies Creditors Arrangement Act, RSC 1985, c C-36 restructuring proceeding.

This application required a consideration of section 11.6 of the CCAA, which permits proposal proceedings under the Bankruptcy and Insolvency Act, RSC 1985 c B-3 to be continued under the CCAA and permits applications under the CCAA by a bankrupt with the consent of a bankrupt’s inspectors (provided the bankruptcy did not result from a deemed assignment in a proposal proceeding or the refusal, deemed refusal or annulment of a proposal).

The Trustee of EncoreFX, a foreign exchange risk management and cross-border payment solutions company, sought to streamline highly complex bankruptcy proceedings by presenting a plan of arrangement pursuant to the CCAA that could resolve numerous contested claims.

The Court noted the lack of case law considering section 11.6(b) of the CCAA, and held that the issues to be determined were:

  1. whether EncoreFX qualified for relief under the CCAA;
  2. whether EncoreFX was barred or limited from that relief by other provisions; and
  3. whether the Court should exercise its discretion to grant CCAA relief.

After concluding EncoreFX qualified for relief and was not barred from bringing the application pursuant to section 11.6(b), the Court held that whether the relief is appropriate for a bankrupt is “largely driven by a consideration as to whether it is consistent with the purposes of the CCAA.”

The Court concluded that CCAA relief was appropriate because the CCAA is suited to complex restructurings given the broad discretion provided to the court, the CCAA proceeding would permit an expeditious resolution of the issues, and creditors’ recoveries would not be reduced by the levy payable to the Superintendent of Bankruptcy. The Court stayed the administration of the estate in the bankruptcy proceeding and appointed EncoreFX’s Trustee as a monitor with enhanced powers.

The decision provides useful guidance regarding an alternative option available to bankrupt companies that qualify for CCAA relief.

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