The unique role of the monitor in Canadian restructurings


Financier Worldwide Magazine

April 2014 Issue

April 2014 Issue

The mandatory court appointment of a ‘monitor’ in Canadian proceedings under the Companies’ Creditors Arrangement Act (CCAA) represents a policy approach to restructurings that has material benefits if utilised thoughtfully.

A monitor is generally an accounting or financial advisory firm that must also be licensed to act as a trustee in bankruptcy under the Canadian Bankruptcy and Insolvency Act which is a federally regulated licensing program. Accordingly, monitors tend to be those professionals inside Canadian accounting or financial advisory firms that have obtained their Chartered Insolvency and Restructuring Professional (CIRP) designation from the Canadian Association of Insolvency and Restructuring Professionals. Monitors are required to be independent from the debtor company and, therefore, as an example, cannot have been related to a director or have been the auditor of the debtor company at any time during the two preceding years of their appointment. Monitors are also statutorily mandated to act honestly and in good faith and comply with a prescribed code of ethics. Monitors have statutorily mandated powers, duties and liability protections pursuant to the CCAA in addition to those that may be provided for in the court orders pertaining to their appointment.

As such, the monitor is an independent officer of the court who essentially implements the court’s commercial oversight of the restructuring proceeding. In this regard, the monitor is not an adversary in the restructuring proceeding and generally avoids taking litigation positions directly against any party. Rather, the monitor will generally restrict itself to providing the court with its views as to the commercial consequences of the positions of the parties. 

The monitor is the party who assesses and comments on the reasonableness of any cash flow forecasts submitted by the debtor company. The monitor is also the party that typically conducts a liquidation analysis of the debtor company and provides a report on the reasonableness and fairness of the debtor’s plan of arrangement or compromise analysing whether or not such a plan treats any creditor class any worse than they would otherwise be treated in a bankruptcy (i.e., a Chapter 7 type liquidation). As such information is reported on by the monitor, as an independent officer of the court, litigation over such matters (which could very well be extensive) is essentially avoided.

As the court’s officer, the monitor can also use its role to facilitate the numerous administrative matters that arise with a view to maintaining the efficient scheduling of all necessary court appearances during the restructuring. As this can be done as a dialogue with the key parties in interest on any motion, scheduling disputes can be kept to a minimum or virtually eliminated.

Perhaps most importantly, however, as the court’s independent and neutral officer the monitor can play an influential role in assisting the parties in resolving or otherwise significantly narrowing their disputes. Essentially, the monitor can proactively attempt to mediate disputes as they arise inside a restructuring with the considerable advantage of indirectly speaking for the court on the matter. Ultimately, as mentioned above, the monitor will have to provide the court with its views on the commercial impacts of the parties’ positions. In so doing, it can engage the parties to any dispute in a discussion which results in the monitor expressing its views as to the commercial impacts and its likely recommendations to the court. As the court often gives considerable deference to the views of its officer who is ‘on the ground’, the monitor’s recommendations on such matters carry significant weight. This context, therefore, often provides a conducive forum for reaching commercially optimal outcomes to disputes as they arise. To the extent that disputes can be resolved in this fashion leading to consent orders on issues, significant litigation time and costs are saved and appeal risk eliminated. Such results are of material benefit to any complex restructuring effort.

The status and role of the monitor can also be proactively used to assist in any necessary deal making during the restructuring, be it inside a formal sales process or otherwise in connection with some critical operational matter. Given the monitor as a neutral party and officer of the court, in negotiations between the debtor company and others the monitor can keep the negotiating parties in check. The monitor can push both the debtor company and the relevant counterparty closer to a deal by taking an independent view of the reasonableness and fairness of the positions being taken by the parties during the negotiations. This role can also be used to bring parties back to the negotiating table under circumstances where they otherwise would not have returned. In so doing, the monitor can facilitate the conclusion of operationally necessary deals with commercially optimal terms which are often not achievable by the debtor company alone. As an example, a sealed tender auction process for the sale of the debtor’s business or certain of its assets generally tends to garner significantly more credibility if run by the monitor (or at least with the monitor’s oversight) rather than by the debtor alone.

The role of the monitor in Canadian restructuring proceedings, when thoughtfully employed, can be used to make the restructuring litigation docket more efficient, eliminate or reduce the scope of disputes, obtain resolutions that avoid potentially extensive litigation and eliminate appeal risk, and facilitate the consummation of deals that otherwise would not have been made or on likely better commercial terms for the parties in interest. Accordingly, the use of an independent monitor as an agent to facilitate the successful restructuring of debtor companies should have obviously considerable advantages over other processes that are focussed primarily on an adversarial approach among the stakeholders and as against the debtor company.


Robin B. Schwill is a partner at Davies Ward Phillips & Vineberg LLP. He can be contacted on +1 (416) 863 5502 or by email:

© Financier Worldwide


Robin B. Schwill

Davies Ward Phillips & Vineberg LLP

©2001-2019 Financier Worldwide Ltd. All rights reserved.