What’s the difference between buying a business from a court-appointed receiver and buying it in a proposal sale?

Who controls the business while it is being sold

s.243(1) lets a court, “on application by a secured creditor”, appoint a receiver to “take possession of all or substantially all of the inventory, accounts receivable or other property”, exercise control over the business, or “take any other action that the court considers advisable”. The debtor is displaced; the receiver runs the sale. s.65.13(1) runs the opposite structure: “an insolvent person” under a filed notice of intention or proposal “may not sell or otherwise dispose of assets outside the ordinary course of business unless authorized to do so by a court” — the debtor stays in possession and applies for its own authorization, with the trustee overseeing rather than displacing it.

What the court actually weighs

A receivership appointment turns on a general standard — “just or convenient”. A proposal sale under s.65.13(4) is more structured: the court must consider, among other things, whether the sale process was reasonable, whether the trustee approved it, whether the trustee reported the sale as more beneficial than a bankruptcy sale, how far creditors were consulted, and whether the price is fair given market value. Where the buyer is related to the insolvent person, s.65.13(5) adds a higher bar — good-faith efforts to find an unrelated buyer, and a price superior to any other offer in the process.

A notice requirement neither regime skips

Before appointing a receiver in most cases, s.243(1.1) blocks the court from acting until ten days after a secured creditor’s enforcement notice under s.244, unless the debtor consents earlier or the court considers it appropriate to move sooner. A proposal sale carries its own notice duty in s.65.13(3), requiring notice to the secured creditors likely to be affected before the court will authorize a sale at all. Both routes end at a court-supervised sale; which one you are buying from decides who negotiated the marketing process and who you are dealing with at the table.

Case Files

The agreement the seller disclaimed before closing runs the s.65.13 route, with the debtor company itself still in possession under a Division I proposal. A receiver with one year to sell a licensed restaurant and The shield that stayed with the receiver both run the s.243 receivership route, with a court-appointed receiver in control throughout. Reading the three together shows how much the buyer’s counterparty, and the process they are negotiating into, changes between the two.

Sources

• • Bankruptcy and Insolvency Act, s.243 — marginal note Court may appoint receiver: (1) the power; (1.1) the 10-day restriction; (2) the definition of receiver.
• • Bankruptcy and Insolvency Act, s.65.13 — marginal note Restriction on disposition of assets: (1) the authorization requirement; (3) notice to secured creditors; (4) the factors; (5) the higher bar for a related-party buyer.
• • Treadstone Law — buying from a bankruptcy trustee vs. a receiver in Ontario — the practical version of this same comparison.