Reorganization under court order (CBCA s. 191)

In the Canada Business Corporations Act, “reorganization” means a court order made under section 241, an order under the Bankruptcy and Insolvency Act approving a proposal (see BIA proposal), or an order under another Act of Parliament that affects the rights among the corporation, its shareholders and creditors (s. 191(1)). You may meet the term when a target’s articles or directors have been changed by a court order.

What the order can do

• Amend the articles by the order, to make any change that an amendment under section 173 could lawfully make (s. 191(2))
• Authorize the issue of debt obligations, convertible or not, and fix their terms (s. 191(3))
• Appoint directors in place of, or in addition to, the directors in office (s. 191(3))

What to check

Articles of reorganization go to the Director, and the reorganization takes effect on the date shown in the certificate of amendment (s. 191(4) to (6)). A shareholder is not entitled to dissent under section 190 if the articles are amended under section 191 (s. 191(7)). Ask for the order, the certificate and the current articles; the answer on selling a business out of insolvency covers the wider setting. Ontario’s Business Corporations Act, s. 186, uses the same word for a court order under its section 248 and for orders under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act (s. 186(1)), and s. 186(6) removes dissent under its section 185 in the same way. This entry covers the federal and Ontario Acts; check the rules where the corporation is incorporated.