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After consulting with our professionals, you may come to the conclusion that the only option available is for the Company to make an Assignment in Bankruptcy.
Although this means the end of your business, it maybe advantageous to take steps to liquidate your business before it deteriorates to the point where there are insufficient assets to cover your debts to the secured creditor or to any government creditor that has Directors obligations (Canada Revenue Agency) or to any creditor that may hold a personal guarantee as this would leave the guarantors with personal obligations.
In a bankruptcy, all of the assets of the business are turned over to the possession and control of a Bankruptcy Trustee. The Trustee takes steps to preserve, protect, and evaluate the business and reports on the assets of the business at the first meeting of creditors.
At the first meeting of creditors, the creditors will generally appoint Inspectors (a creditor committee) to assist the Trustee in dealing with the assets and undertakings of the business. The Directors of the company are required to attend the meeting and may be called upon to explain the causes of the company’s financial difficulties or other matters relating to the assets.
Ultimately the companies’ assets are sold and converted into cash, accounts receivable are collected, and other assets dealt with. A dividend is paid to the proven creditors on a pro-rata basis and the Trustee obtains its discharge.
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