Insolvency proceedings in Canada have expanded well beyond the familiar model of a debtor seeking time to negotiate with its creditors. Courts now accept the Companies’ Creditors Arrangement Act1 (“CCAA”) as a framework for orderly liquidations and business sales. Creditor-led CCAA proceedings are also on the rise. Together, these trends have blurred the lines between restructuring and creditor enforcement.
The growing use of third-party releases marks another shift in Canadian insolvency practice. Since the landmark 2008 Metcalfe2 decision, courts have recognized that these releases can help secure contributions essential to a successful restructuring, as they give parties an incentive to commit funding or other support needed for a collective resolution. However, as third-party releases have become more common, courts are taking a closer look at the contributions offered to justify them.
Two recent Québec proceedings, Groupe Finstar Inc. (“Finstar”) and Asbestos Corporation Limited (“ACL”), illustrate the opportunities and risks for stakeholders who use insolvency proceedings to protect their interests, whether by initiating them or providing the support needed to sustain them.
Creditor-led proceedings: initiating the process and influencing its outcome
The Finstar receivership involved an unusual set of facts. In a typical receivership, a senior secured lender seeks an orderly sale of the assets securing its loan. Under section 243 of the Bankruptcy and Insolvency Act, a court may, on the application of a secured creditor, appoint a receiver over all or substantially all of an insolvent person’s business property. While this remedy is not reserved for first-ranking secured creditors, their position generally gives them considerable influence over the proceedings, subject to the receiver’s independence and its duties to all affected stakeholders. Their influence stems from their direct economic interest in the outcome: in many cases, the proceeds are not enough to repay even the first-ranking creditor.
In Finstar, however, the creditor seeking the receivership order, Carl Dumont, held security over shares of key entities within the corporate group, as well as mortgages over certain properties. Taking both forms of security into account, the Court found3 that he met the requirement of holding security over all or substantially all of the property the debtor used in its business.4
Mr. Dumont’s position differed materially from that of the lenders holding first-ranking security directly over the real estate. Although he was legally a secured creditor, his interest in preserving residual value within the corporate group resembled a shareholder’s interest in important ways.
This created an unusual tension. The lenders with security over individual properties resisted having their collateral drawn into the complex and costly collective sale process that Mr. Dumont favoured. Mr. Dumont then sought to continue the proceedings under the CCAA, which is more often used for going-concern sales to new owners. The Court refused. It found that the existing receivership could carry out the proposed sale and that the anticipated benefits of proceeding under the CCAA did not justify switching.5
Ultimately, the receiver did not obtain a satisfactory offer for all or substantially all of the portfolio. Several secured lenders, including Mr. Dumont, acquired individual assets through credit bids. The process Mr. Dumont had initiated thus unfolded under independent supervision and was shaped by competing creditor interests. He later challenged, without success, aspects of the receiver’s cost-sharing protocol, arguing that he bore a disproportionate share of the costs. At the time of writing, the receivership is ongoing, and some transactions have yet to close.
Finstar shows that receivership can be a double-edged sword for creditors without direct first-ranking security over the underlying assets. The collective sale process they initiate may produce an outcome they had hoped to avoid. Before applying, a creditor should assess priority rankings, the receiver’s independent role, the realization strategy, and the potential cost allocation.
Solvent third parties: what contribution warrants protection?
The ACL restructuring offers a different perspective on proceedings driven partly by stakeholders other than the debtor. ACL is a Québec company that stopped mining asbestos decades ago, and it faced thousands of asbestos-related claims in the United States. It resisted demands to produce corporate records, invoking Québec’s Business Concerns Records Act (CQLR, c. D-12), which restricts the disclosure of business records outside the province in response to foreign demands. In 2023, this led the South Carolina Court of Common Pleas to hold ACL in contempt, strike its pleadings, and appoint a receiver with powers over its insurance assets and U.S. litigation. According to the Superior Court of Québec,6 the receiver’s appointment triggered a “race to the courts,” while discovery sanctions in other jurisdictions led to substantial default judgments. With its ability to manage and defend the claims severely compromised, ACL and its insurers sought CCAA protection. They wanted to establish an orderly claims process that would prevent a minority of claimants from exhausting the available insurance coverage at others’ expense.
The insurers obtained a stay of proceedings protecting them from litigation, even though they were solvent and potential U.S. claimants opposed it. In deciding whether that protection was necessary, the Court drew on Metcalfe and other Canadian decisions on third-party releases, while recognizing that an interim stay serves a different purpose.7 It found that the insurers’ financial participation, including substantial interim funding, was central to the proposed restructuring. A stay could preserve the conditions needed for a collective resolution, even though it also benefited the insurers themselves. An interim stay only pauses proceedings; it does not extinguish claims. Any future third-party release would require separate court review of its necessity, the contribution behind it, and its impact on affected claimants.
Although ACL is not, strictly speaking, a creditor-led case, it illustrates the protection available to stakeholders who make an essential material contribution to a restructuring. This is especially true where their participation is needed not only to fund an eventual arrangement but also to sustain the proceedings that produce it. A solvent stakeholder seeking such protection should be ready to show why its concrete contribution is necessary and why the relief sought is proportionate.
The protection granted to ACL’s insurers should also be considered alongside recent decisions scrutinizing third-party releases. For example, in Lion Electric,8 the Superior Court of Québec declined to extend the broad release sought for directors and officers to certain pending class action claims. The Court stressed that simply performing their ordinary duties was not enough to justify a release. It also found that the applicants had not shown the meaningful contribution each proposed beneficiary made to the restructuring. The decision is under appeal.
The cross-border dimension is equally important. A key issue to watch is how the Canadian orders will continue to be recognized and enforced in the United States under Chapter 15 of the U.S. Bankruptcy Code, the U.S. regime for cross-border insolvency cases. The recognition proceedings have already drawn attention from insolvency practitioners, particularly to the protection for solvent third parties and the application of Canadian claims procedures to U.S. asbestos claimants. While U.S. courts have recognized the Canadian proceedings and enforced the claims bar date orders (the deadlines for filing claims), those decisions do not settle whether a future arrangement or third-party release will be enforced. That question may prove critical to the global resolution sought by ACL and its insurers.
ACL’s path to a final resolution remains uncertain. The case is still at the claims-adjudication stage, and it is not yet clear whether a formal plan will be put to a creditor vote. The key open questions are the terms of any global resolution, whether the interim stays will continue, and what will justify any final releases.
Conclusion
As Canadian insolvency practice continues to evolve, Finstar and ACL underscore the importance of aligning procedural flexibility with the economic realities and competing interests in each case. Further developments stemming from these cases will help clarify how courts balance the contributions needed to sustain these processes with the safeguards required to ensure a fair and binding outcome. For creditors, investors, insurers, and other stakeholders, the strategic value of these proceedings depends not only on the remedies available but also on how those remedies advance the collective process while respecting affected parties’ rights.
Éric Savard, Justin Dépatie, and Charles Lapointe are partners in the Litigation group at Langlois Lawyers, where they work alongside Rémi Leprévost in insolvency and restructuring.
1 R.S.C., 1985, c. C-36.
2 Metcalfe & Mansfield Alternative Investments II Corp., (Re), 2008 ONCA 587.
3 Séquestre de Groupe Finstar inc., 2026 QCCS 1280, paras. 74-80.
4 This is one of the four objective criteria developed in the case law for the appointment of a receiver. See Séquestre de Media5 Corporation, 2020 QCCA 943.
5 Séquestre de Groupe Finstar inc., 2026 QCCS 2037.
6 Arrangement relatif à Asbestos Corporation Limited, 2025 QCCS 2715, para. 24.
7 Arrangement relatif à Asbestos Corporation Limited, 2025 QCCS 2715.
8 Arrangement relatif à Lion Electric Company, 2025 QCCS 4192, leave to appeal granted in Arrangement relatif à Lion Electric Company, 2026 QCCA 211.
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Rémi Leprévost focuses his practice on all aspects of civil and commercial litigation, including business law and insolvency and restructuring. He regularly intervenes at all stages of litigation, from providing strategic advice to representation before the courts. He frequently appears before various judicial bodies, including the Superior Court of Québec and the Court of Appeal, as well as in complex commercial arbitration.
A seasoned litigator, he stands out for his strategic, pragmatic, and results-driven approach, both when handling complex large-scale litigation and applying for urgent extraordinary remedies requiring fast, tangible outcomes, such as Anton Piller and Norwich orders, Mareva and other injunctions, and seizures before judgment.
Owners, developers, contractors and other real estate and construction businesses regularly seek his guidance on construction and public contract litigation. Rémi also represents both public and private companies in a variety of areas of business law, such as shareholder disputes and transactional and commercial litigation.