A Divided Court Dismisses CRA Appeal And Upholds CCAA Super-Priority Charges

Yesterday, the Alberta insolvency community breathed a collective sigh of relief as the Alberta Court of Appeal issued its long-awaited decision in Canada v. Canada North Group Inc.1

The majority decision confirms the power of the Court to grant charges ("Super-Priority Charges") pursuant to the Companies' Creditors Arrangement Act (the "CCAA") in favour of interim lenders, restructuring professionals and directors with such charges having priority to the company's assets ahead of the deemed trust claims ("Deemed Trust Claims") of the Crown arising from the Income Tax Act, the Canada Pension Plan and the Employment Insurance Act (collectively, the "Fiscal Statutes").

Without Super-Priority Charges, companies that might successfully restructure would doubtlessly be driven to liquidate. Successful restructuring generally requires interim financing to allow a company with cash flow issues to continue operations with a view to maximizing value for all stakeholders. Interim lenders, as well as insolvency professionals, who rely on Super-Priority Charges to secure payment would be unlikely to advance credit in a restructuring if indeterminate Deemed Trust...