Business bankruptcy numbers are increasing in Canada at an alarming rate, and the situation may soon worsen. Small and medium-sized businesses struggling to survive the pandemic now find themselves with waning government support, increased costs and supply chain problems.
The problem is multi-pronged. This situation may worsen when interest rates increase later in 2022 because many small business owners still need to pay off the loans they used to stay afloat during the pandemic. Fortunately, there are ways that businesses can avoid shuttering their shops with the help of a licensed insolvency trustee.
THE PROBLEM
According to the Canadian Association of Insolvency and Restructuring Professionals(CAIRP), corporate insolvencies surged by 36.8 per cent in the last quarter of 2021. The increase is the largest in 35 years. Seven hundred thirty-three business insolvency proceedings were filed under the Bankruptcy and Insolvency Act in the final quarter of 2021, a significant increase after two years of nearly record-low bankruptcies. The industries hit hardest were the retail and food and accommodation sectors.
Despite the challenges, business owners should file for bankruptcy only as a last resort. “Walking away isn’t always the only or best option,” says CAIRP chair Jean-Daniel Breton. “Just as these business owners adapted and pivoted to make it through the pandemic, there may be options to restructure or rehabilitate to make the business viable again with the right guidance from a Licensed Insolvency Trustee.”
THE SOLUTION
A LIT can help your business work through financial hardships without closing your doors. A trustee may suggest the following:
Corporate proposal. Also known as a Division 1 proposal, a corporate proposal allows a company to resolve financial challenges without filing for bankruptcy. A LIT will prepare and submit a Division 1 proposal to your company’s creditors, which may include offers of periodic or lump sum payments.
Corporate restructuring. Corporate restructuring is an effective way to avoid insolvency and prove to creditors there’s value in your business. However, reorganizing your company can do more harm than good without professional guidance. A LIT has the experience to determine the best way forward. Corporate insolvency. If a Division 1 proposal or corporate restructuring is unfeasible, corporate insolvency may be your only option. A LIT can help navigate the process for you and ensure your rights are protected.
CORPORATE INSOLVENCY SERVICES FOR BUSINESSES IN OTTAWA AND ACROSS EASTERN ONTARIO
Don’t wait until you’ve entirely run out of time and money to get advice. The experienced Licensed Insolvency Trustees at D. & A. MacLeod Company Ltd. can help you get your financial affairs in order and save your business. With locations across Eastern Ontario including Ottawa, Kingston and Pembroke, you can contact us today to schedule a free, no-obligation consultation.