Anonymised, illustrative composite. The same buyer, the same insolvent target, and a different insolvency officer — because the secured lender chose not to let the debtor run its own sale.
At a glance
An Ontario auto-parts manufacturer and distributor ran short of working capital and filed a notice of intention to make a proposal under BIA s.50.4, the same opening step as the parent file this one forks from. Total claims were $3,700,000: a secured operating facility of $2,600,000 with a Schedule I bank, and unsecured trade debt of $1,100,000. A regional competitor was interested in the business as a going concern.
The company took one 45-day extension under s.50.4(9) while it tried to line up the sale. The bank, having already extended the facility once before the filing, was not prepared to grant a second and notified the company of its intention to enforce its security under s.244(1). Ten days later, rather than wait to see whether a proposal and a s.65.13 sale would follow, the bank applied to the court under s.243(1) for the appointment of a receiver over the company's property.
The company's counsel argued for the debtor-in-possession route: let the notice of intention run its course, let a proposal trustee report on a sale the way the parent file describes, and let the board keep operating the business until closing. The bank's application did not turn on whether that route was available in principle. It turned on s.243(1) itself: on a secured creditor's application, “a court may appoint a receiver…if it considers it to be just or convenient to do so”, to take possession of the property, exercise control over the business, or take any other action the court considers advisable. Nothing in that test asks whether the debtor would rather run its own process.
The ten-day notice period mattered on both sides of the same clock. Section 244(2) barred the bank from enforcing before the notice period expired; s.243(1.1) barred the court, in step, from appointing a receiver “before the expiry of 10 days after the day on which the secured creditor sends the notice”, unless the debtor consented earlier or the court thought it appropriate to move sooner. The company did not consent, so the two provisions ran together to the same date, and the court then had to decide only whether appointment was just or convenient — not whether the debtor's own proposal route was preferable.
Secured bank debt $2,600,000; unsecured trade debt $1,100,000. The receiver ran a sale process and sold substantially all the operating assets — equipment, inventory, receivables, the customer contracts and the brand — for $1,850,000, approved by court order with a vesting order conveying the assets free of the bank's charge, which attached to the proceeds instead. Receiver's fees and disbursements came to approximately $165,000, leaving roughly $1,685,000 for the bank against its $2,600,000 claim — a $915,000 shortfall the bank carried as an unsecured deficiency claim. Unsecured trade creditors recovered nothing; the receivership generated no surplus for the general estate.
Two features distinguish a s.243 receivership sale from the s.65.13 proposal sale in the parent file, and both trace back to the same source: the BIA gives the proposal sale an enumerated statutory test, and gives the receivership sale none.
The first is control. Section 243(1) authorises the court to appoint a receiver to “take possession of all or substantially all of the inventory, accounts receivable or other property… acquired for or used in relation to a business”, to “exercise any control…over that property and over the…business”, or to “take any other action that the court considers advisable”. Section 243(4) restricts the appointment to a trustee. That trustee-as-receiver takes actual possession and control of the receivership property — the board's own operating authority over it ends. Under a s.65.13 proposal, by contrast, the debtor stays in possession throughout and the trustee reports rather than runs the business, as the parent file's own outcome describes.
The second is the statutory basis for approving the sale itself. Section 65.13(4) gives the court six enumerated factors, including whether “the trustee filed with the court a report stating that in their opinion the sale…would be more beneficial to the creditors than a sale…under a bankruptcy”, and s.65.13(7) expressly authorises a sale “free and clear of any security, charge or other restriction”. The BIA contains no equivalent list, and no equivalent free-and-clear authority, for a receiver's sale under s.243. Court approval of a receivership sale, including any vesting order, instead proceeds under the court's general supervisory jurisdiction over the receivership it has created — guided by factors developed in the case law rather than set out in the Act, most commonly traced to Royal Bank of Canada v. Soundair Corp., a 1991 Ontario Court of Appeal decision. That case predates neutral citation and was not reachable from a primary source in this session — it is cited here by name, not quoted.
One further asymmetry is worth naming precisely rather than assuming. Section 65.13(8) makes court approval of a proposal sale conditional on the court being satisfied the insolvent person “can and will make” the wage and pension payments a proposal would otherwise require. Section 243 imposes no equivalent statutory condition on a receiver's sale — whatever protection unpaid wages separately receive under other federal legislation, it is not a condition the BIA itself attaches to the court's approval of what a receiver may sell.
The court appointed the receiver, finding it just and convenient given the bank's withdrawn support and the absence of committed replacement financing for a proposal. The receiver retained existing management under its own direction, ran a five-week sale process, and closed on the terms above. The directors, who had expected to negotiate the sale themselves, instead learned the terms from the receiver's reporting to the court like any other stakeholder.
Had the company assumed a proposal sale was available simply because it had filed a notice of intention, it would have priced its own leverage on a control structure the bank was never obliged to grant it. The notice of intention buys time against creditors generally; it does not bind a secured creditor's own right, once its ten-day notice has run, to apply for a receiver instead.
Who is running the sale process, and under what standard the court is asked to approve it, are the two questions that tell you which regime you are in. If the debtor's own management is negotiating and a trustee is merely reporting, factor by factor, against s.65.13(4), that is a proposal sale. If a trustee acting as receiver has taken possession and is running the process itself, seeking approval under the court's general jurisdiction rather than an enumerated statutory test, that is a receivership — and it began the moment the secured creditor decided not to wait.
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