• Question 1. Bob and Reggie own and operate a sporting goods company (B&R Co) which is in severe financial difficulty. Bob and Reggie are directors of B&R Co. They are also creditors of B&R ( to the extent of about $100,000 – although neither of them ever got around taking security for their debit). Among other things, B&R Co has almost no bank debt and almost no secured creditors, the company is well behind in its rent on its one location where it is a tenant. B&R Co has also failed to pay $500,000 which it owes to Provincial Government Agency. Recently, a representative of the agency visited the business and said that if the amount is not paid right away, there will be serious consequences. The Government representative said that the Government agency has a deemed trust for the amount in question. The representative also said that Bob and Reggie need to be concerned personally about what may happen. Bob and Reggie feel that B&R Co has a valuable asset in the form of a lawsuit which B&R Co could bring against a very large supplier who supplied faulty sporting goods equipment. However, B&R Co does not have money to pursue the lawsuit. Reggie’s uncle Bill is a trustee in bankruptcy. He is of the view that B&R Co should voluntarily assign itselt into bankruptcy. Reggie and Bob have asked Bill what are some of the things that could happen with the government claim and the potential lawsuit in a bankruptcy. Question 2. Smith Company Ltd. (Smith Co) and Jones enterprises Ltd (Jones Co) are both in the forestry business and have done business together for decacdes. Smith Co has supplied raw lumber products to Jones Co. and Jones Co produces plywood and other finished wood products. As well as being a supplier to Jones Co., sometimes Smith Co also purchases finished product from Jones Co because Smith also carries “sidelines carpentry/home renovation business. Unfortunately, these are hard times in the industry and Smith Co tells you that they heard a lot of bad rumours “about Jones” being on the verge of some kind of insolvency filing. They say that they have heard that part of the problem is that Jones Co has been discharging a pollutant into the land next to their plant and now the Provincial Enviromental Protection Agency is after them. Over the years, both Smith Co and Jones Co extended credit to each other. Mr. Smith asks to meet with you, he says that right now Jones Co owes $350,000 to Smith Co. He says that Smith Co owes $85,000 to Jones Co. Mr. Smith says that the companies have tendered to operate on handshake deals and that the contract between the parties are pretty rough. He also says that he hears that the cost of remediating the environmental problem at the Jones Co Plant, could run into millions. Mr. Smith asks you what might happen with respect to Smith Co if Jones Co. goes into some kind of formal insolvency proceeding tomorrow. He knows you are not a lawyer but would like your general comments. Q 3. Your friend Brett bought a condo unit in a large luxury Condo hotel. He knows that many other people have bought condo units- in fact, he has met with a number of them (and has actually become pretty good friends with some of them) through some meetings concerning the hotel and some social functions at the hotel. Unfortunately, while it is a beautiful hotel, it is not succeeding financially. Brett tells you that his understanding is that a lot has happened to get the hotel on track and that some kind of insolvency proceeding concerning the hotel is coming fast. Brett tells you that neither he or any other condo unit holders who he knows can afford to retain a lawyer to deal with their situatiion. He asks you for your views on what might happen in this situation generally and how he and the other condo unit holders might be able to participate.

Answer rating: 100% (QA)

The general issue presented is one that is not going to go away The problem is one of insolvency eco... View the full answer