A Division I Proposal is a formal insolvency proceeding under the BIA to repay what they owe over time. It’s a formalized legal process overseen by an insolvency trustee and used to help get out of debt.
The debtor remains in control of his business while formulating a restructuring plan that could ultimately turn the company to financial stability.
Perhaps you have just weathered a prolonged slow period and are forecasting increased sales and profitability, maybe you have an underperforming business unit or retail store(s), or when considering scaling back operations, you have identified a large potential employee severance obligation. These are all valid reasons to consider a formal restructuring.
An insolvent business can file a Proposal or a Notice of Intention to Make a Proposal under the BIA, either of which will provide your company with an absolute Stay of Proceedings from all of your creditors, including:
- Your bank and other secured lenders
- Canada Revenue Agency
- Your landlord
- Any other creditor/supplier
If you begin by filing a Notice of Intention to Make a Proposal, the Stay of Proceedings will give you a minimum of 30 days to formulate a plan and present a Proposal to your creditors. The period can be extended by applying to the Court for a further 45-day extension to a maximum of 6 months to file the Proposal. The purpose of the Stay of Proceedings is to give management the “breathing” room needed to develop a proposal to restructure the business without the threat of garnishments or other legal proceedings.
A Proposal can take any number of forms, including:
- A lump-sum payment, often provided by a third party
- Payments to creditors over an extended period (i.e. 3 to 5 years or more)
- Liquidation of all or part of your business, or the liquidation of certain assets
- Conversion of debt to equity
The company’s creditors must accept creditor Proposal to be binding on all creditors, including those who voted against it. Once the company has satisfied the terms of its Proposal and continues to meet its current obligations, the debts as of the date of filing are fully extinguished.
The process of implementing a successful Proposal is more complex than we have described and involves a detailed review and assessment of your company’s financial position.
With over 30 years of experience in the field, the team at Campbell Saunders Ltd can analyze your financial situation and find the optimal solutions to manage your debt. We always put you first and develop solutions based on your specific requirements and financial situation. We have a deep understanding of legal procedures and provide various services for personal and corporate debtors, ensuring you have a stress-free experience working with us at all times. You can check our resources to learn more about our services.