Anonymised, illustrative composite. The same sale-motion arithmetic as the file beside this one, but the buyer here is not a director — it is the secured operating lender, credit-bidding its own debt. The extra gate that opened for two insiders never opens for a lender that is merely a lender.
At a glance
A cold-storage and third-party-logistics operator serving the Prairie grocery supply chain filed a notice of intention with $8,100,000 of claims, including a $5,600,000 senior secured operating facility. The trustee ran a marketing process: five weeks, twenty-two parties contacted, four confidentiality agreements signed, and one indicative offer at $3,900,000 from a competing logistics operator that withdrew after diligence flagged the cost of relocating two long-term customer contracts. With no other binding offer on the table, the company's own senior secured lender proposed to acquire substantially all the assets by credit-bidding $5,200,000 of its debt plus $300,000 of new cash to cover priority claims, rather than continuing to fund a company with no buyer in sight.
The trustee's counsel, aware of a recent file in the same jurisdiction where a management-buyout sale had been tested against BIA s.65.13(5)'s enhanced related-person gate, asked whether the same gate applied here. It turns on the definition in s.65.13(6): “a person who is related to the insolvent person includes (a) a director or officer of the insolvent person; (b) a person who has or has had, directly or indirectly, control in fact of the insolvent person; and (c) a person who is related to a person described in paragraph (a) or (b).” The lender held none of the first two positions directly: it had no seat on the board, held no shares, and had never appointed an officer or observer to the company's management. The live question was whether its position as senior secured lender — with the covenant package, reporting rights and default remedies that come with any institutional facility — amounted to “control in fact” under paragraph (b).
The credit bid totalled $5,500,000: $5,200,000 of debt forgiveness plus $300,000 of new cash funding priority wage, vacation and trustee claims ahead of the secured debt itself. Against the withdrawn competing indication of $3,900,000, the credit bid was the higher number by a wide margin, and it was also the only offer still standing at the sale motion. Had the s.65.13(5) gate applied, the trustee would have needed to show both that good-faith efforts were made to find a non-related buyer and that the consideration was superior to any other offer actually made in the process — a comparison the withdrawn $3,900,000 offer would have made straightforward, since the credit bid exceeded it by $1,600,000. But the gate's applicability, not its outcome, was the point in dispute: a bid the court never has to run through s.65.13(5) is measured on a different, and in practice less demanding, set of factors from one that does.
An ordinary sale motion under BIA s.65.13 is decided on the six factors listed in s.65.13(4) — the process run, the parties' views, the effect on stakeholders, whether the consideration reflects the property's value, and the rest of the usual sale-approval inquiry. That is the whole test unless the buyer is a “related person” within s.65.13(6), in which case s.65.13(5) adds a second, narrower gate on top: good-faith marketing to non-related buyers, and consideration “superior to the consideration that would be received under any other offer made in accordance with the process.” Nothing in s.65.13(6)'s three categories reaches an arm's-length secured lender acting within the ordinary scope of its facility. A lender does not become a director or officer by holding a loan, and standard covenant and reporting rights — financial reporting, borrowing-base certificates, the ordinary remedies package on default — do not, without more, amount to the day-to-day “control in fact” the paragraph requires; that threshold is reserved for a lender that has stepped into actually directing the insolvent company's affairs, which this lender had not done. The credit bid was tested on the s.65.13(4) factors alone, and cleared them without the additional s.65.13(5) hurdle ever coming into play.
Had the trustee run the sale motion as though s.65.13(5) applied — requiring an extended further marketing period to be certain no non-related buyer could beat the credit bid, on the assumption that any secured lender buying its own collateral is automatically “related” — the process would have added weeks the company's cash position could not sustain, for a gate the statute does not in fact impose on an ordinary secured creditor. Treating every secured-lender credit bid as presumptively related would make the credit bid itself, one of the BIA's most common and least controversial insolvency-sale mechanisms, functionally unworkable on a compressed timeline.
The tell was the instinct to treat “the buyer already has leverage over this company” as equivalent to “the buyer is related to this company.” They are different questions under s.65.13(6). A secured lender's leverage comes from its security and its covenants, both of which exist precisely because the lender is not inside the company directing it — the opposite of the control-in-fact relationship the enhanced gate is built to catch.
A 30-minute call is enough to tell you whether AI pays for itself here.
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email when the first report lands.
