INFORMED FINANCIAL SOLUTIONS
Proposal
FILE A CORPORATE PROPOSAL IN GATINEAU, OTTAWA AND OUR OTHER OFFICES
A corporate proposal or Division, I proposal under the Bankruptcy and Insolvency Act (BIA), is a procedure that can be requested by any insolvent person, i.e. a natural person or a legal person (corporation) and allows for the restructuration of debts while avoiding bankruptcy.
This legal mechanism consists of a binding offer made to unsecured creditors to reduce, reorganize, or settle outstanding financial obligations. It provides an enforceable solution designed to balance the interests of both the debtor and creditors within a federally regulated framework.
A Division I proposal is typically used when debts are commercial in nature or, for individuals, when unsecured debt exceeds $250,000 (excluding a principal residence). This form of corporate proposal is more robust than a consumer proposal and is commonly used in more complex financial situations, particularly for corporations and business owners.
The process must be administered by a Licensed Insolvency Trustee (LIT), the only professional authorized to file and oversee proceedings under the BIA. The trustee works with the debtor to prepare a viable proposal and ensures compliance with all legal requirements while facilitating communication with creditors.
Our trustees will assist you with your proposal in Gatineau, Ottawa, Val-d'Or or in another of our 15 agencies.
The Role of a Division I Proposal
A Division I proposal is a strategic legal tool that allows a business or individual to regain control of their financial situation without ceasing operations. Rather than liquidating assets through bankruptcy, the proposal enables the debtor to continue operating while restructuring their obligations.
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Keep a business running to avoid bankruptcy and closure of operations
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Maintain jobs
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Preserve profitable divisions and close the ones with a deficit
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Restructure operations to make them viable
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Hold the assets and make a settlement on unsecured debt
Once a notice of intention to file a proposal is submitted, a legal stay of proceedings takes effect. This protection immediately halts collection actions, lawsuits, and creditor enforcement measures. It provides the debtor a reasonable period of time to stabilize operations, implement a structural reorganization, develop a restructuring strategy, or to obtain new financing to ensure business continuity.
What Does a Division I Proposal Consist Of?
A Division I proposal is a detailed restructuring plan that outlines how the debtor intends to resolve its financial obligations while maintaining operations where possible.
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Periodic payments
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A lump-sum settlement of a portion of the debt owed
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A procedure for the sale of certain assets
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A procedure for selling the company in operation
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Operational measures to improve cash flow and reduce expenses
To be successful, the proposal must clearly demonstrate that it offers creditors a better outcome than bankruptcy, making acceptance more likely while ensuring fairness under the law.
Creditor Approval and Legal Effect
A Division I proposal must be accepted by a required majority of creditors prescribed by law and be approved by the court.
Creditors are given the opportunity to review and vote on the proposal, and acceptance requires a majority in number representing at least two-thirds in value of the claims voting.
If the required majority is reached, the proposal must then be approved by the court. Once accepted and approved, the agreement becomes legally binding on all unsecured creditors, including those who voted against it.
This binding effect is a key advantage of the process, as it provides certainty and prevents further legal action related to included debts. Upon successful completion of the proposal terms, the debtor is legally released from those obligations.
However, if the proposal is rejected by creditors, the debtor is typically deemed bankrupt. This underscores the importance of preparing a realistic, well-structured proposal with the guidance of experienced professionals.
Contact Us to File a Proposal in Ottawa or Gatineau
If your business or personal finances are under pressure, a Division I proposal may offer a path forward.
Contact Bernier & Associates today to prepare your proposal file and receive expert guidance tailored to your situation. Our experienced team will support you through every step of the process while ensuring full compliance with the Bankruptcy and Insolvency Act.
