Quote:
Originally Posted by Voodooman
This is a pretty common tactic in insolvency proceedings these days, it's called a Reverse Vesting Order. You put your company (MainCo) into CCAA proceedings, create a new company (SpinCo), and apply to the insolvency courts for an order to move all liabilities and toxic assets from MainCo into SpinCo, in order to facilitiate a sale of MainCo. This is often done in conjunction with a stalking horse bid for MainCo.
It's been used in the cannabis industry a number of times, unsurprisingly. A company is insolvent, sheds all the debt into SpinCo, "new" bidders emerge to purchase MainCo, and SpinCo is bankrupted with all the debt. It's basically a get out of jail free card for badly run companies. There have been multiple cases where an RVO has been successfully executed, MainCo has started fresh, and less than 2 years later, they are back in creditor protection, with even more debts than the first time around. I put "new" as there have been some pretty tenuous apparent arms length sales under these RVOs.
Basically, in the current climate, there is no penalty for bad management. Insolvency courts seem to be operating under t-ball rules. The score doesn't matter, everyone gets a turn and as long as you tried, then you are a winner.
Thanks for attending my TED talk on what is wrong with our economy.
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Makes it feel that much better knowing I was too much of an honest doofus to be caught in the crosshairs holding PG and indemnity obligations personally when my construction co hit the wall towards the end of Covid. Its such fulfilling and rewarding work, building new schools and courthouses for the Government.
I'm sure they will look upon my naive, good natured soul and salt of the earth Albertan morals with kindness and generosity when it comes time to enforce all judgements granted on those PGs that are "never used".
Great system. I love life, people, this country and my future.