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What is creditor protection? Add to ...

The Companies' Creditors Arrangement Act allows companies to reorganize under court supervision, while keeping creditors at bay. It is limited to companies that owe more than $5-million.

Under CCAA, a court will usually grant 30 days of protection from creditors, although this is often extended as the process continues.

While under protection, a plan to reorganize the company is developed, and a "monitor" is appointed by the court in order to supervise the process.

The company usually keeps operating - as best as it can - while this is all going on.

Eventually, the creditors get to vote on whether to accept the plan - which will likely see them get far less than what they are owed.

Sometimes, companies are successfully reorganized and they emerge from court protection as a viable entities.

That's what happened with Air Canada a few years ago. It went through CCAA and a major reorganization, but managed to survive.

Richard Blackwell

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