Kingston Kelsey’s, Montana’s franchises use NOI to preserve sale after CRA threat

1382769 Ontario Limited, operating as Kelsey’s Gardiners Restaurant, and 1622356 Ontario Limited, operating as Montana’s Restaurant, each filed notices of intention to make a proposal on May 1, 2026. The NOI filings are being used to stabilize two adjacent Kingston franchise restaurants while the companies pursue a going-concern transaction through a court-supervised sale and investment solicitation process.

The businesses operate Kelsey’s and Montana’s restaurants in adjacent leased premises at RioCan Centre Mall, 650 Gardiners Road, Kingston, Ontario. The restaurants employed 50 employees each, for a total of 100 employees, as of the filing date. Recipe Unlimited Corporation is the franchisor of both restaurants.

The filings followed a tax-driven liquidity threat that arose just as the companies were working toward a sale. According to the motion materials, the companies and an arm’s length purchaser agreed in 2025 on key terms for a going-concern transaction for the businesses and assets, the franchisor approved the purchaser and transaction, and the parties intended to close on or around May 4, 2026.

In the weeks before closing, however, CRA asserted defaults for HST and corporate income tax and threatened to garnish or freeze the companies’ bank accounts during the first week of May. The companies said that enforcement would have disrupted payroll, supplier payments, rent and franchisor payments, impaired franchise and lease rights, and made the planned transaction impossible.

The record frames the proceedings as a narrow, sale-preservation filing rather than an operating collapse. The companies say they are current with ordinary-course creditors other than CRA, are reviewing CRA’s claims, and would be unable to satisfy those claims in full, if valid and enforceable, other than from proceeds of a comprehensive going-concern transaction. The proposal trustee reported that CRA claimed, as of May 1, that both companies owed HST collected but not remitted and unpaid corporate taxes, while noting that it was still confirming the potential indebtedness with management.

The cash flow materials show the businesses continuing to trade through the NOI period without interim financing.

The proposed restructuring path is built around the pre-filing buyer. , who has agreed to act as stalking horse bidder. The companies intend to work with the purchaser and Recipe Unlimited to convert the existing transaction into a stalking horse bid, develop SISP terms and seek approval of the SISP and stalking horse bid, run the sale process, return for approval of the successful bid, close the transaction and distribute proceeds according to priorities.

Albert Gelman is the proposal trustee. Counsel is Perley-Robertson, Hill & McDougall for the companies, and Miller Thomson for the proposal trustee.