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ARTICLE · 07 JUNE 2022

Buyer Beware: Due Diligence In "Restructuring" Proceedings

Daoust Vukovich LLP
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The Companies Creditors' Arrangement Act ("CCAA") provides a mechanism for financially troubled companies to restructure their affairs. In McEwan Enterprises Inc., 2021 ONSC 6878 ("McEwan"), ...

CanadaReal Estate and Construction
Phillip Wallner
Phillip Wallner

The Companies Creditors' Arrangement Act ("CCAA") provides a mechanism for financially troubled companies to restructure their affairs. In McEwan Enterprises Inc., 2021 ONSC 6878 ("McEwan"), the Ontario Superior Court considered Section 36(4) of the CCAA. This Section requires the applicant to make a good faith effort to find a buyer that is not a related party, or, where a related party becomes the buyer, to ensure that the related party puts forward the best offer. Section 36(4) takes direct aim at applicants who seek to abuse the CCAA process by "restructuring" into a new entity with the same owners, solely to circumvent existing obligations.

McEwan Enterprises Inc ("MEI") operated a number of fine dining restaurants and grocery stores under the name of one of its two shareholders – celebrity chef Mark McEwan. In September 2021, faced with financial difficulties brought on by the COVID-19 pandemic, MEI filed for CCAA protection and proposed a restructuring

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