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Legal Guide

A corporate debtor can seek protection from its creditors by making an application under the CCAA. The CCAA is not a detailed code like the BIA, but is a relatively brief flexible statute that is driven by court orders. Because of its flexibility, the CCAA has been used in most complex insolvencies for large Canadian corporations.

In order to qualify for protection under the CCAA, the debtor corporation must be insolvent and have at least $5,000,000 of indebtedness (secured/unsecured). When a court grants the debtor corporation protection under the CCAA, the court also appoints a Monitor to oversee the operations of the corporation during CCAA protection and to report to the court on the corporation’s activities. The initial court order in a CCAA proceeding typically establishes a stay of proceedings against the debtor in order to maintain the status quo while the debtor formulates a restructuring plan. The CCAA may also be used to facilitate the sale of a debtor company’s assets. However, its primary and overriding purpose is to allow a debtor company to propose a plan of arrangement or compromise to its creditors. Any plan proposed by a debtor to its creditors must be approved by all affected classes of creditors by a vote of 50% in number and 2/3 in value of the indebtedness. The plan must also be sanctioned by the court.

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