Restructure your corporation under the CCAA

The Canadian Creditor’s Arrangement Act, (“CCAA”) is federal legislation that provides insolvent companies the opportunity to restructure their affairs, in doing so, it provides the company the ability to avoid bankruptcy while opening dialogue with its’ creditors.

To start the dialogue the troubled company seeks an order from the court under the CCAA. This Order provides an immediate 30 day Stay of Proceedings* against the company affording the company the time to prepare its Plan of Arrangement.

A Plan of Arrangement is an offer from the company to its creditors in which the creditors are offered a reduced amount, on the outstanding debt, in exchange for the company paying a lump sum of cash, or entering into a payment plan. The CCAA offers significant flexibility and not all plans involve a payment. Plans can include an offer of shares, possessions or cash or a mixture of the three.

The troubled company has the ability to exclude a specific creditor or group of creditors from its Plan, and can even include the shareholders as creditors. There is no limit to what the Plan could entail.

In order to be eligible under the CCAA, the company must be:

  1. a Canadian company; or,
  2. a foreign company with assets in Canada or conducting business in Canada; or,
  3. an income trust;

The company must be insolvent or have committed an act of bankruptcy and the company must have in excess of $5 million in debt.

After receiving the Plan of Arrangement the creditors will meet to vote on acceptance of the Plan. In order to be accepted, and therefore binding on all the creditors in that class, 2/3rds of the creditors, by dollar value, must approve the Plan. If the creditors don’t immediately approve the Plan it can be altered by negotiation between the creditors and the company until all the necessary changes are made to have it approved.

If the creditors and the insolvent company cannot come to an agreement the Plan is rejected and the troubled company loses the protection of the Stay of Proceedings, which ultimately would result in the insolvent company filing for bankruptcy under the Bankruptcy and Insolvency Act (“BIA”). From a creditor perspective, an insolvent company filing for bankruptcy would be the least beneficial option available.

*Stay of Proceedings is the halting of all legal and collection actions by the creditors against the insolvent company.

Thank you for your donations!

Thank you everyone for your generosity, donations and your help in making the Winter Clothing Drive a huge success.

The clothes, footwear and accessories were graciously accepted by St. Mary’s Place, the House of Friendship, and several individuals living on the streets and often seen around downtown Kitchener. One individual, Anita, was overcome with emotion when we gave her a pair of winter boots, some clothes and a new wagon in which to carry all her stuff. The Rabideau Law Angels thank you. A big thanks to my wife Christine for this great idea.

Restructure your Corporation & Return to Profitability!

Whether you are a high profile company, such as Air Canada, or a tradesman operating through a numbered company, ex: Bob’s Tiling, your outstanding tax, debt and supplier obligations have the ability to derail your hard earned business in an instant and leave you personally liable; affecting your home, your family and your livelihood.

If this sounds similar to you, rest assured knowing that there are options available which can help restructure your company’s outstanding debt obligations ensuring the survival of your business while protecting the life style you have come accustomed to living.

In Canada, insolvent* companies have three legislative options available to them in order to restructure their outstanding debt obligations.

The first is The Companies’ Creditors Arrangement Act (CCAA). This option is the usual legislation insolvent companies with outstanding debts utilize. However, the CCAA is only for companies with more than $5 Million in outstanding debt.

Doesn’t sound like you and thankfully so, then the Bankruptcy and Insolvency Act (BIA) is for insolvent companies with less than $5 million in outstanding debts. A corporate restructuring under the BIA is a less costly measure than an arrangement under the CCAA, and is normally used by small to mid-sized businesses.

The third option is to file a plan of arrangement pursuant to the Canada Business Corporations Act (CBCA). Arrangements under the CBCA are very limited as only certain companies meet the very specific requirements.

Beginning in January, my invitation to you is to check back with Rabideau Law as we will examine the above mentioned options and deal with specific case studies which may be applicable to your business.

*Insolvency is defined as the inability of a company to pay its bills, debts and other financial obligations.

Winter Clothing Drive

Join the Angels

As part of our holiday initiatives, Rabideau Law is pleased to announce that we will be collecting new and gently used clothing to donate to local families and charitable organizations including St. Mary’s Place and The House of Friendship.

Donations can be delivered to Rabideau Law at 55 King Street West, Suite 700, Kitchener. Accepting donations  until December 14th

Do I Have To Pay My Debts?

Time limitation on collecting a debt in Ontario

In Ontario, an unsecured creditor has a legal right to collect on an unpaid debt no later than two years from the date of the last activity on the account. Unsecured creditor means a creditor that has not registered a mortgage or a lien on a piece of property such as a house or car, a credit card is normally an unsecured creditor. Last activity means the date of the last payment, even a partial payment, or the date the debtor last acknowledged owing the debt to the creditor.

Therefore, the debt does not have to be repaid if you have not made a payment on the credit card for more than two years and they did not start a legal action against you within that two year time period.

This, however, will not stop all actions by debt collectors and collection agencies. Collectors will continue to contact you and they may threaten legal action as they are aware that most Ontarians are oblivious to this time limitation. In such a case, inform the Collector never to contact you again and under no circumstances should you acknowledge that you owe the debt to the creditor or the collector as this will restart the two year time period.

Further, Collectors still have the ability to report the unpaid debt to credit reporting agencies, such as Equifax and Trans Union. This unpaid debt will remain on the debtor’s credit report for six years from the date of the last activity, thereafter it will be automatically purged by Equifax and Trans Union.

If you see an unpaid debt or discrepancy on your credit report, you can challenge the discrepancy by completing the attached Consumer Credit Report Update Form and providing all the relevant documents:

  1. photocopies of all necessary documents
  2. receipts
  3. legal documents
  4. proof of current address
  5. photocopies of two pieces of identification

What are the fees?

For more information on pricing, please contact our office.

Waterloo Region Housing Market Outlook 2013

The Canada Mortgage and Housing Corporation (CMHC) held the annual Waterloo Region Housing Outlook Seminar Thursday November 22nd at Bingemans in Kitchener. The seminar examined where the local housing market is heading and discussed the challenges to be encountered in 2013.

The highlights of the seminar were:

  1. Housing demand will increase in 2013 as the local economy and the overall economy will pick up
  2. Resale housing sales will improve in the second half of 2013
  3. Resale prices will remain relatively flat through 2013 as the market continues to balance supply and demand
  4. Housing starts will move up from the end of 2012
  5. Low mortgage rates and household growth will support demand

I would add:

  1. Mortgage rates will continue to remain low with only slight increases overall
  2. Consumer debt will continue to be a concern as Canadian debt loads continue to increase at an alarming rate
  3. Resale housing sales will increase as mortgages, which were registered when mortgage rates declined rapidly in 2008, will mature in 2013
  4. First time home buyers will continue to spark sales of houses and condos with a purchase price of less than $300,000.00, however, less first time home buyers will enter the market due to tightened mortgage lending rules.
  5. Multi person housing, such as duplex, condos and houses with an in-law suite or two master bedrooms will increase as baby boomers move into households with their adult children.

In memory of Ed Devlin

In memory of Ed Devlin, client and friend of Rabideau Law, you will be missed. Our thoughts and prayers are with you Sheila.

Powers of Attorney in Ontario

Originally authorized under the Powers of Attorney Act, R.S.O. 1990, c. P.20, a power of attorney is a legally binding document in which one person (the principal or grantor) appoints another person or persons (the attorney or substitute decision maker) to act on their behalf in the event they are unable to make their own decisions.

The Powers of Attorney Act only provided a mechanism for appointing substitute decisions makers with respect to property and has been substantially repealed. It was not until the enactment of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (“SDA”), which came into force on April 3rd, 1995, that it became possible to also name substitute decisions makers with respect to personal care decisions.

The SDA preserves certain powers of attorney created under the old legislation. They must have been executed before April 3rd, 1995 or within six months after that date. They must also: contain a provision expressly stating that it may be exercised during any subsequent legal incapacity of the grantor; have been executed in accordance with the Powers of Attorney Act; and otherwise be valid.

Powers of Attorney for property, unless restricted as to their use, allow the attorney to do on behalf of the grantor anything the grantor could do except make a will or other form of testamentary disposition. For example, property decisions would include such financial issues as: bank deposits and withdrawals, paying bills, making or changing investments, buying, selling or refinancing a home, making payments to or on behalf of dependants, and filing income tax returns.

Personal care is defined in the SDA and includes decisions about health care, shelter, clothing, nutrition, hygiene, and safety.

In Ontario, there are currently three different types of power of attorney: two for property and one for personal care. These include: a general power of attorney for property, a continuing power of attorney for property, and a power of attorney for personal care.

A General Power of Attorney for Property is ordinarily used if a person wants to appoint someone to act on their behalf for a specific period of time or for a specific task. This type of power of attorney ends upon completion of the time or the specific task, or if the grantor becomes mentally incapable.

A Continuing Power of Attorney for Property is used where a person wishes to appoint someone to act on their behalf while they are mentally capable as well as to act on their behalf in the event of mentally incapacity. These powers of attorney can be for a specified period or task or they can be all encompassing. Both types of powers of attorney for property can be effective on the date of signing or on the happening of a specified condition other than incapacity which can only be a condition for continuing powers of attorney for property.

A Power of Attorney for Personal Care enables the grantor to appoint an Attorney for Personal Care to make personal care decisions in the event the grantor becomes incapable of making their own personal care decisions. Incapacity can be either mental or physical depending on the circumstances. For persons who have specific wishes regarding their personal care, these can be included in the power of attorney for personal care document. These wishes can also be specified in a separate advance directive, usually prepared in consultation with a doctor or other health care provider, and incorporated by reference into the power of attorney for personal care.

Power of attorney documents confer significant authority on the substitute decision maker. Caution should be exercised in selecting these persons, especially with respect to unrestricted continuing powers of attorney for property that are effective on signing.

The requirements for a valid power of attorney under the SDA are:

  1. The donor must be at least 18 for powers of attorney for property, and at least 16 for powers of attorney for personal care.
  2. The donor must be capable of granting a power of attorney. Each type of power of attorney. Each type of power of attorney has its own guidelines for assessing capacity with powers of attorney for property having the higher standard.

    For powers of attorney for property a person is capable if he or she:

    • knows what kind of property he or she has and its approximate value;
    • is aware of obligations owed to his or her dependants;
    • knows that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will, subject to the conditions and restrictions set out in the power of attorney;
    • knows that the attorney must account for his or her dealings with the person’s property;
    • knows that he or she may, if capable, revoke the continuing power of attorney;
    • appreciates that unless the attorney manages the property prudently its value may decline; and
    • appreciates the possibility that the attorney could misuse the authority given to him or her.

    For powers of attorney for personal care a person is capable if he or she:

    • has the ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and
    • appreciates that he or she (the donor) may need to have the proposed attorney (the donee) make decisions for him or her.
  3. Both powers of attorney for property and personal care must be executed in the presence of two witnesses. A witness cannot be the attorney or the attorney’s spouse or partner, a the grantor’s spouse or partner, a child of the grantor or a person whom the grantor has demonstrated a settled intention to treat as his or her child, a person whose property is under guardianship or who has a guardian of the person, and a person who is less than eighteen years old.

Powers of attorney for property and personal care can both be revoked by the donor if they have the capacity to do so.

Top 15 questions about Powers of Attorney

What is a Power of Attorney?

It is a legal document which authorizes another person to act on your behalf.

Is there more than one type of such a document?

Yes. Ontario law allows for three types. They are:

  1. A Continuing Power of Attorney for Property
  2. A Non-Continuing Power of Attorney for Property
  3. A Power of Attorney for Personal Care

What is a Continuing Power of Attorney for Property?

A It is a written legal document in which you give another person (your “Attorney”) the power and authority to make decisions concerning your property and financial affairs. It is called “Continuing” because it will continue in effect even if at a later time you should become mentally incapable of making these decisions on your own behalf.

What is a Non-Continuing Power of Attorney for Property?

It is a written legal document giving the same power and authority as the above-mentioned Power of Attorney. However, as the name suggests, it would not continue in effect should you subsequently become mentally incapacitated. This type of document is often used for a limited, specific purpose such as enabling another person to complete the legal paperwork for the sale of your home in the event that you are away elsewhere at the time.

What is a Power of Attorney for Personal Care?

A Power of Attorney for Personal Care is a written legal document in which you give another person (your “Attorney”) the power and authority to make decisions relating to your medical and personal care in the event that subsequently you are unable to make these decisions on your own behalf.

Why should I have a Continuing Power of Attorney for Property?

With such a Power of Attorney you decide who will step in with the required legal authority to make financial decisions if you become unable to do so. This document allows you to select the best person available to serve as your Attorney and in doing so you eliminate any uncertainty that might otherwise arise concerning which person should fill this role if you become unable to make these decisions.

If you do not have this Power of Attorney, a member of your family or someone else will be put to the time, trouble and expense of having to apply to the Office of the Public Guardian and Trustee of Ontario or, in some cases, to the Court to be appointed as Guardian of Property to act on your behalf. Needless to say, this is a legal proceeding to be avoided whenever possible. If you have a Power of Attorney for Property, you can choose who will act on your behalf. If you don’t have one, the Government or the Court chooses for you.

Why should I have a Power of Attorney for Personal Care?

This type of Power of Attorney enables you to take control of your future medical and personal care in the situation where you are no longer able to make such decisions. By choosing as your Attorney someone familiar with your situation and your wishes, you gain considerable comfort and assurance knowing that proper decisions will be made on your behalf.

You and your family also secure some peace of mind. Knowing your wishes in advance can relieve your family members of the otherwise heavy and stressful burden of making life and death decisions without knowing what you would have wanted. This can also spare them the guilt feelings which often flow from these difficult circumstances.

Who can I choose as my Attorney when making a Power of Attorney?

Ontario law permits you to appoint any person you wish including someone who resides outside Ontario. However, the person chosen must be at least eighteen years of age to act as your Attorney for Property and at least sixteen years of age to act as your Attorney for Personal Care .

Can I appoint more than one person to act be my Attorney?

Yes. You can have more than one Attorney, whether it be in a Continuing Power of Attorney for Property or a Power of Attorney for Personal Care. If you choose more than one person you can determine whether they must make decisions together in agreement with one another (acting ”jointly”) or whether any one of the persons chosen will be entitled to make decisions with or without the approval of the other(s) (acting “severally”). Where you choose only one attorney it is advisable to select a second person to serve as a substitute or “backup” in the event that the first person chosen is unable to act as your Attorney for any reason.

What questions should I ask myself when choosing someone to act as my Attorney?

  1. How close to you personally is the person you are considering? If you are married and your spouse is up to the task, then he or she is the most likely choice. If not, then another close family member such as a sibling or an adult child would probably suffice.
  2. How close in terms of distance or proximity is the person you are considering? For reasons of convenience it is preferable to have your Attorney who lives nearby rather than on the other side of the country.
  3. Can the person you are considering be counted on to act properly and make decisions on your behalf which you would approve of if able to do so? When choosing an Attorney for Property you must be satisfied that the person chosen will prove to be honest, conscientious and capable of handling your finances.

In the case of an Attorney for Person Care you should feel confident that the person has both the level-headedness and sensitivity to handle the extremely difficult, sometimes delicate, decisions involved in dealing with serious or terminal illness.

What powers and authorities will my Attorney for Property have?

Unless you put specific restrictions in place, your Attorney for Property will have the same freedom to make decisions and take actions concerning your property and financial affairs that you would have, if able. Paying bills, signing documents and making investments are but a few examples of what your Attorney would be empowered to do on your behalf. There are two things which your Attorney for Property is not permitted to do on your behalf. The first is to make a new Continuing Power of Attorney for Property; the second is to make a Last Will and Testament.

Am I free to cancel or change a Power of Attorney after I give it?

Yes. Provided your are mentally capable, you can cancel or revoke a Power of Attorney previously given and have a new Power of Attorney prepared and signed reflecting any changes you wish to make.

Will my Attorney be entitled to receive payment or compensation?

Yes. Unless your Power of Attorney states otherwise, Ontario law gives your Attorney the right to receive payment for work done on your behalf. Payment is awarded pursuant to a fee schedule set by statute. However, where you choose a close family member as your Attorney, normally, they are serving out of natural love and affection for you. In this case you would provide in your Power of Attorney document that no compensation be paid to your Attorney.

Are there certain legal requirements which must be complied with in order to create a legal and valid Continuing Power of Attorney for Property and Power of Attorney for Personal Care?

Yes. There are and it is essential that these legal requirements be observed. Failure to follow them can result in a Power of Attorney being rendered null and void and of no legal effect. This can result in serious and, in some cases, catastrophic consequences.

Contract Law in Canada

The following is a general description of contract law in Canada, except Quebec, and the remedies for breach.

General

A contract is a promise or set of promises, the breach of which gives a remedy or the performance of which creates a legally recognized obligation. Contract law in Canada is, for the most part, governed by the common law of the provinces and territories or, in the case of Quebec, by the civil law as set out in the Civil Code of Quebec. Originating in, and adopted from, 19th century England, the common law affecting contracts has continued to develop over the years through decisions of the Canadian courts. Certain types of contracts will be impacted by statute, and the enforcement of all contracts will be subject to statutory limitation periods.

Formalities

Except for certain contracts that must be in writing or signed under seal, Canadian law recognizes the enforceability of promises, oral or written, provided there is “consideration” flowing from the promisee to the promisor or a mutuality of promises. Courts look to the parties’ bargain to determine an objective or manifest intent of the parties to be bound. Courts will also determine whether there has been an “offer” and “acceptance” based upon the type and transmission of communication between the parties.

Overview of Remedies

The law provides a multitude of remedies against those who breach their contracts. In addition to self-help remedies such as rights of set-off or termination for anticipatory repudiation, contracting parties have access to the courts for enforcement or obtaining redress in respect of agreements that are not being honoured. However, with the exception of certain types of equitable remedies (such as specific performance, injunctions or an accounting for profits), the most common and usual remedy for breach of contract will be an award of damages.

Damages

The general rule for recoverable loss in breach of contract cases is that the courts will award damages to place the aggrieved parties in the same position they would have been in had the contract been performed. Damages for mental distress or hurt feelings are not typically awarded, although Canadian courts have shown a willingness to award punitive damages in recent years for certain types of breached contracts (for example, employment and insurance). Owing in part to a reluctance of courts to award punitive damages for the breach of private agreements and the fact that most breach of contract cases will be heard by a judge and not a jury, the vast majority of broken contracts will result in damages governed by the general rule mentioned above.

Equitable Remedies

As a general principle, Canadian courts will not compel the performance of a contract. However, where it can be established that damages will be an inadequate remedy, Canadian courts have the power to order specific performance of a contract or to issue injunctions preventing the temporary or permanent breach of an agreement. In addition to, or in lieu of, this type of equitable relief, courts may also award damages but these are not awarded on the same principles as those governing common law damages. For example, damages might be awarded instead of an injunction where the injury that will result from a future unlawful action (such as a threatened trespass on land) can be adequately compensated for in damages. The breach of certain types of contracts (for example, distribution of licensed goods) may also entitle the aggrieved party to elect an accounting of the breaching party’s profits.

Liquidated Damages

In some contracts, the parties may choose to specify a liquidated sum of damages in the event of breach. The caveat here is that the specification of liquidated damages cannot be a penalty. If the liquidated damage clause is enforceable, it will avoid the need for the aggrieved party to prove their actual damages. In the absence of a liquidated damages clause, the aggrieved party will be entitled to damages directly resulting from the breach and consequential damages in the minds (or which ought to have been in the minds) of the parties at the time of contract.

Excuses for Non-Performance

Excuses for non-performance can include mistake (with or without rectification), misrepresentation, unconscionability, fraud, illegality or rendering the contract void for reasons of public policy. As mentioned above, certain contracts such as consumer agreements can be set aside for statutorily prescribed reasons. In some cases, performance of the contract may not be possible because events which neither party had anticipated have rendered the agreement radically different from what was undertaken by the contract.

Other Restrictions

Statutory limitation periods will impact upon enforceability depending upon when the breach occurred. The ability to enforce may also be affected by waiver or estoppel although most commercially written contracts will contain express provisions dealing with such matters. The assertion of collateral contracts affecting the primary contract may also affect enforcement.

If a contract to which you a party has been breached or if you are concerned that it will be breached contact Rabideau Law to better understand and protect your legal rights.