Know which stage you are at
Three things get confused. A **demand letter** requires repayment. A **notice of intention to enforce security** is the statutory notice a secured creditor must generally give a business borrower before enforcing, and it starts a defined period. An **application to appoint a receiver** is enforcement itself.
The remedies available differ at each stage, and the window narrows sharply once a receiver is appointed. Establish the stage and the exact date before doing anything else.
Read the security and the guarantees before negotiating
What is secured, in what priority, and who guaranteed it. General security agreements, specific charges over real property, and personal guarantees from directors all behave differently.
**Personal guarantees survive the company's insolvency.** That is the single most important thing for owner-managers to understand: winding up the company does not extinguish your exposure, and lenders frequently pursue guarantors precisely because the company has nothing left.
Engage early - forbearance is routine
Lenders generally prefer repayment to enforcement, and enforce when they lose confidence rather than when a covenant first trips. Forbearance agreements, standstills and revised covenants are negotiated regularly where the borrower comes forward early with a credible plan and honest numbers.
What destroys that: surprises, missed remittances discovered by the lender rather than disclosed, and forecasts that miss immediately. Credibility is the asset being negotiated with.
Restructuring stops the clock
A proposal under the BIA, or CCAA proceedings for larger companies, creates a **stay** halting enforcement while a plan is developed. That is frequently the immediate objective, and it is available only while the option is still open - a receiver already in place changes the analysis substantially.
Both routes require a licensed insolvency professional and a viable underlying business. Restructuring cannot save a company with no path to profitability; it buys time for one that has.
Protecting the directors
Trust amounts - payroll source deductions and GST/HST - carry personal liability for directors, and that exposure survives the corporation. Prioritising them, and documenting the reasoning for every payment decision made in the distress period, is the practical due-diligence defence.
Be equally careful about who else gets paid. Preferential payments to selected creditors, and transfers below value, can be reversed and can create personal exposure. Every payment decision in this window should be advised on.
Frequently asked questions
- How long does the notice period give me?
- Secured lenders must generally give statutory notice before enforcing against a business borrower, and the period is short. The exact date is on the notice - that is the deadline that matters.
- Can the bank take my home?
- If you signed a personal guarantee or granted security over it, potentially. Guarantees survive the company's insolvency, which is why they are the first document to review.
- Will filing a proposal stop the receiver?
- A filing creates a stay halting enforcement while a plan is developed, but the option narrows once a receiver is appointed. Take advice before that point.
- Should I keep paying suppliers?
- Be careful. Preferential payments before insolvency can be reversed and can expose directors personally. Get advice on who to pay before paying.
- Are trust amounts really personal?
- Yes. Unremitted payroll deductions and GST/HST carry director liability that survives the company. Prioritise them and document why.
This guide is general information, not legal advice. Laws, costs, and procedures vary by state, province, and your specific situation — speak with a qualified banking & finance lawyer about your circumstances before acting.