Protecting Stakeholders’ Interests: Reverse Vesting Order Sale Approved in Insolvency Case

A recent decision by the B.C. Supreme Court regarding the sale of insolvent businesses through a reverse vesting order (RVO) non-BIA or CCAA proceedings has sparked significant interest and discussion within legal circles. In Royal Bank of Canada v. Canwest Aerospace Inc., the court approved the sale of two insolvent businesses—despite opposition from the Government of Canada counsel—finding that the RVO structure left no stakeholder worse off than they would be otherwise.

The case revolved around Canwest Aerospace Inc. and CanWest Global Airparts Inc., which provided specialized aircraft and helicopter maintenance services. Facing financial distress and mounting debts, Canwest sought protection under the Companies’ Creditors Arrangement Act in 2023. After failed attempts to secure a buyer, the court-appointed receiver sought approval for a sale, contingent on implementing an RVO.

The decision—delivered by Justice Geoffrey Gomery—underscored the court’s jurisdiction to order an RVO in exceptional circumstances, citing precedent from Peakhill Capital Inc. v. Southview Gardens Limited Partnership. Despite opposition from Canada, the court deemed the proposed sale reasonable and necessary, serving the interests of all parties involved.

The use of RVO structures in insolvency proceedings has garnered attention due to its potential to facilitate sales while minimizing liabilities. Boughton’s Martin C. Sennott—counsel for the proposed buyers—highlighted the value of RVOs in preserving businesses and protecting stakeholders’ interests.

This case exemplifies the nuanced considerations involved in insolvency proceedings and the importance of legal expertise in navigating complex legal frameworks. As the law evolves, RVO structures may continue to play a crucial role in facilitating transactions in insolvency scenarios, subject to judicial scrutiny and adherence to statutory requirements.

For a complete summary of the case, visit the Law 360 article (paywall), Court approves reverse vesting order sale of businesses in receivership despite Crown objections.

To engage Boughton’s team to support your company through insolvency or restructuring, please contact the Boughton’s Martin C. Sennott or Lauren B. Morris.