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  • Supreme Court Rules Crown Doesn’t Have Rights To GST And QST

    In a unanimous decision on October 30, 2009 relating to the Goods and Services Tax (“GST”) and the Quebec Sales Tax (“QST”), the Supreme Court of Canada rejected the most recent attempt of the Crown to secure its position by recovering the tax portion of accounts receivable outstanding at the time of bankruptcy where the bankrupt had not made the required remittances.

     
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  • PPSA & Legislative Q's
     
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  • Fraudulent Financial Information

    Often, the depth and breadth of a credit analysis is based on the risk associated with a potential or existing customer.  For example, when the risk is considered low, a simple trade reference check might suffice whereas in cases where the stakes are high, many seasoned and trained credit managers will resort to financial statement analysis.  Aside from the challenge of getting your customers to furnish financial statements, determining the reliability of such documents can prove to be quite tricky.

     
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  • What to do when a customer files for Bankruptcy

    Find out exactly what the situation is. Most people when they think of bankruptcy only think of the final stage, where the customer is no longer in business. In reality there are a few different types and various levels of severity.

     
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  • Cross Border and International Collections
    You've serviced your client, you've invoiced the job, and you've not been paid. What can you do?
     
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  • Can creditors recover goods under the 30-day rule in a bankruptcy?
    Enjoy this complimentary Video Break
     
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  • Construction Credit

    Construction credit is a unique and specialized form of mercantile credit. Although the field follows many of the same principles, practices and procedures as mercantile credit, there are a number of factors that make the practice unique. In order to be successful, the credit professional must...

     
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  • International Debt Recovery, Legal Obstacles & Strategies
    INTERNATIONAL DEBT RECOVERY, LEGAL OBSTACLES & STRATEGIES
     
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  • Direct payments and construction insolvency
    Main contractor Carillion’s entry into liquidation has resulted in many employers seeking to establish relationships with subcontractors, under which they will be paid directly in order to stay on site and finish the relevant project. On the face of it, this seems like an attractive solution, and may leave some employers wondering why they didn’t procure their projects by construction management in the first place. However, establishing direct relations is not without risks, and requires safeguards for employers and subcontractors alike. Those are set out in the last section of this article, but it is important to understand the pitfalls, particularly of direct payment, first.
     
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  • Legal insights on minimizing exposure to bad debt and maximizing recovery efforts

    In this webinar you will learn: What information should you gather from new customers?, The importance of documenting, How can you identify opportunities for recovery?, and What remedies might the law offer?

     
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  • Do Not Miss the Warning Signs of Insolvency!
     
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Q and A (1)
  • We see more and more public companies partially or completely reorganizing as Income Trusts. What are the advantages and disadvantages to the company and what could the ramifications be to trade creditors? Is there anything we should be questioning or looking for in this type of transaction?
    https://creditedu.org/knowledgecentre/index.php/site/qa/4

    An income trust (the "Trust") is essentially an investment vehicle which a corporation (the "Corporation") can establish in order to divert and distribute its revenues in a generally more tax efficient manner to the investors of the Trust.

    While the pros and cons of establishing an income trust are largely tax driven, extremely complex and beyond the scope of this forum, income trusts basically operate by taking the monies raised by the Trust from its investors and loaning them to the Corporation. Such loan can either be on a secured or an unsecured basis. Revenues from the Corporation's operations are then paid to the Trust in order to service the loan with those monies then being available for distribution to the Trust's investors.

    The typical structure sees virtually all of the Corporation's distributable income paid out without corporate tax because the income is being used to service the Corporation's debt (e.g., the loan from the Trust). If the investors of the Trust are tax-exempt entities such as RRSPs or pension funds, payments to them from the Trust will be received on a more favourable tax basis than if the monies were distributed as dividends.

    While the establishment of the Trust will not alter the manner in which the Corporation carries on its business (note that the Trust does not carry on business - it is simply an investment vehicle), the difference is that with the establishment of the Trust, the Corporation has a new and typically large creditor (being the Trust) whose debt must be serviced by the Corporation.

    From the perspective of companies doing business with the Corporation and extending credit to the Corporation, while the creation of the Trust in and of itself will not negatively impact upon the Corporation's ability to carry on its business, companies doing business with the Corporation may be at a greater risk should the Corporation subsequently run into financial difficulties. Aside from the Corporation having less flexibility to refinance since cash flow will be committed to debt service on the monies owing to the Trust (and other lenders), the Trust represents a new creditor which did not previously exist. If the Trust's loan to the Corporation is made on a secured basis, the Trust will be entitled to recover its monies prior to all of the Corporation's unsecured creditors, thereby diminishing the pool of funds available to the unsecured creditors. Similarly, secured creditors are at risk to the extent that the Trust's security has priority over their security. If the Trust's loan to the Corporation is made on an unsecured basis, the Trust will be another unsecured creditor sharing in the monies available to the unsecured creditors, meaning less monies will be available for the unsecured creditors had the Trust not been created.

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