CCAA: Cross Border Insolvency and Re IMRIS Sam Gabor Wednesday, December 2, 2015 MBA Bankruptcy & Insolvency Section Meeting Topic: Joint Session with MAIRP
Agenda 1. CCAA - Cross Border Insolvency 2. Re IMRIS 3
Cross Border Insolvency - Purpose Recognizes globalization of the business world To promote mechanisms for dealing with cross border insolvency, cross-jurisdictional comity, to protect the interests of creditors United Nations Commission on International Trade Law formalized a Model Law on cross border insolvencies based on the principles of comity Provides for protection and maximization of value of the debtor s property - Not practical to put large scale companies into bankruptcy A mechanism to obtain Orders in one jurisdiction and have them enforced in another jurisdiction as if the Orders had been made in the court enforcing it 4
CCAA Part IV 44. The purpose of this Part is to provide mechanisms for dealing with cases of cross-border insolvencies and to promote (a) cooperation between the courts and other competent authorities in Canada with those of foreign jurisdictions in cases of cross-border insolvencies; (b) greater legal certainty for trade and investment; (c) the fair and efficient administration of cross-border insolvencies that protects the interests of creditors and other interested persons, and those of debtor companies; 5
CCAA S. 44 Purpose (d) the protection and the maximization of the value of debtor company s property; and (e) the rescue of financially troubled businesses to protect investment and preserve employment. 6
Interpretation foreign proceeding means a judicial or an administrative proceeding, including an interim proceeding, in a jurisdiction outside Canada dealing with creditors collective interests generally under any law relating to bankruptcy or insolvency in which a debtor company s business and financial affairs are subject to control or supervision by a foreign court for the purpose of reorganization. 7
Interpretation foreign main proceeding means a foreign proceeding in a jurisdiction where the debtor company has the centre of its main interests Centre of its main interest no definition in CCAA r COMI factors: (a) Location is readily ascertainable by creditors, (b) where debtor s principal assets or operations are found, (c) where headquarters or management of the debtor takes place. Massachusetts Elephant & Castle Group Inc, Re, 2011 ONSC 4201 See Re Angiotech Pharmaceuticals Inc., 2011 BCSC 115 for a more extensive list If no other proof of COMI, debtor s registered office deemed COMI Section 45(2) CCAA 8
Interpretation foreign representative means a person or body, including one appointed on an interim basis, who is authorized, in a foreign proceeding respect of a debtor company, to (a) monitor the debtor company s business and financial affairs for the purpose of reorganization; or (b) act as a representative in respect of the foreign proceeding. i.e. US debtor who files under Chapter 11 of US Bankruptcy Code and seeks recognition of Order(s) in Canada 9
Requirement of the Court to Recognize 46. (1) A foreign representative may apply to the court for recognition of the foreign proceeding in respect of which he or she is a foreign representative. Documents that must accompany application 46. (2) Subject to subsection (3), the application must be accompanied by (a) a certified copy of the instrument, however designated, that commenced the foreign proceeding or a certificate from the foreign court affirming the existence of the foreign proceeding; (b) a certified copy of the instrument, however designated, authorizing the foreign representative to act in that capacity or a certificate from the foreign court affirming the foreign representative s authority to act in that capacity; and (c) a statement identifying all foreign proceedings in respect of the debtor company that are known to the foreign representative.
Requirement of the Court to Recognize 47. (1) If the court is satisfied that the application for the recognition of a foreign proceeding relates to a foreign proceeding and that the applicant is a foreign representative in respect of that foreign proceeding, the court shall make an order recognizing the foreign proceeding 47 (2) The court shall specify in the order whether the foreign proceeding is a foreign main proceeding or a foreign non-main proceeding. 11
Stay of Proceedings for Foreign Main Proceeding Order relating to recognition of a foreign main proceeding 48. (1) Subject to subsections (2) to (4), on the making of an order recognizing a foreign proceeding that is specified to be a foreign main proceeding, the court shall make an order, subject to any terms and conditions it considers appropriate, (a) staying, until otherwise ordered by the court, for any period that the court considers necessary, all proceedings taken or that might be taken against the debtor company under the Bankruptcy and Insolvency Act or the Winding-up and Restructuring Act; (b) restraining, until otherwise ordered by the court, further proceedings in any action, suit or proceeding against the debtor company; 12
Stay of Proceedings for Foreign Main Proceeding (c) prohibiting, until otherwise ordered by the court, the commencement of any action, suit or proceeding against the debtor company; and (d) prohibiting the debtor company from selling or otherwise disposing of, outside the ordinary course of its business, any of the debtor company s property in Canada that relates to the business and prohibiting the debtor company from selling or otherwise disposing of any of its other property in Canada. Section 48(3) Stays and prohibitions don t apply if CCAA insolvency proceedings had already been commenced with respect to the debtor when recognition Order made Section 48(4) Insolvency proceedings may be commenced or continued by the debtor 13
Stay of Proceedings for Foreign Main Proceeding If Foreign non-main proceeding - local insolvency and other proceedings will not be stayed - 49(3) CCAA 14
Other Orders Other orders 49. (1) If an order recognizing a foreign proceeding is made, the court may, on application by the foreign representative who applied for the order, if the court is satisfied that it is necessary for the protection of the debtor company s property or the interests of a creditor or creditors, make any order that it considers appropriate, including an order (a) if the foreign proceeding is a foreign non-main proceeding, referred to in subsection 48(1); (b) respecting the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor company s property, business and financial affairs, debts, liabilities and obligations; and (c) authorizing the foreign representative to monitor the debtor company s business and financial affairs in Canada for the purpose of reorganization. Terms and conditions of orders 50. An order under this Part may be made on any terms and conditions that the court considers appropriate in the circumstances. 15
Re IMRIS First Recognition Order IMRIS Medical technology producer i.e. x-ray technology IMRIS Canada (Parent corp) and NASL - federally incorporated & located in Winnipeg IMRIS US operations mainly in Minnesota; incorporated in Delaware IMRIS Canada borrows from secured creditor under credit facility; IMRIS US and NASL guarantee the facility on a secured basis IMRIS US, IMRIS Canada and NASL obtain protection Orders under Chapter 11 of the US Bankruptcy Code in Delaware US First Day Orders (a) IMRIS US as foreign representative (operations in US); (b) Interim DIP financing; (c) Sales process, etc. IMRIS US comes to Winnipeg seeking an Initial Recognition Order of US First Day Orders pursuant to section 47 CCAA (a) IMRIS US as foreign representative; (b) Declaring Chapter 11 proceeding as foreign main proceeding; (c) stay of proceedings; (d) FTI as Information Officer; (e) Interim DIP Charge; (f) Admin charge; (g) Recognize First day Orders COMI for IMRIS Canada and NASL? Corp head quarters in US; officers and directors manage out of US; employees, HR, marketing, communications in US; managed primarily in US (pricing, business development); books and records in US Court grants Initial Recognition Order recognizes and enforces US Orders, but concerns over DIP TBD 16
Re IMRIS Second Recognition Order US Orders under Chapter 11 i.e. KERP, Bid Procedures Order for sale process, Final DIP Facility Foreign representative brings motion for recognition of further US Orders, including Final DIP financing, etc. Issue US Court provides charge for financing given prior to commencement of Chapter 11 proceedings but CCAA section 11.2(1) says The security or charge may not secure an obligation that exists before the order is made. Hartford Computer Hardware Inc. 2012 ONSC 964; Xinergy Ltd., 2015 ONSC 2692 Notwithstanding prohibition, Order made in US granting a pre-filing charge was recognized in Canada Orders granted but on basis that Dewar, J. not setting a precedent; granted only because no opposition; Applicants in foreign courts at COMI should make Canadian laws known to the foreign Court to prevent foreign proceeding from potentially unravelling due to Canadian law 17
Re IMRIS Third Recognition Order US Orders under Chapter 11 Sale Approval Motion Foreign representative brings motion for recognition of Sale Approval Order, Assignment of Contracts, Approval and Vesting Order Sales of Assets s. 36(1) CCAA; Assignment of Contracts s. 11.3(1) CCAA Orders granted by Dewar, J. 18
Questions? 19
Thank you and enjoy the Jets game. 20