Formal Restructuring under the BIA

What is

The Bankruptcy and Insolvency Act

If your business is facing financial trouble and cannot pay back the debt you owe, there are alternatives to filing for bankruptcy. Crowe MacKay & Company offers corporate restructuring services to help your business manage your debt under the Bankruptcy and Insolvency Act (BIA) using a Division 1 Proposal.

What is a Division 1 Proposal?

A Division 1 Proposal (Proposal) is a legally binding process governed by the BIA and administered by a Licensed Insolvency Trustee (LIT).

Unlike informal negotiations, a Proposal acts as a binding contract between you and your creditors. A Proposal is very flexible and tailored to your company’s specific financial circumstances. It often includes a deferral of time for payment, an offer to settle in full satisfaction at something less than 100 cents on the dollar, converting debt to equity, or a combination of all of these.

How Does a Division 1 Proposal Get Approved?

It’s common for debtors to approach their larger creditors in advance of filing the Proposal to seek their support. The majority of creditors holding at least two-thirds of the value of the claims must approve the Proposal. Once accepted by the majority of creditors, the court must approve it.

A Proposal accepted by the creditors and approved by the court is binding on all unsecured creditors regardless of their vote. It is also binding on secured creditors whose classes voted for the acceptance of the Proposal.

paying off debts

How Does a Proposal Benefit Me?

A Proposal offers flexibility to a company in financial distress as it provides a stay of proceedings preventing creditors from taking aggressive collection actions.

If your financial situation is particularly urgent, as it can take some time to formulate a viable proposal, there is an option to file a Notice of Intention to File a Proposal (NOI), which provides an immediate stay of proceedings against all creditors, for an initial 30 days (subject to certain requirements) and may be extended for up to six months subject to further court approvals.  During this time, the debtor remains in possession of its assets and operations while it works in good faith to formulate a Proposal.

When Should I Choose a Division 1 Proposal?

There are numerous provisions in the BIA that may impact a Proposal filing.  These provisions are designed to provide accountability and transparency to your creditors.  Once you start down the path of a NOI or Proposal, you must proceed to file a Proposal within the required time.  If you do not, or if the Proposal is not accepted by your creditors in sufficient numbers or otherwise approved by the court, a deemed bankruptcy will occur. It’s important you discuss your restructuring options with a LIT before deciding to file for a Proposal.

Discover Your Debt Restructuring Options

Have questions on debt solutions and debt restructuring in Vancouver or Surrey? Book a free consultation with our Licensed Insolvency Trustees by calling (604) 591 6181, emailing, or filling in the form below.

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