Ontario Solicitor Bar Practice Exam

The first step in a corporate reorganization under the Bankruptcy and Insolvency Act (BIA) typically involves the debtor company making a proposal to its creditors. This proposal outlines how the company intends to address its financial difficulties and can include various options such as restructuring debt, extending payment terms, or other arrangements to satisfy creditors.

This initial proposal is crucial because it formally communicates the debtor's intentions and provides a framework for negotiations with creditors. It enables the company to remain in control of the restructuring process while seeking to maintain operations and preserve value for stakeholders.

The process typically unfolds with the debtor assessing its financial situation, developing a viable proposal, and then presenting it to creditors for consideration. The creditors will then review the proposal before engaging in discussions that may lead to a vote on the plan.