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CCCA_V4No3_Restructuring-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 9/2/10 12:43 PM Page 30 Feature T he recent revisions to the federal government’s bankruptcy and restructuring statutes that fully came into force last year were supposed to make it easier for businesses in financial dis- tress to renegotiate their debts and reorganize their enterprises.To this end,the changes cod- ified rules governing the ability of debtors to get interim financing, disclaim contracts and sell assets.What’s more, the new statutes give employees and receivers greater protections. But James Farley, Q.C., once called “Canada’s top bankruptcy judge” by The Globe & Mail, says the amendments are “seriously flawed.” “The drafting left many loopholes that are now being jumped on and exploited aggres- sively,” warns Farley, a former judge on the Ontario Superior Court of Justice, now coun- sel with the Toronto office of McCarthy Tétrault LLP. As a judge, Farley presided over some of the countries biggest insolvencies, including Air Canada, Stelco, Laidlaw and Eaton’s. He worries that the amended statutes will handcuff judges who will no longer have the flexibility to make the right decisions in a fast-moving situation like a looming bankruptcy.“We should trust judges to come up with a balanced approach if not constrained by statute,” he argues. In particular,Farley objects to the inclusion of a provision allowing debtors to apply to court for an order allowing them to unilaterally terminate contracts. Section 32 of the Companies’ Creditors Arrangement Act (CCAA) doesn’t apply to financing agreements, leases of real proper- ty, eligible financial contracts or collective agreements. Even so, Farley fears that it may be regarded as “an open invitation for anyone to take a swing at almost any contract.” Canada’s sweeping overhaul of insolvency and restructuring legislation aims to help struggling businesses find their footing. Here’s what to watch for under the new regime. PAUL EEKHOFF 30 CCCA Canadian Corporate Counsel Association FALL 2010