Court Rejects Distressed Corporate Arrangement Transaction

A recent decision of the Court of King's Bench of Alberta provides useful guidance to distressed companies that are considering arrangement transactions under business corporations legislation. In HEAL Global Holdings Corp. (Re), the Court refused to grant a final order in respect of a "three-corner amalgamation" that was approved by 100% of the voting shareholders of the two amalgamating corporations and where, absent the transaction, the ability of one of the corporations to continue as a going-concern was subject to significant doubt. Notwithstanding these facts, the Court held that arrangement was not fair and reasonable and rejected the proposed transaction.

The arrangement, which was attempted under the Business Corporations Act (Alberta), involved a publicly traded corporation (Pathway Health Corp.) and two other corporations (The Newly Institute Inc. and HEAL Global Holdings Corp.). HEAL already owned 22% of the shares of Newly and Pathway proposed to