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[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN CANADA]
permits (or other intangible assets) being preserved under the RVO structure? While still relatively new, Canadian courts have begun to deal with RVOs more frequently. In Forage Subordinated Debt LP v. Enterra Feed Corporation , the Alberta Court of King's Bench granted an RVO in the context of a receivership. The Court reaffirmed the use of an RVO as an extraordinary remedy and clarified the Court's authority in granting RVOs for receiverships, which is derived from the interplay of several provincial statutes. An RVO in a BIA receivership was approved for the first time at the appellate level in the 2024 British Columbia Court of Appeal decision British Columbia v. Peakhill Capital Inc. The Court emphasized that to determine whether and RVO will be granted, it must fulfill the purpose and object of the statutory scheme. RVOs can therefore be used as a remedy under the BIA if they further the BIA's objective of maximizing recovery for creditors. Following Peakhill , the Supreme Court of British Columbia further defined when RVOs were appropriate under the BIA in Aquilini Development Limited Partnership v. Garibaldi at Squamish Limited Partnership . The Court found that they are particularly appropriate when there is an absence of a viable alternative to preserve the value of a company's ongoing project in order to maintain the likely economic benefits for the stakeholders of the company. The framework originally outlined in Harte Gold Corp. Re, was applied recently in the Ontario Superior Court in Xplore Inc. (Re) . The Court notably established that RVOs can be approved under section 192(4) of the Canadian Business Corporations Act rather than strictly the CCAA or BIA due to the statute's broad and flexible restructuring purpose, similar to that of section 11 of the CCAA . Nonetheless, it was emphasized that RVOs should remain an extraordinary remedy.
The first denial of an RVO came from the Ontario Superior Court in In the Matter of the Companies’ Creditors Arrangement Act. In denying the RVO, the Ontario Superior Court addressed the unfairness to one of the creditors with a security interest in the equipment. It would have been unfair to accept a bid where the equipment would have been transferred to the residual corporation, especially when there was a less prejudicial bid available. Following this, the British Columbia Superior Court refused to grant an RVO in PaySlate Inc. (Re). The court provided guidance on the procedural and substantive requirements for RVO applications. The refusal to grant the RVO was the result of inadequate notice to affected creditors and an insufficient evidentiary record. Environmental Obligations and Priorities In 2019, the Supreme Court of Canada released its decision in the case of Orphan Well Association v Grant Thornton Ltd. , which held that certain environmental remediation obligations of an insolvent entity can and should be prioritized over and above the rights of secured creditors in the context of a closed oil and gas operation. More recently, the Alberta Court of Appeal released their decision in Qualex-Landmark Towers Inc. v. 12-10 Capital Corp . which saw them reverse the lower court decision that held that private citizens could claim a super-priority of environmental remediation obligations over and above other creditors. The Court of Appeal noted that the lower court judge had acted outside of his authority by using the common law to expand the availability of super-priority claims in a way that was incompatible with the legislation. Subsequently, the Alberta Court of King's Bench released their decision in Re Mantle Materials Group Ltd. The court held that restructuring charges, which would satisfy end-of-life
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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