A doctor had been assessed by the Canada Revenue Agency for both outstanding personal income taxes and unremitted employee source deductions. The total debt was in excess of $1,500,000. The taxpayer had unsuccessfully appealed the quantum of the assessments.
While the doctor attempted to restructure his professional practice, he was without the resources to satisfy the amounts owing to CRA and other creditors. As a result of the high level of indebtedness, continuation of the professional practice was at risk.
As an alternative to bankruptcy, the Debtor elected to make a Proposal to creditors.
The debtor initially filed a Notice of Intention to Make a Proposal and then filed a proposal. Rosen Goldberg Inc. was appointed Trustee.
The specific terms of the proposal required extensive negotiations by the trustee and the debtor’s financial advisor with both the Canada Revenue Agency and secured lenders.
Ultimately, a proposal was accepted whereby the claim of Canada Revenue Agency for unpaid source deductions would be paid within a prescribed time frame and the payment to remaining creditors would be paid through the issuance of redeemable non-interest bearing promissory notes.
The proposal was ultimately accepted by creditors and received court approval.
The proposal was advantageous to both the debtor and creditors in that: