The Notice of Intention to Make a Proposal (NOI)

The Fastest Debt Help in Canada: The NOI

In recent months, more companies than ever are facing financial difficulty. Insolvency filings have increased in both the oil and gas industry as well as retail. Companies, such as Reitmans, have had to seek protection from their creditors to avoid bankruptcy. When companies or individuals are faced with aggressive creditors, they need fast action. What’s the fastest way to get debt help in Canada? Without a doubt, it’s the NOI.

What Is an NOI?

NOI, otherwise known as the Notice of Intention to Make a Proposal, is a strong piece of legislation. It is intended to help companies or individuals that are having financial difficulty. This legal remedy is outlined in Canada’s Bankruptcy and Insolvency Act. It is the first step that financially troubled corporations can take to avoid bankruptcy.

Using the NOI, companies are able to continue operations while they restructure their finances to bring their debt under control.

Why Is It So Fast?

The quick answer is that very little paperwork is needed. Therefore, it is relatively easy to                  get the documents together, providing immediate relief from creditors.

What Happens When an NOI Is Filed?

When a NOI is filed, an insolvent company receives 30 days of protection from all of its creditors. This is called a stay. It means that the company does not have to pay its bills for 30 days. Further, it prevents creditors from taking action. These creditors include:

  • secured creditors;
  • unsecured creditors, such as credit card companies;
  • trade creditors; and
  • judgement creditors who may be garnisheeing.

In effect, the stay stops all legal proceedings.

What Is an Insolvent Person or an Insolvent Corporation?

An insolvent person or corporation is one that owes more than $1,000. They are unable to pay their debts as they come due. If an individual owes less than $250,000 they would normally proceed straight to a consumer proposal. As a result, an NOI is more commonly used by a company.

When Is an NOI Used?

An NOI is used in circumstances when a business or an individual is unable to repay their creditors but does not want to file bankruptcy.

It is often used when:

  • a company receives a 10-day Notice of Intention to Enforce Security from a secured lender or bank; or
  • when there is a threat or garnishee in place.

The initial stay of proceedings may be extended, with Court approval, for up to six months. The extensions are granted in 45-day intervals at the Court’s discretion. During this time, the company, in consultation with a Licensed Insolvency Trustee, develops a proposal to creditors.

Is the Tax Department or CRA Also Stayed by an NOI?

Yes, all creditors are stayed by the filing of an NOI including the Canada Revenue Agency.

Why Is an NOI Available?

Parliament, as do creditors, generally want companies to succeed and continue. However, financial difficulties can arise from time to time whereby creditors are not able to be repaid in the ordinary course. It is not fair that one creditor receives a higher repayment than others. The creditors will generally receive more when a corporation files an NOI, followed by a proposal, rather than file for bankruptcy.

Accordingly, the requirements to file an NOI are relatively easy and quick but the implications can not be understated. The effects on all creditors need to be considered prior to filing the NOI. That is why you should always consult with an insolvency expert when exploring options.

How Do You File an NOI?

You will need to:

  1. Retain the services of a Licensed Insolvency Trustee (“LIT”).
  2. Provide a list of all of the creditor names, addresses, and amounts owed.

The LIT will file the NOI with the Official Receiver at the Offices of the Superintendent of Bankruptcy. The LIT will subsequently notify your creditors of the NOI and the stay.

When the NOI is filed, the terms of the proposal may be unknown. Most often, the terms are worked out later. These terms can be very creative but the main objective is to come up with a successful proposal that is accepted by the majority in number of creditors who represent two-thirds of the value of the claims.

What Other Things Should I Know About the NOI?

  • A cash flow statement is prepared and filed within 10 days after filing the NOI. This provides an estimate of the cash received and disbursed over a three to six month period.
  • The LIT is required to monitor the affairs of the company during the stay period.
  • The LIT will assist the company in preparing and filing the proposal
  • A meeting of creditors is required within 21 days of filing the proposal. At that meeting the creditors vote to accept or reject the proposal.

What Happens at the First Meeting of Creditors?

The first meeting of creditors is the place and time where the creditors can have a better understanding of what happened. It is a formal meeting where questions can be raised. The meeting is usually chaired by the LIT or the Official Receiver. The main business at the first meeting is to vote on the acceptance of the proposal.

What Happens If the Creditors Reject the Proposal?

Should the majority of creditors reject the proposal there is an automatic bankruptcy. Often prior to the vote, the LIT has had an opportunity to communicate with the creditors and the corporation to find a successful compromise.

Next Steps

To learn more about how an NOI can help you or your company, please contact our office for a free, no hassle, confidential consultation where one of your experienced team members will help you start on a path to a better financial future.

Stephen Boale, LIT
Stephen Boale, LIT

Prior to joining Derek L. Chase & Associates Ltd. in 2019, I was a founding partner of a boutique insolvency firm in Vancouver. Earlier, I spent ten years practicing exclusively in insolvency matters with a big four chartered accountancy firm. I have also been employed as an Official Receiver with the Office of the Superintendent of Bankruptcy.



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