Business Bankruptcy in BC

Dealing with debt issues as a business owner can be overwhelming, and many people don’t know what their responsibilities, rights, and remedies are when it comes to dealing with debts incurred through their business operations. A Licensed Insolvency Trustee can help you navigate these challenges and get a plan to solve debt problem that you may be facing both as a business, and as an individual.

Read on to learn more about how business bankruptcy can be a viable option to get debt relief, and when business bankruptcy alternatives may be a better solution for you and your business.

How Can a Licensed Insolvency Trustee Help my Business?

A Licensed Insolvency Trustee can help your business because in Canada they are the only professionals empowered by the Federal Government to help both individuals and businesses legally restructure and write-off debt. For businesses, these insolvency options include restructuring through the Companies’ Creditors Arrangement Act, receivership, Division 1 Proposal, or bankruptcy.

If you think your business may be in financial trouble, here are some of the areas a Licensed Insolvency Trustee can help you assess and evaluate:

• Financial viability of the business and opportunities for turnaround
• Cashflow and financial statements of company
• Specific creditors the business owners should be aware of
• Pros and cons of restructuring the business

If you are a creditor with an interest in a business, a Licensed Insolvency Trustee may also help you review the business operations, viability and receivership appointments.

What is Business Bankruptcy?

Business bankruptcy is a legal debt solution that business owners may consider when a business cannot pay its debts, and business owners should also consider a Division 1 Business Proposal as an alternative to business bankruptcy.

• Before filing a bankruptcy or Proposal it’s important for business owners and stakeholders to understand the complexities of these processes, including all potential liabilities and repercussions of both unique options.

Bankruptcy for a Sole Proprietorship or Partnership

If your business is set up as a sole proprietorship or partnership you are not legally separated from your business – essentially the assets and debts of your business are also your personal assets and debts.

A business bankruptcy in this case would amount to a personal bankruptcy, or bankruptcy may be avoided entirely if you (the business owner) file a Consumer Proposal instead.

• Filing a personal bankruptcy (or Consumer Proposal) to deal with business (and personal) debts is a relatively straight-forward process.
• You are not required to shut down your business as part of these solutions.

The first step in the bankruptcy process is to meet with a Licensed Insolvency Trustee – there is no requirement for you to consult with a lawyer or accountant to start a bankruptcy.

How Do I Qualify for a Consumer Proposal? Learn More

Bankruptcy for a Corporation or Limited Company

If your business is incorporated, then by law it is considered its own legal entity. Many people think that by setting up a limited or incorporated business they are fully separating themselves from their business assets and debts, but that is not always the case.

Even if your business is structured as a corporation or limited company there is still a personal liability created for certain debts, such as money owing to employees for wages, and to Canada Revenue Agency for GST debt or payroll source deductions.

• Filing a bankruptcy for your corporation does not end the business’ existence; companies are not automatically dissolved because of a bankruptcy filing.
• However, unless the bankrupt corporation is able to later repay all the debts it owed at the time of the bankruptcy filing, it will ultimately cease to operate.

Learn More About Debt Solutions for Having Government Debts Forgiven

What Are the Main Steps in a Corporate Bankruptcy?

The following is a very basic overview of the key steps for business owners who want to file a business bankruptcy. It’s important to remember that a personal bankruptcy filing will generally not have the same steps involved:

1. Meet with a Licensed Insolvency Trustee

To file a corporate (or personal) bankruptcy you will first need to meet with a Licensed Insolvency Trustee to discuss and evaluate your situation. Generally, this first meeting will be to understand:

• The average revenue and profits of the business
• Who the business owes money to, and how much is owed
  • Whether any personal guarantees have been signed by directors or stakeholders
• Who the directors, officers and other stakeholders of the company are

The Licensed Insolvency Trustee will explain the general process of business bankruptcy to you and ensure that you fully understand the requirements.

2. Sign the Corporate Bankruptcy Documents

If a decision has been made to proceed with a business bankruptcy, the Licensed Insolvency Trustee will prepare official bankruptcy documents for you to sign.

Once you have read and signed all the official business bankruptcy documents the bankruptcy will be registered and your creditors will no longer be able to pursue you for debt payments or continue to attempt collection actions.

3. Complete the Corporate Bankruptcy Duties Required

 Some obligations may be required of the business owner. Some of these duties include:

• Attending a meeting of your creditors
  • Your Licensed Insolvency Trustee will hold a meeting of your creditors within three weeks of the date of the business bankruptcy
  • This meeting gives opportunity for claims of creditors to be reviewed, and for creditors to vote on some decisions that may need to be made
• Providing information to/help the Licensed Insolvency Trustee
  • You may need to provide the Licensed Insolvency Trustee general information about, or assistance with any assets that may be sold under the bankruptcy, or information about the company’s creditors

Once the administration of the business bankruptcy has been completed and there are no further duties required of the Licensed Insolvency Trustee, the Trustee will then apply to the court to be discharged (released), this essentially closes the bankruptcy file and there is nothing else to be done on the part of the business owner or the Trustee.

We understand that the decision to wind down a business that is struggling financially can be difficult and emotional. Connect with a local Licensed Insolvency Trustee to discuss your situation, get more information about how to manage business debts, and evaluate all possible debt solutions available to you.