Abitibi CBCA Plan Of Arrangement Order Has Implications For Eligible Financial Contracts

Earlier this year Abitibi-Consolidated Inc. (Abitibi) and various related entities proposed to enter into an arrangement with certain classes of its creditors relying on the plan of arrangement provisions in the Canada Business Corporations Act (CBCA). It is unusual to propose a corporate plan with respect to a company's debt.  The CBCA plan of arrangement provision is not fundamentally an insolvency law.  The procedure is most often used to restructure securityholder relationships within solvent companies and that is the primary intention.  Restructurings involving insolvent entities are typically done under the Companies' Creditors Arrangement Act (CCAA). However, on rare occasions, the corporate proceeding is used by corporations that are insolvent. While the CBCA requires that a corporation be solvent to use the proceeding, courts have "finessed" this requirement by holding that it is satisfied as long as one of the applicant companies is solvent (even where the