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Division 1 Proposals: What You Should Know About Rejections

Our Licensed Insolvency Trustees canl help you determine whether filing a Division 1 proposal is the right solution for you.

If you’re struggling with major debt, a Division 1 proposal is an alternative to filing for bankruptcy that’s available to all Canadian corporations and individuals who owe more than $250,000 in debt. However, in order to be a viable solution to reducing your debt, your creditors must first accept the proposal. Although you’ll have a licensed insolvency trustee to guide you through the process, here are a few things you should know.

 

Can Division 1 corporate proposals be rejected?

In order for a Division 1 proposal to be accepted by your creditors, more than 50 percent of them, representing more than 66.6 percent of the debt in question, must vote in favour of the proposal. The proposal must then be approved by the Court. The primary reason creditors would choose to reject a proposal is because they feel they’d benefit more if the debtor declared bankruptcy.

Can you prevent a Division 1 proposal rejection?

To maximize the chances that your proposal will be accepted, you’ll need to work with a licensed insolvency trustee to ensure your Division 1 proposal is more appealing to creditors than what they would receive if you filed for bankruptcy. Keep in mind, however, that your proposal should be mutually beneficial. In other words, it should also leave you better off than if you choose the bankruptcy route.

 

What happens if your proposal is rejected?

Before you begin the process of preparing a Division 1 proposal, it’s important to understand what will happen if the proposal is rejected. If you don’t get enough votes in favour of your proposal, you will automatically be put into bankruptcy. Whereas an approved corporate proposal would allow you to retain your assets and employees, this isn’t the case if you’re forced to declare bankruptcy.

 

Division 1 Corporate Proposal Support For Ottawa Businesses

If you or your business are struggling to repay your debt, the team at D. & A. MacLeod Company Ltd. can help. Simply book a consultation with one of our licensed insolvency trustees, and they’ll help you determine whether filing a Division 1 proposal is the right solution for you. If filing for bankruptcy proves to be the best option, our team is also equipped to guide you through the process. For more information about our services, or to schedule a free consultation in the Ottawa area, contact us today.

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