Companies’ Creditors Arrangement Act (CCAA): Filing, Stay, and Plan

The Companies’ Creditors Arrangement Act is a Canadian federal statute that lets a large insolvent corporation freeze creditor actions and reorganize its debts under court supervision instead of being forced straight into liquidation.¹ Cited as R.S.C., 1985, c. C-36 and known as the CCAA, it is available only to companies (or affiliated groups of companies) with total claims exceeding $5 million.² The point of the Act is to give a struggling business court-protected room to negotiate with creditors, sell what it needs to sell, and emerge as a going concern — usually a better recovery for everyone than a straight bankruptcy would produce.

Who Can File Under the CCAA

Two conditions have to be met. Total claims against the company, or against the company together with its affiliates, must exceed $5 million. The Act treats companies as affiliated when one holds securities carrying more than 50% of the voting rights that elect the other’s directors, and the affiliated companies’ debts are added together to test the threshold.²

The applicant also has to be a “debtor company” under the statute. That means it is bankrupt or insolvent, has committed an act of bankruptcy under the Bankruptcy and Insolvency Act (BIA), or is being wound up under the Winding-up and Restructuring Act because of insolvency.³ Courts examine whether the company can meet its obligations as they come due or whether liabilities exceed assets. Clearing the $5 million floor without meeting the insolvency test is not enough.

CCAA or BIA

Canada has two main corporate restructuring regimes, and the choice between them matters. The BIA is open to any insolvent corporation regardless of debt size, and a BIA proposal has to be completed within six months. The CCAA is reserved for larger cases — the $5 million floor keeps smaller insolvencies in the BIA stream — and imposes no statutory deadline for completing a plan.² The open timeline makes the CCAA better suited to complex restructurings with multiple creditor classes, cross-border operations, or major asset sales that cannot be resolved in six months.

The trade-off is cost. CCAA proceedings involve more court appearances, more professional fees, and more stakeholder negotiations than a BIA proposal. A company that qualifies for the CCAA can still file under the BIA if the simpler process suits its needs. One difference catches companies off guard: if creditors reject a BIA proposal, the company is automatically deemed to have made an assignment into bankruptcy. Under the CCAA, rejection does not trigger automatic bankruptcy; creditors have to apply to lift the stay before they can pursue their own remedies.

The Initial Order and Stay of Proceedings

Granting a CCAA application produces an Initial Order that freezes legal actions against the company. Under section 11.02, the court can stay proceedings under the BIA and the Winding-up and Restructuring Act, halt existing lawsuits, and prevent new ones from being filed.⁴ The stay lets management concentrate on restructuring instead of fighting collection actions on every front.

The initial stay lasts no more than 10 days.⁴ After that, the company must return to court and show it has acted in good faith and that an extension would not unfairly prejudice creditors. Extensions are granted in increments, often for several months at a time, as long as progress continues. The short initial window forces the company to prove early on that restructuring is realistic rather than a stall.

DIP Financing

A company in CCAA proceedings usually needs fresh cash to keep operating: payroll, suppliers, utilities. Section 11.2 allows the court to authorize debtor-in-possession (DIP) financing and to grant the new lender a charge over the company’s property that ranks ahead of existing secured creditors.⁵ That priority is what makes DIP lending viable, because no rational lender would advance funds to an insolvent company without jumping to the front of the repayment line.

Before approving DIP financing, the court weighs whether the loan would genuinely improve the chances of a successful restructuring, whether any creditor would be significantly prejudiced by the new charge, and whether major creditors still have confidence in management. During the initial 10-day stay, DIP borrowing is limited to what is reasonably necessary for ordinary-course operations.⁵

Critical Suppliers

Some suppliers are so essential that losing them would sink the restructuring before it starts. Under section 11.4, the court can designate a vendor as a critical supplier if the goods or services it provides are critical to the company’s continued operations, and can order that supplier to keep providing them on existing terms or on terms the court considers appropriate. In exchange, the court must grant the supplier a charge over the company’s property equal to the value of what it supplies under the order, and that charge can rank ahead of other secured creditors.⁶

The Court-Appointed Monitor

Every Initial Order comes with the appointment of a monitor to oversee the company’s business and financial affairs. The monitor must be a licensed insolvency trustee under the BIA. The company usually nominates a candidate, but the monitor serves the court, not the debtor. Independence is enforced by statute: anyone who acted as a director, officer, employee, auditor, or legal counsel of the company in the preceding two years is barred from acting as monitor unless the court specifically permits it.⁷

The monitor files regular reports on the company’s financial condition and compliance with court orders, and assesses whether proposed plan terms are feasible. Creditors who believe the monitor is not adequately protecting their interests can apply to have the monitor replaced.⁷

Selling Assets Under Court Approval

CCAA restructurings frequently involve selling off business units or assets to raise cash or shed unprofitable operations. Section 36 requires court approval for any sale outside the ordinary course of business, and the court can authorize the sale even without shareholder approval.⁸ Before approving, the court considers whether the sales process was reasonable, whether the monitor supported it, whether creditors were consulted, and whether the price is fair against market value. The monitor must file a report stating whether, in its opinion, the sale would produce a better result for creditors than a bankruptcy liquidation.

Sales to insiders face extra scrutiny. The court will approve a related-party transaction only if the company made genuine efforts to sell to arm’s-length buyers first and the insider’s offer beats any competing bid. The court can also authorize a sale free and clear of existing security interests, charges, or other encumbrances, but when it does, substitute security must be placed on the remaining assets or the sale proceeds for the benefit of the affected creditor.⁸

What a Plan Must Protect

Employee Wages

A court cannot sanction a plan of arrangement unless it provides for immediate payment of employee wages and salary. Employees must receive at least what they would have been entitled to as preferred creditors under the BIA if the company had gone bankrupt on the day CCAA proceedings started. Wages, commissions, or compensation earned after the proceedings began must also be paid in full before the plan takes effect.⁹

Collective Agreements

Unionized workplaces get additional protection. A company cannot unilaterally modify a collective bargaining agreement during CCAA proceedings. If it cannot voluntarily agree on revised terms with the union, it can apply to court for permission to issue a notice to bargain, but only after giving the bargaining agent five days’ notice. The court will grant the order only if a viable restructuring is impossible under the existing agreement, the company made good-faith efforts to renegotiate, and inaction would cause irreparable damage.¹⁰ If no revised agreement is reached, the existing collective agreement stays in force and the court cannot alter its terms.

Pension Obligations

Pension claims currently receive a form of super-priority in CCAA proceedings for amounts deducted from employee pay, normal-cost employer contributions, and amounts owed to pooled registered pension plan administrators. The Pension Protection Act (Bill C-228), which received royal assent in 2023, expands that super-priority to include unfunded liabilities and solvency deficiencies in defined benefit pension plans. The expanded protection takes effect on April 27, 2027, four years after royal assent, giving employers with existing defined benefit plans time to adjust.¹¹ Once fully in force, no plan will be sanctioned unless it provides for payment of the full pension deficit.

Crown Claims

The court cannot sanction a plan unless it provides for full payment, within six months, of all outstanding Crown claims of the types that could be subject to a demand under the Income Tax Act, the Canada Pension Plan, and the Employment Insurance Act. If the company defaults on any post-filing remittance of these amounts, the court cannot sanction the plan at all.⁹ GST/HST is treated differently: following the Supreme Court’s decision in Century Services Inc. v. Canada (Attorney General), deemed trusts for collected but unremitted GST/HST do not survive a CCAA restructuring, so those obligations can be compromised as part of a plan while payroll deductions cannot.

Directors and Officers

Directors of insolvent companies face personal liability under various federal and provincial statutes for unpaid wages, unremitted taxes, environmental obligations, and more. The CCAA responds in two ways. The stay of proceedings can be extended to cover directors personally, blocking claims related to the company’s obligations for which the directors are liable in their capacity as directors.¹ That protection does not extend to claims based on a director’s own negligence, misconduct, or fault.

The court can also grant a priority charge over the company’s property to indemnify directors and officers against liabilities they may incur after proceedings begin. Without it, directors would resign rather than steer a restructuring. The court will not grant the charge if adequate indemnity insurance is available at reasonable cost, and the charge automatically excludes liabilities arising from gross negligence or wilful misconduct.¹² A plan can also compromise pre-filing claims against directors related to the company’s obligations, but not claims based on misrepresentation, oppressive conduct, or contractual rights of individual creditors.¹³

Creditor Voting and Court Sanction

Most CCAA proceedings aim at a plan of arrangement, a document setting out how the company’s debts will be restructured, whether through reduced payments, extended timelines, debt-for-equity conversions, or some combination. Creditors are grouped into classes based on the similarity of their interests, and each class votes at a formally convened meeting.

Approval requires a double majority within each class: a majority in number of the creditors present and voting, representing at least two-thirds of the total dollar value of claims in that class.⁹ The two-part test keeps a handful of large creditors from overriding smaller ones while making sure the plan has real financial support. If any required class misses either threshold, the plan does not pass.

Shareholders sit at the bottom of the priority ladder. Creditors holding “equity claims” — covering dividends, returns of capital, share redemption obligations, and losses from buying or selling equity interests — are placed in their own class and cannot vote on the plan unless the court orders otherwise.¹⁴ No plan can distribute anything to equity claimants until secured and unsecured creditors have been paid in full. In a typical CCAA restructuring, shareholders are wiped out entirely.

Creditor approval alone does not make a plan binding. The company must apply for a sanction order under section 6. The court reviews whether the plan is fair and reasonable, whether all statutory requirements have been met, and whether the mandatory protections for employees, pensions, and Crown claims are satisfied. Once sanctioned, the plan binds every creditor, including those who voted against it, and any trustee in bankruptcy or liquidator.⁹ The company then moves into implementation under continuing judicial oversight.

Cross-Border Cases

Large Canadian corporations often have operations, creditors, and assets in multiple countries. Part IV of the CCAA provides a framework for recognizing foreign insolvency proceedings in Canada. A foreign representative — the equivalent of a monitor or trustee appointed in another country — can apply to a Canadian court for recognition by filing a certified copy of the instrument that commenced the foreign proceeding, along with proof of their authority to act.¹⁵ Once recognized, the foreign proceeding can benefit from Canadian court cooperation, coordination of claims, and protection of assets in Canada. The provisions follow the UNCITRAL Model Law on Cross-Border Insolvency, allowing parallel proceedings in different countries to be managed cooperatively.

When a Restructuring Fails

Not every CCAA filing ends in a successful plan. If creditors reject the plan or the court refuses to sanction it, the stay of proceedings may be lifted and creditors can resume collection actions. The company does not automatically go into bankruptcy the way it would under the BIA. Creditors or other stakeholders must apply separately to lift the stay, and in practice a failed CCAA restructuring often leads to a receivership, a BIA bankruptcy filing, or a court-approved liquidation of the company’s assets under section 36. Courts will generally give a debtor company reasonable extensions if it can show genuine progress toward a viable plan, because avoiding that outcome is the whole point of the Act.

1
Justice Laws Website. Companies’ Creditors Arrangement Act
2
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 3
3
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 2
4
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 11.02
5
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 11.2
6
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 11.4
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Justice Laws Website. Companies’ Creditors Arrangement Act – Section 11.7
8
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 36
9
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 6
10
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 33
11
Parliament of Canada. Legislative Summary of Bill C-228 – An Act to Amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act
12
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 11.51
13
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 5.1
14
Justice Laws Website. Companies’ Creditors Arrangement Act – Section 22.1
15
Justice Laws Website. Companies’ Creditors Arrangement Act – Part IV