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Corporate Restructuring vs. Bankruptcy: What You Need to Know for Your Struggling Business

Do you own a business? Are you struggling financially and unsure how to get back on track? Instead of filing for bankruptcy, corporate restructuring may be the best way forward. Here’s an overview of what you need to know.

The Basics: What’s Corporate Restructuring?

When a company goes through restructuring, it reorganizes its management, finances and operations to reduce debt, increase efficiency and improve the business going forward. Instead of shutting down or filing for commercial bankruptcy and surrendering its assets, the business can continue operating while paying back creditors at least part of what it owes.

Overall, restructuring allows the company to stay afloat, minimizes losses for lenders and shareholders and is far less expensive than the prospect of bankruptcy.

Restructuring Options

In Canada, businesses of all sizes can restructure their financial liabilities either through a Division I Proposal or a Plan of Arrangement. Here’s a look at both.

Division I Proposal

The Bankruptcy and Insolvency Act (BIA) allows businesses that owe less than five million dollars to restructure their finances by filing a Division I Proposal. When filing a Division I Proposal, the business makes a formal offer to its creditors to change the amount or payment terms of its debt. For example, the business can offer to reduce the size of its payments or negotiate more time to pay off its debt. The process is similar to a consumer proposal.

Plan of Arrangement

The Companies’ Creditors Arrangement Act (CCAA) is a federal law that allows insolvent businesses owing creditors over five million dollars to restructure their business and financial affairs through a formal Plan of Arrangement. The CCAA also allows a company to address its shareholders. CCAA proceedings offer more flexibility and greater judicial discretion than the more rules-based BIA to deal with complex issues that arise during the restructuring process.

Why You Need a Licensed Insolvency Trustee

In Canada, only a licensed insolvency trustee (LIT) is qualified to prepare and file a Division I Proposal or Plan of Arrangement with the Office of the Superintendent of Bankruptcy (OSB).

As licensed professionals regulated by the government, we have a legal duty to act in the best interests of both the debtor and the creditor. This ensures that the process is fair and transparent for all parties involved. Additionally, licensed insolvency trustees have access to legal powers and tools, such as filing a proposal under the Bankruptcy and Insolvency Act, that can help facilitate the restructuring process and protect the company's assets.

Before deciding whether corporate restructuring or bankruptcy is best for the future of your business, speak with a licensed insolvency trustee from D. & A. MacLeod. With over 70 years of experience, we’ll competently evaluate the current state of your organization’s finances and help you come up with a debt relief plan that works for you.

Corporate Restructuring and Bankruptcy Services in Ottawa

If your business is experiencing financial difficulties, the professionals at D. & A. MacLeod Company Ltd. can help. Our licensed insolvency trustees provide various corporate debt relief solutions, including restructuring and bankruptcy.

We’re located in Ottawa and have offices throughout Eastern Ontario, offering both in-person and virtual consultations to help you find a new beginning™. Contact us today to schedule a confidential consultation. We have offices in Ottawa, Brockville, Cornwall, Kanata, Kingston, Pembroke, and Smiths Falls to meet you in person.


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