The Chartered Insolvency and Restructuring Professional (CIRP) is a dedicated business advisor
Businesses operate in a highly competitive environment, which means that financial problems can arise from any side. The Chartered Insolvency and Restructuring Professionals (CIRP) can become a business advisor to help manage business risks more effectively.
A supportive, experienced, trustworthy and objective professional
Whatever the cause - losing a large contract or client, suffering an adverse legal judgment, having insufficient access to financing or unimpeded growth - any business can run into trouble. More often than not, these situations happen slowly, over time. Being able to identify early signs of impending financial difficulties puts you one step ahead in preventing them or minimizing their impact on your business and personal life.
Whether a company is stressed, distressed or on the brink of collapse, a CIRP can provide advice on the options available to restructure the organization to become viable and avoid bankruptcy or liquidation.
Through close contacts developed over time with most stakeholders, including bankers, lawyers, major creditors and tax authorities, a Licensed Insolvency Trustee who is also a CIRP has developed credibility and trustworthiness that is essential in the performance of statutory duties and the ability to assist with the appropriate resources.
Bankruptcy and Insolvency Act and Companies' Creditors Arrangement Act
The Bankruptcy and Insolvency Act (BIA) and the Companies' Creditors Arrangement Act (CCAA) are two of the most commonly used statutory tools to which a CIRP will have access in order to put the insolvent company back on track.
A Licensed Insolvency Trustee is the only professional licensed to act under these legislations.
Such a formal proceeding offers greater flexibility in restructuring. It also has the added benefit of providing a company in financial difficulty with a stay of proceedings which will provide the needed "breathing room" to formulate a plan of arrangement or proposal to its creditors. The company is protected from certain actions creditors might take to collect previous amounts owing for goods and services, including loans or similar debts, delivered prior to the formal proceeding.
In a formal proceeding, a company can implement restructuring initiatives as noted below:
- revising lease terms with landlords or disclaiming leases;
- disclaiming contracts;
- selling assets (outside the ordinary course of business); and
- reducing labour force or negotiating new labour agreements.
Certain claims against directors of an insolvent company may also be compromised during such a formal process.
While implementing its restructuring initiatives, the company will work to develop a plan of arrangement (CCAA) or a proposal (BIA) to its creditors. The plan of arrangement or proposal is a formal agreement that the company is presenting to its creditors on how it intends to deal with debt it owes at the time of entering into the proceeding.
Once this agreement is reached, approved and executed, the insolvent company will be solvent and its business' viability restored as a going concern. A win-win scenario.
However, when a company is so overwhelmed with financial problems and/or an agreement cannot be achieved with creditors, bankruptcy may be the only available solution.
Bankruptcy suspends the steps taken by the creditors against the company, and provides a framework to orderly liquidate its assets, generally improving the returns to its distressed creditors. A Licensed Insolvency Trustee is tasked with authority and responsibility for carrying out the liquidation and must adhere to the Bankruptcy and Insolvency Act.
The use of these legislative solutions requires professionalism, trustworthiness and objectivity, qualities for which a Licensed Insolvency Trustee with the CIRP designation is valued and recognized.
In addition, in some cases, a less formal proceeding can be an adequate substitute to using formal insolvency solutions.