Filing a Notice of Intention to Make a Proposal (NOI) in Ontario provides a distressed business with an immediate, automatic 30-day stay of proceedings. This freezes creditor lawsuits and CRA garnishments, giving you breathing room to restructure your debt with the help of a Licensed Insolvency Trustee.
When an Ontario business faces overwhelming financial pressure, avoiding bankruptcy is often the top priority. Whether your company is located in Toronto, Mississauga, or Ottawa, struggling with cash flow issues can threaten everything you have built. The Bankruptcy and Insolvency Act (BIA) offers a powerful tool for commercial restructuring known as a Notice of Intention to Make a Proposal (NOI). This legal mechanism temporarily halts aggressive collection actions, allowing your business time to negotiate a viable payment plan with its creditors. 💼
Understanding how to properly file an NOI is essential for B2B companies looking to survive a financial crisis. The process is highly regulated and requires the expertise of specialized professionals. Generally, navigating this legal framework demands careful planning, transparent financial reporting, and strict adherence to federal timelines. By taking proactive steps, many Ontario businesses successfully reorganize their debts and return to profitability without ever declaring bankruptcy. 📈
Step-by-Step Process to File an NOI in Ontario
The restructuring process under the BIA applies federally across Canada, but you will interact with regional offices and local courts, such as the Ontario Superior Court of Justice, if litigation or extensions are required. Whether your operations are centred in London or Thunder Bay, the steps below outline how a typical business initiates an NOI.
Step 1: Consult a Licensed Insolvency Trustee (LIT)
An NOI cannot be filed directly by the business owner or a standard corporate lawyer. By law, you must engage a Licensed Insolvency Trustee (LIT) to act as the proposal trustee. The LIT will review your company’s financial records, assess its viability, and help determine if an NOI is the correct strategy compared to other options like a standard Division I Proposal or full bankruptcy. 🤝
Step 2: Draft and File the NOI Document
Once you retain an LIT, they will prepare the formal Notice of Intention. This document is then filed electronically with the Office of the Superintendent of Bankruptcy (OSB). The very moment the OSB registers the NOI, a nationwide stay of proceedings goes into effect. This means creditors, including the Canada Revenue Agency (CRA), must immediately stop all lawsuits, wage garnishments, and asset seizures. ⏱️
Step 3: Notify Creditors and Appoint Monitors
Within five days of filing the NOI, your trustee is legally required to send a copy of the notice to all known creditors. At this stage, the LIT also acts as a monitor, overseeing the company’s ongoing business operations and ensuring that no assets are improperly moved or hidden. The business continues to operate, but it is closely scrutinized to protect creditor interests. 🔍
Step 4: Prepare the Cash-Flow Statement
Within 10 days of filing the NOI, the business must file a projected cash-flow statement with the OSB. This document, usually prepared with the assistance of an accountant or financial advisor, proves to the trustee and creditors that the company has enough working capital to continue operating and pay for necessary expenses during the 30-day restructuring period. 💰
Step 5: Draft and Present the Formal Proposal
You have an initial 30 days to draft a comprehensive Division I Proposal, which is essentially the new contract offering reduced debt payouts or extended payment terms. If you need more time, your insolvency lawyer can apply to the Superior Court of Justice for an extension. Once the proposal is ready, creditors will vote on it at a formal meeting. If accepted by the required majority, the court will formally approve it, binding all unsecured creditors to the new terms. 📝
How Much Does it Cost in Ontario?
Restructuring a mid-to-large corporate entity is a significant financial undertaking. While fees vary drastically depending on the size and complexity of the business, here is a general breakdown of what to expect in Ontario:
- OSB Filing Fees: The standard government filing fee for a Division I Proposal is approximately $150 CAD, but a mandatory levy is also deducted from distributions later.
- Licensed Insolvency Trustee Fees: LITs generally charge hourly rates. For a standard corporate NOI, upfront retainers typically range from $10,000 to $30,000 CAD or more.
- Corporate Lawyer Fees: Retaining a local business law firm to handle court extensions and creditor negotiations typically costs between $350 and $800 CAD per hour.
- Court Application Fees: If an extension is needed, filing a motion at the Superior Court of Justice generally incurs a fee of around $330 CAD.
How Long Does the Process Take?
The timelines for an NOI are strictly enforced under the BIA. The initial stay of proceedings lasts exactly 30 days. If your business cannot formulate a proposal in that time, you must apply to the court for a 45-day extension. You can seek multiple extensions, but the absolute maximum time allowed from the date of filing the NOI to filing the actual Proposal is six months. If you miss a deadline or the court denies an extension, the business is automatically placed into bankruptcy. ⌛️
Frequently Asked Questions (FAQ)
Can the CRA still audit or collect taxes during an NOI?
Once the NOI is filed, the CRA is bound by the stay of proceedings for pre-filing debts, meaning they must stop garnishments and collection efforts. However, your business must continue to pay all post-filing taxes, such as current HST and payroll deductions, exactly on time.
What happens if the creditors vote against the Proposal?
If the creditors reject your Division I Proposal at the meeting, your business is instantly and automatically deemed bankrupt under the BIA. The trustee will immediately begin liquidating corporate assets.
Are company directors personally protected by the NOI?
Generally, a corporate NOI stays claims against the company, but directors can sometimes still face personal liability for unpaid employee wages, vacation pay, and unremitted CRA source deductions. You may want to consult an Ontario insolvency lawyer regarding director protections.
Do we need to close the business while the NOI is active?
No, the primary purpose of the NOI is to allow the company to keep trading and operating while protecting it from creditor lawsuits. You remain in control of the business, but under the careful supervision of the trustee.
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