Summary

Keywords

Bankruptcy and insolvency — Procedure — Whether reverse vesting orders are legal in Canada —Whether reverse vesting order improperly deprived creditors of rights and is legally impermissible under Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 — Whether the test for leave to appeal under Companies’ Creditors Arrangement Act should be modified for pure questions of law – Companies’ Creditors Arrangement Act, ss. 11, 13, 36.

Summary

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A Company began the development of a mining project. It signed a loan agreement with two secured creditors who held a minority of shares in the Company. Another group of shareholders collectively held 54% of the shares in the Company.

Following the secured creditors’ refusal to renew the loan, the Company initiated proceedings under the Companies’ Creditors Arrangement Act. The supervising court approved a two-phase process of call for submissions concerning the assets and companies, and it approved a Stalking Horse bid by the secured creditors. One potentially viable bid was identified during Phase 1, but it was found not viable at Phase 2. The Stalking Horse Bid was the only remaining bid.

The Company and secured creditors submitted a proposal for a reverse vesting order that included third-party releases from claims relating to the Company and its restructuring. The majority shareholders opposed the transaction. The Superior Court approved the transaction and issued the reverse vesting order and third-party releases. A judge of the Court of Appeal dismissed the majority shareholders’ application for leave to appeal.

Lower Court Rulings