The Supreme Court of Canada has agreed to review a controversial pension case decided by the Ontario Court of Appeal in April 2011. The case involves the treatment of pension plans after a company has applied for protection from creditors under the Companies’ Creditors Arrangement Act (the CCAA) – a process similar to Chapter 11 bankruptcy in the United States.
In the case under appeal, the company, Indalex Limited, entered CCAA proceedings at a time when its pension plans were underfunded. Later, after Indalex sold off its major assets the proceeds went to pay off the company creditors while the company pension plans remained underfunded.
At the Ontario Court of Appeal the pensioners successfully argued that the pension shortfalls should be funded in priority to the creditors who lent money to the company once it had entered CCAA proceedings. The company then appealed this ruling to the Supreme Court of Canada.
The eventual Supreme Court decision will have a significant impact on how underfunded pension plans are treated by companies who have applied for creditor protection under the CCAA.
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