An insolvent entity will often have one or more businesses that,
once separated from the insolvent organization or cleansed of their
existing liabilities, is quite attractive acquisition targets.
For this reason, insolvency of a commercial enterprise will
often lead to a court-supervised process for the sale of attractive
business lines in order to maximize recoveries for stakeholders.
The process can be highly formal, such as a court-approved,
multi-stage, sale process and auction. The process can also be
informal, where the assets in question are marketed under the
direction of a court-appointed receiver or monitor.
Insolvency practitioners are regularly approached by potential
acquirers who would like to have participated in a particular sales
process for the business and assets of an insolvent company, but
for a variety of reasons did not do so in the manner and on the
timelines approved by the court or established by the
court-appointed receiver or monitor. At that point, the sale
process has run its course and a winner has been selected.
The potential acquirer may be ready and able to execute a
transaction that could provide a much higher purchase price than
the winner in the sale process. However, late offers are regularly
Would-be acquirers ask, "how can it be fair to refuse to
consider my offer to acquire this business, when it is clearly
superior to any other offer available?" This is not an
unreasonable question in most non-insolvency contexts.
However, fairness in an insolvency context is a balancing act
and must be viewed from the perspectives of: (i) the insolvent
company seeking to sell its business or assets; (ii) the creditors
of that insolvent company; and (iii) the bidder who emerged as the
winner after following the required sale process and who has agreed
to acquire the business.
These are the perspectives of stakeholders that have a legal or
proprietary right in the property being sold. The late potential
bidder has no legal or proprietary interest in this context and no
legally recognizable right or interest that can be enforced or
considered by the court.
The late bidder is out of luck in most cases. The bidder's
hopes will rest with creditors who may wish to argue that a late
bid should be considered due to the higher potential recovery that
may be available.
Those who are interested in acquiring a potentially attractive
business that is owned by an insolvent company must actively engage
in any formal process established for the sale of that business.
Insolvency practitioners, such as lawyers or accountants, are often
a good source of early information on potential acquisition
opportunities in order to ensure that a potential acquirer does not
miss its opportunity.
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The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should be
sought about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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