If you are having difficulty paying yourself a salary from your business or are falling behind in tax obligations (GST, employee source deductions, income tax) a business proposal could be an option for your business.

Before eroding your personal net worth to finance your company obligations, our licensed, experienced Proposal Administrators will meet with you confidentially at no cost to discuss your business solutions.

What is a Business Proposal?

A business proposal is an effective and flexible tool which can be used to eliminate debt and save your business.  A proposal can only be filed through a Trustee and is a binding agreement with the company’s creditors.  Depending on the company’s cash flow, the amount of the agreement and debt forgiveness varies.  

A key theme of a proposal is that it must offer creditors more than what they would receive in a bankruptcy.

The Trustee works with the owners of the company in drafting a proposal that presents a “win-win” situation for both the business and its creditors. Typically, the creditors are asked to give up rights to the monies they are owed, in exchange for an offer by the company to pay so many cents on the dollar over time or even as a lump sum payment.

In a successful proposal, the company wins because it survives. The creditors win because they retain a customer and also because they get some of their money, whereas in a bankruptcy they are likely to receive very little.

Does it cost anything to meet with Sands & Associates?

Our confidential initial meetings or phone calls are at no cost or obligation.

In order to provide you as much assistance as possible, we ask that you come prepared with a list of creditors and most recent financial statements.

What would be discussed in the Initial Meeting?

Our first step at Sands & Associates is to determine if the business is worth saving.  We bring a fresh perspective, experience and a full toolbox of options.

In assessing the viability of a business, we review the operations of the company, its financial statements and its ability to generate cash flow.  The amount of cash-flow a company can generate and the value of its assets determines its options.

What does a Trustee in Bankruptcy know about Saving a Business?

At Sands & Associates, we employ designated accountants (CA / CGA / CMA), Management Consultants (CMC), Chartered Insolvency and Restructuring Professionals (CIRP) and individuals with years of experience assisting businesses in financial difficulty.

We pride ourselves on being able to provide practical advice and assistance to business owners who walk through our doors.

When should a Business file a Proposal?

Generally a company should consider filing a proposal when it becomes difficult to pay trade accounts, payroll or other bills.

Some common business owner reactions to a shortage of business funds are to:

  • apply for more credit;
  • inject personal equity to fund the business;
  • make the mistake of delaying payment to Canada Revenue Agency for GST or employee source deductions.

All three of these actions tend to increase the business owner’s personal liability associated with the company. 

How is a Proposal structured?

Generally, proposals are a structured as a payment plan or a one time lump sum payment, however, proposals can be flexible and as creative as needed – no one size fits all!  One certainty is that a proposal must offer more to creditors than a bankruptcy.

Proposals can also be used to wind down a company with the business owner in control or conclude non-profitable arms of a business.  As a proposal is a transparent process, it is often used to sell non-performing assets, in an asset rich, cash flow poor scenario for example.

What Creditors should every Business Owner be aware of?

Business owners should be aware of all of the company’s creditors, including those that give rise to director liability and/or personal liability.  Common examples are GST/source deduction debts to Canada Revenue Agency, personal guarantees, whether to a bank, credit card, landlord, or trade creditor, and wages owed to employees.

When would a Business not be worth Saving?

Usually when the company is suffering continual losses and there are no apparent solutions to return it to profitability.  In this situation, a voluntary business bankruptcy may be an option.

Key Steps in a Business Proposal

1. Intention to Make a Proposal

If a company fears that a creditor is going to take some action to shut the company down, such as obtaining a judgement or seizing assets, a company can file a Notice of Intention to Make a Proposal.

The Notice of Intention to Make a Proposal is a simple document and upon filing, commences a stay of proceedings.  A Stay of Proceedings is essentially a “timeout” and prevents creditors from taking any action against your company.

2. File a Proposal

The company works with Sands & Associates to formulate a proposal. Once the proposal is complete it is sent to creditors to be voted upon.

3. Meeting of Creditors to Consider the Proposal

Creditors vote on the proposal by mail or in person at a creditors’ meeting, held approximately three weeks after the proposal is filed.

The Trustee must file a report to the creditors on the affairs of the company and causes of financial difficulties. The Trustee must also present to the creditors his or her estimate of what the creditors would realize under both a bankruptcy and proposal.  The proposal must provide creditors with more than a bankruptcy.

If the proposal is accepted by the creditors and approved by the Court then all unsecured and secured creditors, in respect of which the proposal was made, are bound by the proposal; not just the creditors who voted in favour of the proposal.

If the proposal does not receive the required votes the company is immediately bankrupt effective on the date of the creditors’ meeting.

4.  Complete Proposal

Once accepted, all creditors and the business must adhere to the terms of the proposal.  The business has now achieved a ‘second chance’ at success.

 

Are creditors harassing you? Are the endless phone calls and collection letters causing you stress? Are you living on your credit cards? Are you unable to maintain your minimum payments? Are you being pursued for government debt? If you answered "yes" to any of these questions, you are not alone. In the twelve-month period ending July 2016, more than 66,000 Canadians were in the same financial position and found relief by seeing a Licensed Insolvency Trustee and filing personal bankruptcy. Another 57,000 Canadians settled their debt management problems by filing a consumer proposal.

If you are not a resident of British Columbia, more information is available about bankruptcy in Canada.

No matter what the cause of your financial difficulties, the Bankruptcy and Insolvency Act does not restrict a person from filing personal bankruptcy or making a consumer proposal. For example, you could be in financial trouble due to the loss of employment, a divorce, a leaky condo, medical problems, gambling, substance abuse, or poor money management. Regardless of the reason, filing personal bankruptcy or making a consumer proposal to your creditors is based upon your unique individual circumstances and is ultimately your personal decision. In BC, both of these remedies can only be filed by utilizing the services of Licensed Insolvency Trustees. At Sands & Associates, our Licensed Insolvency Trustees understand that most people file into bankruptcy or make a consumer proposal to creditors because of unfortunate circumstances, and we will guide you through this difficult time. 

Personal bankruptcy or a consumer proposal to creditors can provide shelter from the financial storm. Each will stop virtually all legal proceedings, garnishees, and phone calls from your creditors. These legal remedies provide a fresh start by pardoning your debts including credit card debts, lines of credit, legal bills, utility bills, medical bills, automobile insurance, judgments, government debts, etc. A Licensed Insolvency Trustee can help you understand the relative merits of each of these debt management options within BC. 

At Sands & Associates, we make filing personal bankruptcy or making a consumer proposal to creditors simple. We will arrange for a free initial consultation with one of our knowledgeable staff to discuss your financial status, and help you to determine whether bankruptcy or a proposal to creditors is the right choice for you.

Should you choose to file personal bankruptcy or make a consumer proposal to your creditors, we will process the necessary paperwork, arrange for possible meetings with creditors, provide two credit counselling sessions at our convenient offices located in Vancouver, Burnaby, New Westminster, Richmond, Surrey, Langley, Coquitlam, Maple Ridge, White Rock, Abbotsford, Chilliwack, Victoria, Nanaimo, Kamloops and Kelowna. 

After you have filed personal bankruptcy or a consumer proposal, you are required to perform your duties as outlined in the Bankruptcy and Insolvency Act. Some of the duties in a personal bankruptcy include keeping the Licensed Insolvency Trustee informed of your current address, declaring your monthly income and expenses for a minimum of nine months, attending two credit counselling sessions, and paying the Licensed Insolvency Trustee an amount that is dependent upon your income and the assets that you own. 

If this is your first personal bankruptcy, the earliest that you will be eligible for your discharge is nine months after your date of filing. A discharge from bankruptcy means that your debts will be eliminated and your creditors can no longer pursue you for the outstanding amount owed. It provides peace of mind and a chance for a fresh financial start. 

If you choose to make a consumer proposal to your creditors and if the creditors and the court accept it, the contract is binding between you and the creditors. A certificate of completion, which discharges your indebtedness, will be given as long as you meet the terms of the contract and remit the appropriate funds or assets to the Licensed Insolvency Trustee.