Vol 14 (2017) - Issue 6

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Join the Party! An Overview of the Case Law on Representation Orders in Canadian Insolvency Proceedings

Introduction:
Despite the absence of codified standard procedures pertaining to the appointment by the court of creditors’ representatives in proceedings under the Companies’ Creditors Arrangement Act ('CCAA'), recent case law across Canada has established a common approach in tackling this specific question, which arises increasingly frequently in insolvency proceedings involving several stakeholders. In fact, unlike Chapter 11 of the US Bankruptcy Code, in Canada, the CCAA does not provide for the appointment of creditors’ committees representing their interest during the proceedings.
It is uncontested that sections 11 and 11.52 of the CCAA grant Canadian courts a wide discretion to appoint representatives on behalf of different creditors’ groups in CCAA proceedings and to even order legal expenses of such representatives to be paid by the debtor’s estate. The court’s main objective in rendering such representation orders is to facilitate the representation of a large group of creditors who are impacted by complex insolvency proceedings so that all of the group members can be represented by a single or a few representative(s) and that their rights be protected and championed by an independent legal counsel. Regarding the payment of the representatives’ legal expenses by the debtor’s estate, such measure will only be ordered when it is deemed essential to the success of the insolvency proceedings.