How to Solve a Company’s Financial Problems

If you are an entrepreneur like me, you know that even without a pandemic, difficulties can arise, and often the word that comes to mind at that moment is “bankruptcy.” But today, I am here to talk to you about an alternative to bankruptcy: the business proposal. – Mathieu Roy, LIT

Faced with mounting debt and the looming risk of bankruptcy, many business owners turn to the business proposal as a lifeline. Financial struggles are often a major source of stress, and this legal alternative to bankruptcy allows struggling companies to negotiate a realistic repayment plan with creditors while continuing their operations.

In this article, we will break down everything you need to know about the business proposal: its key benefits, the step-by-step process to initiate it, and the professional resources available to guide you.

Our goal is to give you a clear and practical understanding of how a business proposal works and how it can protect your business from bankruptcy. We want to equip you to make informed decisions and successfully navigate this challenging situation.

What Is a Business Proposal?

Financial difficulties in a business can come from many different sources. Loss of clients, rising costs, poor management decisions by leadership, or years of accumulated debt, all of these factors can impact a company’s cash flow (its liquidity). – Mathieu Roy, LIT

A business proposal, also called an ordinary proposal, is a legal process under the Bankruptcy and Insolvency Act of Canada. It allows an indebted company to present a repayment plan to its creditors. The main goal is to avoid bankruptcy and reach a workable solution for all parties involved. By filing a business proposal, a company can relieve itself of the heavy burden of debt while continuing its operations.

Key Steps in a Business Proposal

With the assistance of a licensed insolvency trustee, the debtor prepares a proposal that outlines a debt repayment plan. This repayment plan may include:

• Reduction of the debt amount: Creditors agree to accept less than what they are owed.
• Extension of the repayment period: The debtor has more time to pay off the debts.
• A combination of both: The plan can include a partial reduction of the debt and an extension of the repayment deadline.

The proposal is then filed with the Office of the Superintendent of Bankruptcy and submitted to the creditors for a vote. To be accepted, it must receive approval from the majority of creditors, both in number and in dollar value. Specifically, it must be approved by a majority of creditors representing at least two thirds of the total debt amount. Once accepted, the debtor is legally required to comply with its terms.

It’s important to note that in many cases, a Notice of Intention must be filed before submitting a business proposal. Filing this notice gives the business extra time to prepare the proposal and provides protection from creditors while it develops its recovery plan.

The Advantages of the Business Proposal for a Struggling Company

[A solution] that allows the business to continue operating and avoid bankruptcy. – Mathieu Roy, LIT

The main advantage of a business proposal is that it gives companies an alternative to bankruptcy. It makes it possible to negotiate a reduction of debts and an extended repayment period, while also offering protection from creditors.

For a business, a proposal creates many opportunities to achieve financial stability. It allows the company to improve its situation and restructure in a sustainable, long-term way. The business can dispose of non-performing assets and focus on its most profitable activities. This provides the opportunity to preserve jobs and reposition itself into the marketplace.

If your business is currently experiencing cash flow problems that could lead to bankruptcy, it is crucial to take action immediately. Concrete steps must be taken to get out of this situation. – Mathieu Roy, LIT

A business proposal is an effective solution for indebted businesses that want to avoid commercial bankruptcy. It is especially valuable for companies seeking relief from the burden of debt and looking to rebuild their financial health. It serves as a powerful tool for struggling businesses, by offering the opportunity to regain financial stability and address the warning signs of financial trouble before it’s too late.

Keep in mind that every financial situation is unique. That is why it is essential to consult a professional for personalized advice to put an end to your company’s financial troubles. A licensed insolvency trustee can explain your options and guide you toward the best solution for your situation.

Don’t hesitate to seek the expertise of one of our advisors at M. Roy & Associés to learn more about the business proposal. Contact us today for a free initial consultation, during which we will work with you to find the solution best suited to your needs.