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Insolvency (BIA) - Shareholders. Proex Logistics Inc. (Re) [BIA standing of corporate shareholders]
In Proex Logistics Inc. (Re) (Ont CA, 2025) the Ontario Court of Appeal dismissed an insolvency appeal, here brought against a "motion judge’s decision to deny ... standing, and to allow the trustee’s motion to consolidate estates, pay the claims of the respondent ... distribute any surplus to the equity holders, and approve the trustee’s report".
Here the court considers the standing of corporate shareholders in insolvency (here, BIA) proceedings:(e) No Standing on Account of Equity Interest
[108] Rana argues that his status as a shareholder should somehow grant him the ability to challenge the Wrongful Conduct Claim. I do not accept this submission.
[109] In most insolvency proceedings, equity holders have no economic interest in the outcome of the proceeding and have no standing to interfere. However, in rare circumstances, an equity owner can be a creditor. The BIA defines “equity claim” as:a claim that is in respect of an equity interest, including a claim for, among others,
(a) a dividend or similar payment,
(b) a return of capital,
(c) a redemption or retraction obligation,
(d) a monetary loss resulting from the ownership, purchase or sale of an equity interest or from the rescission, or, in Quebec, the annulment, of a purchase or sale of an equity interest, or
(e) contribution or indemnity in respect of a claim referred to in any of paragraphs (a) to (d). [110] No payment can be made in respect of an equity claim until all claims other than equity claims are satisfied in full. In the vast majority of insolvencies, this will never occur. However, the BIA provides that where there are sufficient funds to repay all debts and liabilities of a bankrupt, an equity claim can be a “claim”, and one holding an equity claim can be a “creditor”. For example, s. 54.1 provides that “creditors having equity claims” are to be classed together for proposal voting purposes, and s. 140.1 provides that “A creditor is not entitled to a dividend in respect of an equity claim until all claims that are not equity claims have been satisfied.” In such cases, an equity holder can be a creditor.
[111] In this case, Paul’s Wrongful Conduct Claim is an equity claim. On pages 7-8 of the Trustee’s Second Report, the Trustee also classified Paul’s Ownership Claim (his claim for his right, as a shareholder, to receive a proportionate distribution of the corporate debtors’ assets if any remain after all debts and liabilities are satisfied) as an equity claim.
[112] Nevertheless, holding an equity interest alone is not enough for a provable equity claim or creditor status. As noted above, in most cases shareholders have no economic interest in an insolvency proceeding. Nor can equity holders “bootstrap” their way into s. 135 by contending that, if their challenge to an accepted claim is successful, they will then become creditors or their theoretical likelihood of recovery will increase[3].
[113] Based on Rana’s arguments before me, I see no reason to disturb the motion judge’s conclusion that Rana’s failure to file a timely and well-supported proof of claim means he is not a “creditor” and cannot access s. 135(5).
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