Critical Supplier Priority Charges In CCAA Restructurings

Companies restructuring under the Companies' Creditors Arrangement Act ("CCAA") depend on a supply of critical products and services in order to continue operations during the proceedings. An interruption in the supply of such goods and services would likely be fatal to any restructuring. Prior to 2009, the CCAA was silent about how the post-filing supply of such goods and services was to be obtained. The CCAA provided only that a supplier could not be forced to supply on credit. Most suppliers required cash on delivery, cash in advance or a letter of credit delivered by the lenders that had agreed to provide a DIP loan to the insolvent company.

2009 Amendments – Court May Order that Charge Ranks in Priority to Secured Creditors