Case information

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, RSC 1985, c. C 36 — Whether debtor companies can emerge from Companies’ Creditors Arrangement Act protection without a plan in their respect being accepted by creditors and sanctioned by the court?

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Proceedings were commenced under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C 36, in respect of companies involved in a mining project in Quebec. This led to an uncontested sale or investment solicitation process and an offer subject to a condition that a reverse vesting order be issued. Under the reverse vesting order, the offering companies acquire the shares of the insolvent companies, they assume secured debt, but claims of creditors and unwanted assets are transferred to a new non operating company before closing. The insolvent companies applied to the Superior Court of Quebec for an order approving the transaction and issuing the required reverse vesting order. Mr. Cantore, a shareholder and a creditor of royalties objected to the transaction and the reverse vesting order. The Superior Court of Quebec granted leave to enter into the transaction and issued the reverse vesting order. The Court of Appeal dismissed an application for leave to appeal.