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Cow Harbour True Lease Characterization Decision 'Released'
Whether a lease is a “true” or “finance” lease has been debated in Canadian courts for decades in many different contexts. The consequences of the categorization of a lease can have a material impact on the recovery that a lessor may have in an insolvency of its lessee. The Alberta Court of Queen's Bench recently released its decision in the matter of Royal Bank of Canada v. Cow Harbour Ltd. and 1134252 Alberta Ltd. on Jan. 23, 2012. This is one of the most important recent decisions in this debate and provides significant guidance as to how leases are to be classified in insolvency cases. We will review, at a high level, the tests that the court used in making its decision and offer an alternative analysis of what we believe should be the proper process.
Generally speaking, if a lease is determined to be a “true” lease, then the lessor is entitled to be paid rent during the restructuring period and may not be subject to certain costs associated with the restructuring. Accordingly, the economic impact of not being a “true” lease can be a very significant difference in the recovery obtained. Historically, the determination also impacted whether leases had to be registered under the Personal Property Security Act (“PPSA”), but recent changes to the PPSA have made this debate a non-issue. Unfortunately, the statutes governing Canadian insolvency legislation simply utilize the word “lease” but do not provide for any commentary or direction as to the meaning of the term. Reliance is placed on the common law and the common law, not surprisingly, is unclear. To complicate matters, tax and accounting have different tests for “true” and “finance” leases that are not common law driven but rules based.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
Coverage Issues Stemming from Dry Cleaner Contamination Suits
In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.