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Corporate Proposal: Bankruptcy Alternative for Businesses
Tax increases, rising costs, slower consumer demand, and debt repayment obligations are just a few of the things that can make it difficult for businesses to stay profitable. If your business is struggling with debt, a Corporate Proposal may be the solution you’re looking for to save your business and avoid Bankruptcy.
Dealing With Business Debt
Using credit to build a business is a common strategy since it can cover expenses like payroll, purchase supplies, finance necessary equipment, or many other purposes. However, debt payments can quickly mount up making repayment difficult.
Three types of business debt relief in BC are Corporate Proposals, also known as Division 1 Proposals in Canada, Bankruptcy and Receivership. However, they differ from one another.
| Process | Corporate Proposals | Bankruptcy | Receivership |
| What type of debt does the process deal with? | Unsecured debt. | Unsecured debt. | Secured debt. |
| Who initiates the process? | A Licensed Insolvency Trustee initiates the process on your behalf. | A Licensed Insolvency Trustee initiates the process on your behalf. | A secured creditor initiates the process of receivership. |
| What are the goals of the process? | Make the payments manageable to pay off some or all of your debt so you can save your business. | Pay back what’s possible, sometimes by selling the business’s assets, and write off the remaining amount. | The receiver will sell the company’s assets that secure the debt to pay the creditors. |
| What is the impact on business operations? | A business can continue to operate if it has filed a Corporate Proposal. | The LIT, upon direction from the creditors, will either sell the business as a going concern or liquidate it. | The receiver will sell the assets to repay secured creditors, often leaving the business unable to continue operations. |
| What is the impact on debt and creditors? | The debt is paid off over a period of time, sometimes for less than the amount owed. | The business’ assets are seized and sold to pay down the debt. | The receiver uses the sale of the assets to pay down or pay off the secured debts. |
| What is the impact on business ownership and control? | The business owner retains the company’s assets and remains in control of the business. | The business is closed. | The business usually stops operating in its current form. |
Corporate Proposals
Depending on your circumstances, a Corporate Proposal can benefit your business because:
- There’s no maximum limit to the amount of debt.
- It makes payments more manageable by giving you a more extended period to pay off the amount you owe.
- You can keep control and continue to operate your business.
- It allows you to turn your business around and achieve long-term success without having to close or sell it.
- You may be able to keep your business assets like property or equipment.
- Collection calls and legal action will stop.
To be eligible for a Corporate Proposal, your business:
- Must typically owe more than $250,000 in unsecured debt.
- Be unable to meet its debt obligations as they come due.
Filing a Division 1 Proposal is a relatively straightforward process. First, contact a Licensed Insolvency Trustee (LIT) because only a LIT can file a Corporate Proposal.
Your LIT will work closely with you to develop a proposal that your creditors will accept to avoid having your creditors decline it. If your creditors reject the Proposal, your company will be put into Bankruptcy.
Once you have a plan, your LIT file the Proposal with the Office of the Superintendent of Bankruptcy. Your creditors will then be notified of your Corporate Proposal by the LIT office.
Your creditors have 21 days to vote to accept or reject the Proposal after they receive it. For it to be accepted, at least 50% of your creditors, who hold two-thirds of your debt or more, must agree. If they agree to the Proposal, it goes to the court for final approval, and you begin making payments to your LIT. Your LIT then distributes the agreed-upon amount to your creditors. Your company’s debts will be paid off once you make your last payment.
Get Commercial Insolvency Solutions In BC
If you’re looking for business debt relief in BC, we can help. Our team at Chase & Associates are experts in helping businesses like yours find the best solutions for their debt. We can help you with debt negotiations, business financial restructuring, and alternatives to Bankruptcy.
Please contact us by calling 1-866-371-8331 or filling out our online form for a free consultation. We’ll work with you to find the best solution for your business needs so you can get back to doing the things you love.