CCAA stay rejected, receiver appointed over BC trucking companies

V K Delivery & Moving Services Ltd. (Re), 2025 BCSC 2454
What is the test for terminating CCAA proceedings and appointing a receiver?

Summary: The British Columbia Supreme Court has refused to extend CCAA protection for the VK Group and instead appointed a receiver at the request of Royal Bank of Canada, concluding that the proceedings no longer served the remedial purposes of the CCAA. Although the monitor accepted that the debtors had acted in good faith and continued to generate revenue, the Court found that after nearly seven months under protection, the VK Group remained cash flow negative, had not produced a viable plan of arrangement, and was making insufficient progress toward stabilizing its operations. The Court placed particular weight on the fact that RBC would not be paid in full under the proposed financing, held an effective veto over any plan, and faced ongoing collateral depreciation while stayed from enforcement. In those circumstances, the Court held that extending the stay would merely buy time for the debtors at RBC’s expense, denied the stay extension, and granted the appointment of a receiver under section 243 of the BIA.

The VK Group was subject to proceedings commenced pursuant to the Companies’ Creditors Arrangement Act on May 16, 2025. The stay of proceedings in effect was set to expire on December 17, 2025. The VK Group sought to extend the stay of proceedings to February 27, 2026, arguing that it continued to generate revenue of approximately $3.131 million per month, had demonstrated the ability to make large payments to creditors while under CCAA protection, and that it had the support of its proposed lender, BVD.

The Monitor noted that there remained uncertainty regarding the timeline for the preparation of the financial information required for the BVD Financing and that the VK Group did not appear to have made substantial progress toward meeting the other BVD Financing Pre-Conditions. Nevertheless, the Monitor believed that the VK Group continued to act in good faith and with due diligence. It believed that there remained a reasonable prospect of the VK Group making a viable plan of arrangement (“POA”) if the stay extension were granted. The Monitor cautiously recommended that the Court grant a stay extension to February 27, 2026 on the basis that the petitioners file a POA prior to the end of this period.

Royal Bank of Canada opposed the stay extension and requested an order pursuant to s. 243(1) of the Bankruptcy and Insolvency Act appointing MNP Ltd. as a receiver and manager over the VK Group because the VK Group had not produced a viable POA. RBC argued that it had a controlling vote in respect of the POA that was, effectively, a veto, and it would not support a POA that did not fully pay it out. RBC further argued that it had lost confidence in the VK Group and by extension, the Monitor, and it resisted involuntarily enabling the VK Group’s operations while being prevented from asserting its contractual right to have a receiver appointed.

The court may grant a further extension of the stay if it is satisfied that:

1. the petitioner has acted and is acting in good faith and with due diligence; and

2. circumstances exist that make a stay of proceedings appropriate.

In considering if an extension of the stay period is appropriate, the court determines whether the extension advances the remedial purposes of the CCAA. The purpose of the CCAA is to “facilitate the survival of going concerns” by “permitting the debtor to continue to carry on business and, where possible, avoid the social and economic costs of liquidating assets”. The “chances for successful reorganization are enhanced when participants achieve common ground, and all stakeholders are treated advantageously and fairly, as circumstances permit”. A stay extension should only be granted in furtherance of the CCAA’s purpose of facilitating a POA between the debtor companies and their creditors.

Other factors to be considered on an application for a stay include:

1. the debtor’s progress during the previous stay period(s) toward a restructuring;

2. whether creditors will be prejudiced if the court grants the extension; and

3. the comparative prejudice to the debtor, creditors, and other stakeholders in not granting the extension.

The CCAA does not impose a maximum stay period as companies with significant debts sometimes require flexibility and additional time to deal with their complex facts and claims. Examples of situations where the courts have lifted stay orders include when the plan is likely to fail or after the lapse of a significant time period, if the debtor company is no closer to a proposal than at the commencement of the stay period.

The VK Group had been cash flow negative for most of the CCAA proceedings. It was not generating enough cash to pay its liabilities as they came due. Over the past ten months, the VK Group’s indebtedness had increased by about $840,000, which was larger than the payments of $800,000 made to the CRA. As a result, the interest on the indebtedness was accruing faster than the VK Group was paying down its arrears to the CRA. After almost seven months of CCAA protection, the VK Group had not produced a POA. The maximum amount of funds available to RBC from the BVD Financing, assuming the financing was advanced immediately, was $6.863 million, leaving a shortfall of approximately $515,500. Accordingly, RBC would not be fully repaid. The longer RBC was stayed from enforcing against its security, the more its collateral would depreciate.

The Court was not convinced that there was utility in continuing with the CCAA proceedings. A further extension was not justified because the VK Group was not conducting itself in good faith and it was making insufficient progress towards stabilizing its operations. A continuation of the CCAA stay of proceedings would simply buy the VK Group more time at the expense of RBC. Even if a POA were completed, RBC had the power to effectively veto it. Extending the stay merely delayed this expected outcome.

The Court denied the extension of stay period sought by the VK Group, and granted RBC’s application for the appointment of a receiver.

Judge: The Honourable Justice Basran

Professionals involved:

• William Skelly and Jess Reid of MLT Aikins for RBC

• Brad Martyniuk and Haoyu Nie of Lindsay Kenney for the VK Group 

• Daniel Nugent of Richards Buell Sutton for the monitor, Crowe MacKay

• Aminollah Sabzevari for Canada Revenue Agency