Webinar: Target Canada bankruptcy protection with Toronto bankruptcy lawyer Russell Bennett
Toronto Lawyer Russell Bennett presents a webinar for the Credit Institute of Canada on Target Canada’s bankruptcy protection: How Canadian Suppliers Missed the Mark.
Target: is bankruptcy protection better than waiting five years?
Target Canada’s paltry two-year existence marks a new era in the expendability of people and goods and services to big box retailers. Legal counsel for Target Canada reported to the Commercial List Court in Toronto that it would have taken at least five years for their 133 stores across Canada to turn a profit. Was that too long to wait?
With over 17,000 Canadians losing their jobs, and millions of dollars of merchandise and services left unpaid, the decision to mothball the discount stores may have been hasty. On the other hand, why didn’t the successful US retailer test the Canadian market with a handful of stores first?
Left in the wake of liquidation sales were the unpaid suppliers, the unsecured creditors whose rights were crushed when the legal team chose to make liquidation their plan under the Companies’ Creditors Arrangement Act (“CCAA”), instead of a plan of reorganization, or instead of following the more creditor-friendly Bankruptcy and Insolvency Act (“BIA”).
Companies’ Creditors Arrangement Act versus Bankruptcy and Insolvency Act
In general, the BIA is used for less complicated restructurings that take 6 months or less. For more complicated restructurings that take more than 6 months, the CCAA is used, which is more similar to the US Chapter 11 of the Bankruptcy Code, because the initial stay, which is 30 days, may be extended indefinitely. So using the CCAA is not unusual.
However, trade creditors could have applied to the court to lift the CCAA stay and applied for a bankruptcy order under the BIA. They could have argued that the restructuring had no hope of success, or that Target acted improperly – going straight to liquidation instead of trying to restructure and formulate a plan, and in the weeks before making the filing, Target raised its prices, bought more inventory while it was aware of its insolvency.