Ontario Court Rejects Reverse Vesting Order For The First Time

In 2015, Justice Wilson-Siegel approved a new form of vesting order, referred to as the "reverse vesting order" (or RVO) as part of the restructuring in Plasco Energy (Re). An RVO is a court order that transfers unwanted assets and liabilities out of a debtor company into a (oftentimes newly incorporated) affiliated company, referred to as "ResidualCo." The debtor company is left holding only the assets and liabilities the purchaser wants to acquire. The debtor company then emerges from the Companies' Creditors Arrangement Act proceeding, typically by way of an acquisition of its shares by the purchaser, while ResidualCo remains in the proceeding and typically makes an assignment into bankruptcy. (This is in contrast to an AVO – an AVO transfers wanted assets and liabilities out of the debtor company to the purchaser; an RVO transfers unwanted assets and liabilities out of the debtor company.)