If you have a corporation that cannot pay off its debts, you will want to get professional assistance in deciding your next steps. Filing for bankruptcy is an option of last resort, but fortunately your liability is limited in a corporation. If your corporation files for bankruptcy, the business won't continue and employees will likely lose their jobs although they may be entitled to recover severance. With much at stake, it is important to obtain a consultation with a Licensed Insolvency Trustee (LIT) to find out if you qualify for any alternatives to bankruptcy.
Three Ways to Bankruptcy
A voluntary assignment is the most common. In a voluntary assignment into bankruptcy, you assign your company’s assets to for the general benefit of your creditors on your own accord. Your company would need to be insolvent.
In a petition for a bankruptcy order (involuntary assignment), your creditors will file a petition in a provincial court to seize your assets. Your creditors need to state in a court application that you have committed an act of bankruptcy within the last six months.
If a restructuring plan is voted down in a Division I Proposal or does not receive court approval, your company will be deemed bankrupt.
How a Licensed Insolvency Trustee Can Help with a Corporate Bankruptcy
A Licensed Insolvency Trustee (previously known as a Trustee in Bankruptcy), can conduct a review of your corporate finances to help you determine if there is another option that is suitable besides declaring bankruptcy. Often there is another option available to you even if your corporation has been insolvent for an extended period of time.
If there is no other option but bankruptcy, your trustee will administer the process, complete the necessary forms, and handle all communications with creditors. Company assets will be liquidated to pay creditors as much as possible.