A Receiver is usually an independent third party appointed by the Court. The Receiver must be licensed as a Licensed Insolvency Trustee by the Office of Superintendent of Bankruptcy.
The Receiver’s role will be detailed in the Court order authorizing its appointment. Generally, the Receiver will take possession of the assets that are subject to its engagement, secure the assets, and realize upon the assets for the benefit of the creditors.
It depends on the proceeds realized from the sale of the assets and the priority of creditor’s claims. After realizing upon the assets, the Receiver will need to consider the claims of secured lenders, prior ranking claims, deemed trusts, statutory liens, and the costs of administrating the Receivership prior to repaying unsecured creditors. Accordingly, an unsecured creditor will only be paid if there are any proceeds remaining after the payment of priority claims.
An employee is entitled to a priority claim for unpaid wages and vacation pay, which remain outstanding six months before the initial Bankruptcy event or the date of Receivership. The amount of the priority is limited to $2,000 per employee with an additional $1,000 for disbursements made by a travelling salesperson. The priority claim for unpaid wages does not include termination and severance pay.
The priority amount is paid out of the proceeds from the realization of assets after taking into account deemed trusts, statutory liens, and the rights of unpaid suppliers under section 81.1 of the BIA. The priority claim for employee wages and vacation pay will rank ahead of secured creditors only to the extent of realization from current assets (cash, inventory and accounts receivables).
WEPP is a program delivered by Service Canada, which reimburses eligible employees for unpaid wages, vacation pay, severance and termination pay that are owed after an employer becomes Bankrupt or is subject to a Receivership under the Bankruptcy and Insolvency Act.
The maximum payment for an eligible employee is equivalent to four weeks of insurable Employment Insurance earnings less amounts prescribed by regulations. Payments under WEPP will be made directly by Service Canada and not by the Receiver or Trustee. If a payment is made to an employee by Service Canada, then Service Canada will be entitled to any dividend payments made by the Receiver or Trustee to the employee, up to the amount paid by Service Canada.
All important information relating to the Receivership will be posted on the Receiver’s website: www.alvarezandmarsal.com/DMEGroup