Hitting Reverse: B.C. Court Refuses To Grant A Reverse Vesting Order

With the recent flurry of reverse vesting orders (RVOs) in Canadian insolvency proceedings in the last two years, courts have warned against over-use of this distressed M&A structure. In PaySlate Inc. (Re), 2023 BCSC 608, the Supreme Court of British Columbia hit reverse. The Court, in reinforcing the judicial view of RVOs as an extraordinary remedy rather than a new norm, refused to grant an RVO and its related releases and claims bar, and provided further guidance as to the circumstances when a court should, and should not, grant an RVO.

What you need to know

• The Supreme Court of British Columbia refused to grant an RVO because, among other reasons, the debtor: (i) did not provide adequate notice to creditors whose claims would be impaired by the transaction; (ii) failed to establish that the RVO was sought for a proper purpose; and (iii) did not support the transaction with fulsome valuation evidence to demonstrate that it was necessary and appropriate in