Journal of Corporate Renewal

Sandra Abitan (left) and Marc Wasserman (center) are partners, and Dave Rosenblat is an associate in the Insolvency & Restructuring group of Osler, Hoskin & Harcourt LLP. Abitan is located in the firm’s Montreal office and advises public and private corporations, equity sponsors and strategic purchasers, financial institutions, and monitors, as well as Canadian and U.S. asset-based lenders and liquidators. Wasserman practices corporate and commercial law in the areas of corporate restructuring, financial services, and private equity in the firm’s Toronto office.

Rosenblat is also located in Osler, Hoskin & Harcourt’s Toronto office.

main proceeding. Without written reasons for the court’s decision, uncertainty remains as to what courts will do when factual circumstances deviate from those in Catalyst.

For example, will the nerve center of a U.S. subsidiary shift from a foreign jurisdiction as certain management responsibilities are delegated? If so, what threshold must be passed before such a shift occurs? In other words, how much decision making must occur beyond the U.S. border before a company’s nerve center will be found to reside in a foreign jurisdiction?

It will also be interesting to see how U.S. creditors react to the Catalyst decision. Objecting to a recognition proceeding may be used to gain a strategic advantage in commercial negotiations by creating uncertainty and forcing a debtor to potentially have more than one plenary proceeding.

Although the objecting noteholders opposed the motion on legal principles, one can speculate as to whether they actually wanted to deal with the U.S.

Catalyst entities under a Chapter 11 proceeding or whether the position they took was really an attempt to gain leverage in the commercial negotiations.

It is important to note that the Catalyst
entities had previously pursued a
consensual restructuring under
the Canada Business Corporations
Act and were in negotiations with
their major stakeholders for some
time prior to the commencement
of the Chapter 15 proceedings. The
uncertainty surrounding recognition
of a foreign main proceeding may
open the door for unhappy creditors
to try to use the objection process
strategically to influence the outcome
of commercial negotiations. J

1 See In re Fraser Papers, Inc., Case No. 09- 12123 (Bankr. D. Del. July 13, 2009) and In re Angiotech Pharm., Case No. 11-10269 (KG) (Bankr. D. Del. Feb. 22, 2011).

GREENSBORO CHARLOTTE ATLANTA JACKSONVILLE RICHMOND

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