Please refer to the list of documents and information below to be brought to your first meeting with the trustee.
A corporation becomes insolvent when it reaches a stage where the debts of the corporation are no longer being paid in the terms agreed upon with the suppliers of the goods or services. It is not uncommon for a corporation to be insolvent for an extended period of time before the corporation files an assignment in bankruptcy, or make a proposal to its creditors.
Meeting with the Licensed Insolvency Trustee
When it becomes apparent that the corporation can no longer continue to carry on and an assignment in bankruptcy is one of the options to be considered, the initial meeting with a licensed insolvency trustee takes place. The normal information that is reviewed between the trustee and the shareholders/directors of the corporation would include the following;
• Recent financial statement available for discussion (either prepared internally or by external accountants).
• A list of all assets of the corporation showing the book value of the assets but also showing the cash value or current liquidation value of each asset.
• A list of all liabilities of the corporation broken into the following categories;
• Any leases for premses or equipment
- Those debts that are government claims (payroll deductions, GST, Ontario Sales Tax, WSIB, etc.)
- Those liabilities that are secured on the assets of the corporation (eg. a bank loan secured on accounts receivable or a mortgage on real estate).
- All unsecured trade debts.
- Debts owing to shareholders and other non-arms length parties (which are considered deferred creditors).
- Any liabilities which can result in the personal exposure to liability of a director or officer.
The initial meeting with the trustee will focus on the current cash flow from the operation of the business and it’s availability to meet current expenses. As an alternative to continuing in business, what cash would be raised if the business ceased and the assets were liquidated? Will there be sufficient cash raised in order to discharge all legal obligations of the business? In situations where goodwill is still present, the business may be sold as a going concern generating a higher cash value than liquidating the assets of the business. In the initial meeting, options other than bankruptcy: consumer proposal and refinancing will also be reviewed.
If the decision is made to proceed with bankruptcy, the trustee will normally prepare all required documents. This will consist of a Statement of Affairs (consisting primarily of a summary of the assets and liabilities of the corporation), an assignment for the general benefit of creditors (being the broad admission of the insolvency by the company), a resolution of the Board of Directors authorizing one person to sign all of the documentation necessary to place the corporation into bankruptcy and any other appropriate documents as required by law. The director who assumes the responsibility for signing all of the documentation necessary to file the assignment in bankruptcy will be given those sections of the Bankruptcy & Insolvency Act as are necessary for him to be aware of any duties that he might have with respect to the bankruptcy process. That director will have the obligations for full disclosure of all assets and liabilities and will be required to attend at the Office of the Superintendent of Bankruptcy to discuss the cause of the bankruptcy and history of the company with an Official Receiver and also attend a meeting with the creditors. The individual signing all of the documents with respect to the bankruptcy should be the most senior director available who is fully conversant with in all operations of the company.
During the Term of Corporate Bankruptcy
We would be pleased to discuss the ongoing events that take place during the bankruptcy with you at our initial meeting. Please give us a call to discuss your specific situation. The initial meeting is no charge. It’s purpose is to give you sufficient information for you to make an informed next move.
If you have any difficulties at any time throughout the bankruptcy, please contact the Trustee’s in office.