Expertises connexes

Corporate reorganization

When a company’s financial or structural needs change, often because of its growth, adjustments to its organization may be necessary. A corporate reorganization may take the form of a merger of corporations, the creation of a family trust or the issuance of new shares, to name only a few.

In the face of these important organizational changes, it may be necessary to review certain corporate documents, including the shareholder agreement. Renowned lawyers from the firm Bernier Fournier can guide you as to the steps to take in the event of a corporate reorganization. In particular, they will be able to adapt the different contracts and agreements according to the changes you wish to make to your company. They will also be able to advise and guide you as to your legal obligations as well as your business decisions.

Corporate restructuring

Incorporated companies have several means to anticipate the end of their activities and thus protect the interests of their employees, directors and creditors.

Small and medium-sized corporations

Under the Companies’ Creditors Arrangement Act, a large corporation may, under certain conditions, apply to the court to suspend its creditors’rights in order to be able to restructure itself and thus continue its operations. This Act has been used as part of the restructuring of several large, well-known companies, such as Air Canada, Stelco, Boutiques San Francisco and Quebecor World. Recourses are also available to smaller corporations to encourage their rehabilitation and to avoid the liquidation of their assets under the Bankruptcy and Insolvency Act.

Purpose of the Companies’ Creditors Arrangement Act

The legislator, through the adoption of this Act, wanted to promote the restructuring of companies under judicial supervision in order to allow the continuity of their operations and to avoid all the harmful consequences related to the closing thereof. In short, this allows the companies concerned to benefit from a second wind and avoid having to avail themselves of the bankruptcy process.

Among the procedures to follow is the filing, with the official receiver, of a proposal (section 62 (1) of the Bankruptcy and Insolvency Act) or of a notice of intention to make a proposal to its creditors in the insolvent person’s locality (section 50.4 (1) of the Bankruptcy and Insolvency Act).

It is also possible to carry out a restructuring even if the company is not in a state of critical debt. Fluctuations of the market and of financing, lawsuits and changes in administration or shareholding are all factors that can make restructuring necessary. As a result, many legal fields are involved since corporate restructuration has an impact on corporate taxation, but also on the company’s employees.

Layoffs as part of a corporate restructuring

Sometimes layoffs may be necessary to allow the business to survive. Even in these cases of lawful dismissals, the employer will have to consider every legal and financial implications in relation to labor law.

Effects of corporate restructuring

The restructuring provides funds to enable the restart of operations by temporarily suspending the right of creditors to seize the assets of the business, the whole, under the supervision of an officer appointed by the court.

In addition, the following operations may be necessary:

  • Recovery of debts (accounts, contracts, etc.);
  • Negotiation of settlements relating to the termination of contracts;
  • Strategic sale of an asset in difficulty;
  • Acquisition or merger with a competitor;
  • Layoffs and downsizing.

In conclusion, restructuring accompanied by a formal insolvency procedure provides protection for companies, a credible supervision for the creditor’s protection and a flexibility to carry out the reorganization of the company, notably by allowing the cancellation of certain leases.