Plan of compromise or arrangement (CCAA)
A plan of compromise or arrangement is the proposal a company under the Companies’ Creditors Arrangement Act puts to its creditors on how it will deal with its debts. If creditors agree by the vote the Act sets and the court sanctions it, it binds the company and the creditors.
A business in CCAA proceedings gets time to restructure, and the plan is where that restructuring is set out. You meet it as a creditor or a buyer when a company you deal with files. See how to buy assets from an insolvent company.
How the Act handles it
Sections 4 and 5 let the court order a meeting of unsecured or secured creditors, or a class of them, on a proposed compromise or arrangement. Under section 6(1), if creditors vote in favour by the majorities the Act sets, it may be sanctioned by the court and, if sanctioned, binds the company and all the creditors or the class. A class having equity claims is excluded from that vote unless the court orders otherwise. The Office of the Superintendent of Bankruptcy’s French-language page describes the plan as a proposal to creditors on how accumulated debts will be repaid.
What to check or ask
- How the claims are grouped into classes.
- Whether the plan pays any equity claim, which section 6(8) lets the court sanction only if the plan provides that all claims that are not equity claims are to be paid in full first.
- What the Crown, employee and pension plan conditions in section 6(3) to (7) require.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of Canada (Department of Justice)GovernmentCompanies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36
- 02Bureau du surintendant des faillites Canada (ISDE)GovernmentRestructuration de votre entreprise par l’intermédiaire de la Loi sur les arrangements avec les créanciers des compagnies (LACC)
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